In job push, Union Cabinet approves Rs 1.07 lakh crore employment-linked incentive scheme

New Delhi: The Union Cabinet on Tuesday approved an Employment Linked Incentive (ELI) scheme with an outlay of Rs 99,446 crore to incentivise creation of more than 3.5 crore jobs, particularly in manufacturing sector, in the next two years.

Under the new scheme, the central government will provide first-time employees one month's salary of up to Rs 15,000. Employees with salaries up to Rs 1 lakh per month will be eligible for this incentive.

The government will pay this amount through Direct Benefit Transfer (DBT) to the eligible candidates in two installments. The first installment will be payable after 6 months of service and the second installment will be payable after 12 months of service and completion of a financial literacy programme by the employee.

“This initiative is designed to encourage individuals to join the workforce and contribute to the Employees’ Provident Fund (EPF) for the first time,” said Puneet Gupta, Tax Partner, EY India.

Employers will be given financial incentives for the generation of additional employment. The government will incentivise employers, up to Rs 3,000 per month, for two years, for each additional employee with sustained employment for at least six months. For the manufacturing sector, incentives will be extended to the third and the fourth years as well.

“With the ELI Scheme, the government intends to catalyse job creation in all sectors, particularly in the manufacturing sector,” Union Minister Ashwini Vaishnaw said at a media briefing.

Establishments, which are registered with the Employees' Provident Fund Organisation (EPFO), will be required to hire at least two additional employees (for employers with less than 50 employees) or five additional employees (for employers with 50 or more employees), on a sustained basis for at least six months, to be eligible to get the ELI incentive. Payments to the employers will be made directly into their PAN-linked accounts.

An important outcome of the scheme will also be formalisation of the country’s workforce by extending social security coverage for crores of young men and women, the Ministry of Labour & Employment said in a statement.

The ELI scheme is a part of the PM’s package of five schemes announced in the Union Budget 2024-25 to facilitate employment, skilling and other opportunities for 4.1 crore youth with a total budget outlay of Rs 2 lakh crore.

“ELI is a significant step towards boosting employment and formalising India's workforce,” Confederation of Indian Industry (CII) Director General Chandrajit Banerjee said.

Kartik Narayan, CEO-Staffing, TeamLease Services, said the new scheme signals strong intent of the government to tackle youth unemployment and strengthen workforce participation.

“For staffing companies, this opens up massive potential—not only to match talent with demand but also to drive skilling, compliance, and formalisation at scale. The structure of dual incentives for both employers and jobseekers is pragmatic and timely,” Narayan said.