In a significant move to strengthen India’s labor market, the Union Cabinet has approved a new Employment-Linked Incentive (ELI) Scheme. This initiative is designed to encourage employers to create more formal jobs, especially in sectors that have a high employment potential.

The scheme aligns with the government’s broader mission to promote inclusive growth, formal workforce expansion, and economic revival.

What is the Employment-Linked Incentive Scheme?

The Employment-Linked Incentive Scheme is a financial support program where the government offers incentives to employers who create new formal jobs. These incentives will be linked to the number of new employees hired and registered under formal employment platforms like EPFO (Employees' Provident Fund Organization).

Objectives of the Scheme

-1. Create formal employment opportunities across key sectors.

-2. Support MSMEs and large industries in expanding their workforce.

-3. Encourage businesses to register new hires under formal social security systems.

-4. Drive economic recovery post-pandemic through job-led growth.

How the Scheme Works

- Incentives for Employers:

• Businesses that add new employees to their workforce and register them under EPFO will be eligible for government subsidies.

- Eligibility Criteria:

• Employers must show a net increase in their workforce compared to a pre-defined baseline.

- Target Sectors:

• Sectors such as textiles, manufacturing, logistics, construction, and MSMEs are likely to benefit the most.

-Incentive Period:

• The benefits may be available for up to three years, encouraging long-term employment rather than short-term contracts.

Impact on Job Seekers and Businesses

This scheme is expected to:

- Create lakhs of new formal jobs in both rural and urban areas.

- Offer job seekers social security benefits such as provident funds, health insurance, and pensions.

- Help businesses reduce hiring costs while expanding operations.

- Formalize the labor force, reducing dependency on unregistered workers.

Why This Scheme is Important

India’s unemployment and informal workforce challenges need targeted solutions. By directly linking incentives with verified job creation, this scheme ensures that both businesses and workers benefit. It also promotes long-term economic sustainability by supporting industries that hire at scale.

Simple Example:

Let us say a company has 100 employees. If they hire 30 more and register them under EPFO, they can receive financial incentives from the government for each of those 30 new employees. This encourages genuine expansion, not just number-shifting.

What’s Next?

The Ministry of Labour and Employment is expected to release detailed guidelines and open a dedicated online portal where businesses can register and track their incentive eligibility.

Conclusion

The Cabinet’s approval of the Employment-Linked Incentive Scheme marks a major milestone in India’s journey toward inclusive growth and job creation. By incentivizing both employers and first-time employees, the scheme is poised to transform the job market, formalize employment, and empower millions of young Indians.

For businesses looking to expand, now is the time to hire smart and hire formally.

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