India continues to face the persistent challenge of transitioning its vast informal labour market into a more structured and formal system. As highlighted in the India Employment Report 2024, published by the ILO, nearly 90% of employment in the country remains informal. Recognising this structural gap, the government began to reorient its industrial policy focus—not just toward output and investment, but also toward employment generation. While the Production-Linked Incentive (PLI) scheme, launched in 2020, aimed at increasing exports, boosting job creation, and accelerating domestic production, the Employment-Linked Incentive (ELI) Scheme is designed to specifically incentivise and accelerate the creation of formal jobs. With an ambitious target of generating nearly 3.5 crore employment opportunities between 1 August 2025 and 31 July 2027, the ELI scheme is backed by a substantial budget outlay of ₹99,446 crore (approximately ₹1 trillion). Together, these initiatives reflect the government’s strong commitment to reshaping India’s employment landscape.
From PLI to ELI: Driving Job Growth
The PLI scheme, with over ₹1.76 lakh crore of investments till March 2025, covers key industries including electronics, automobiles and auto components, pharmaceuticals and medical devices, textiles, and renewable energy (solar PV). The scheme has generated ₹16.5 lakh crore in production and created over 12 lakh jobs across various sectors. While these outcomes underscored the scheme’s success in catalyzing industrial growth, policymakers recognized the need for a sharper focus on formal employment generation. Building on the momentum created by PLI, the government launched the ELI scheme in 2025 with an enhanced budget, aiming to stimulate higher rates of formal job creation and complement India’s manufacturing push with a people-centric employment strategy.
Broad Overview Behind ELI Implementation
- Increasing Formalisation & Expanding Social Security
By incentivizing EPFO registrations, the scheme seeks to accelerate the formalization of jobs and extend social security benefits to first-time employees. This step is crucial for ensuring long-term income security and fostering a culture of savings. - Reducing Constraints in Fresher Hiring
Through wage subsidies for freshers, the scheme helps employers overcome concerns about training costs and associated risks. This support encourages companies to hire young talent, thereby enabling the entry of nearly 19.2 million first-time workers into the formal workforce, which is the target of the ELI scheme. - Stimulating Sectoral Growth
The ELI Scheme prioritizes labor-intensive sectors, particularly manufacturing, to stimulate production and strengthen the Make in India initiative. By diversifying local value chains, the scheme accelerates sector-specific hiring and addresses workforce needs in high-demand industries. - Aligning Skilling with Quality Employment
With course completion as a prerequisite to receive the benefits, the scheme motivates fresh hires to prioritize upskilling while employed. This approach not only facilitates immediate job placements but also enhances the long-term employability of young workers.
Key Features of the ELI Scheme
Incentive for First-Time Employees
Under the scheme, first-time employees entering the formal workforce and registering with EPFO are eligible, provided their monthly gross salary does not exceed ₹1,00,000. These employees are entitled to receive an incentive from the government, capped at ₹15,000, equivalent to one month of their basic salary, disbursed in two instalments.
- First Instalment: Released after successful completion of six months in the job.
- Second Instalment: Released after twelve months of continuous employment. In addition, the employee must have completed a Financial Literacy Program.
There is a mandate that a portion of the incentive must be deposited into the employee’s savings account, reinforcing the scheme’s objective of promoting long-term financial security and savings discipline among the employees.
Incentive for Employers
The (ELI) Scheme provides incentives for employers, encouraging them to expand their workforce and contribute to formal job creation. It covers all the industries in India, with a special focus on boosting the manufacturing sector.
Eligibility
- Applies to all employers registered with the EPFO that hire net additional employees beyond their base headcount from Aug 2024 – Jul 2025.
- Firms with fewer than 50 employees must add at least 2 new workers.
- Firms with 50 or more employees must add a minimum of 5 new workers.
- Net additional hires must be maintained for at least 6 months.
Incentive Structure
- ₹1,000/month for employees with wages up to ₹10,000.
- ₹2,000/month for employees with wages between ₹10,001 and ₹20,000.
- ₹3,000/month for employees with wages between ₹20,000 and ₹1,00,000
The duration of the ELI scheme is two years for most sectors, but it is four years for the manufacturing industry, reflecting its potential in formal job creation in the country. The payment is transferred directly to employers’ PAN-linked bank accounts through Direct Benefit Transfer (DBT).
The Employment-Linked Incentive (ELI) Scheme represents a pivotal step in India’s progress toward greater formalization of its workforce. For employees, it not only lowers barriers to formal employment but also extends social security benefits, financial literacy, and long-term savings opportunities. For employers, it eases hiring costs, mitigates training-related risks, and supports expansion in labour-intensive sectors. Ultimately, the ELI scheme is geared towards revolutionizing the formal labour economy in India.
