To boost employment and improve workforce benefits in India, the Union Cabinet has approved the Employment-Linked Incentive (ELI) Scheme, effective from August 1, 2025 to July 31, 2027. The scheme has two parts:
- Part A incentivizes first-time employees
- Part B rewards employers who create additional job opportunities
The scheme covers eligibility criteria, incentive amounts, conditions, timelines, and illustrations for both employees and employers. While detailed operational guidelines are still awaited, the current announcement lays out the structure and scope of the program. Let’s break it down.
Introduction
The core goals of the ELI scheme are to:
- Encourage employment generation
- Promote employability of the workforce
- Strengthen social security, particularly in the manufacturing sector
Approved on 1 July 2025, the scheme is active for a two-year window beginning from 1 August 2025. It’s split into two segments:
- Part A: Focuses on incentivizing first-time employees
- Part B: Focuses on supporting employers who generate additional jobs
Part A – Incentive to First-Time Employees
Who qualifies?
Employees who:
- Are registered with the Employees’ Provident Fund Organization (EPFO) for the first time
- Earn up to Rs. 100,000/month
Incentive Structure:
- Total incentive = One month’s EPF wage, capped at Rs. 15,000
- Paid in two equal installments based on meeting conditions
| Installment | Condition | % of EPF Wage |
| 1st | 6 months of continuous employment | 50% |
| 2nd | 12 months of continuous employment + completion of financial literacy course | 50% |
Other Features:
- Paid via Direct Benefit Transfer through the Aadhaar Bridge Payment System
- A portion of the incentive will be invested in saving instruments and can be withdrawn later
Part A – Illustration
Two employees, Shreyans and Rithanya, both join on 1 August 2025, earn Rs. 12,000 and Rs. 75,000 respectively, and meet all eligibility conditions. Here’s how their incentive looks:
| Condition | Shreyans | Rithanya | Expected Payout Date |
| 6-month service (50%) | Rs. 6,000 | Rs. 7,500 | Around Feb 2026 |
| 12-month service + literacy module (50%) | Rs. 6,000 | Rs. 7,500 | Around Aug 2026 |
| Total | Rs. 12,000* | Rs. 15,000* | — |
*Part of this incentive will be retained in saving instruments for future withdrawal.
Part B – Incentive to Employers
Who qualifies?
Establishments that are:
- Registered with EPFO (including exempted organizations*)
- Hiring employees with salary up to Rs. 100,000/month (no first-time registration required)
*Includes companies with their own PF trusts
Conditions for Employer Eligibility:
- If current workforce is 50 or more, must add at least 5 employees
- If fewer than 50 employees, must add at least 2
- New hires must work for minimum 6 months
Incentive Period:
- 2 years for non-manufacturing sector
- 4 years for manufacturing sector
Quantum of Incentive:
| EPF Wage (Monthly) | Incentive/Employee/Month |
| Up to Rs. 10,000 | 10% of EPF wage |
| Rs. 10,001 – Rs. 20,000 | Rs. 2,000 |
| Rs. 20,001 – Rs. 1,00,000 | Rs. 3,000 |
Other Features:
- Employers must register using PAN, GSTN, and bank account
- Incentive calculated on net additional employment
- Paid into the PAN-linked bank account of the employer
Part B – Illustration
An IT-ITeS company with 40 employees hires 4 new employees on 1 August 2025:
| Employee | EPF Wage | Slab | Incentive/Month |
| A | Rs. 9,000 | ≤ Rs. 10,000 | Rs. 900 |
| B | Rs. 14,000 | Rs. 10,001 – Rs. 20,000 | Rs. 2,000 |
| C | Rs. 18,000 | Rs. 10,001 – Rs. 20,000 | Rs. 2,000 |
| D | Rs. 22,000 | Rs. 20,001 – Rs. 1,00,000 | Rs. 3,000 |
Total Monthly Incentive: Rs. 7,900
| Year | Annual Incentive | Cumulative |
| 2025–2026 | Rs. 94,800 | Rs. 94,800 |
| 2026–2027 | Rs. 94,800 | Rs. 1,89,600 |
| 2027–2028* | Rs. 94,800 | Rs. 2,84,400 |
| 2028–2029* | Rs. 94,800 | Rs. 3,79,200 |
*For manufacturing sector, incentive continues for additional 2 years
Key Points to Ponder
Several operational questions remain:
- How much of the Part A incentive will be retained in savings?
- When can employees withdraw that retained amount?
- Can employers claim both Section 80JJAA and Part B benefits for the same employee?
- How are incentives handled if an employee joins mid-month?
- What’s the cut-off or frequency for employers to apply for Part B?
- What happens if an employee’s salary exceeds Rs. 100,000 after joining?
- For Part B, is monthly hiring required or is meeting the headcount once enough?
The government press release is introductory. More clarity is expected from detailed guidelines by the EPFO authorities.
Conclusion
The ELI scheme represents a targeted move to incentivize job creation while building financial awareness and long-term savings for employees. It benefits both young professionals entering the formal workforce and employers ready to expand. While some implementation details are pending, the structure signals India’s strong commitment to inclusive employment growth and social security reform.
