Employment-Linked Incentive (ELI) Scheme 2025: A Complete Guide for UPSC Aspirants

Government Scheme

Introduction: A Major Shift in India’s Employment Landscape

The Employment-Linked Incentive (ELI) Scheme is one of the most ambitious employment generation initiatives in India’s recent history. Approved by the Union Cabinet on 1 July 2025, this ₹99,446 crore scheme aims to create over 3.5 crore jobs in two years, making it an extremely important topic for UPSC and competitive exam aspirants.

For serious candidates, understanding the ELI scheme is essential as it covers governance, policy implementation, and economic development—core areas of the UPSC syllabus.

What is the Employment-Linked Incentive (ELI) Scheme?

The ELI scheme is a comprehensive employment generation initiative aimed at promoting job creation, enhancing skills, and expanding social security, with special focus on the manufacturing sector.

Background and Context

This scheme was first announced in the Union Budget 2024-25 as part of a package of five schemes targeting 4.1 crore youth with a total budget of ₹2 lakh crore. This initiative reflects the government’s resolve to tackle the growing challenge of unemployment among India’s youth.

Timeline and Implementation

The scheme’s benefits apply to jobs created between 1 August 2025 and 31 July 2027, focusing on maximum job creation within a two-year period.

Scheme Structure and Key Components

The ELI scheme operates through two primary components, addressing both the demand and supply sides of job creation:

Part A: Incentives for First-Time Employees

This component provides direct support to individuals entering the formal sector for the first time:

Eligibility Criteria:

First-time employees registered with EPFO (Employees’ Provident Fund Organisation)

Monthly salary up to ₹1 lakh

Completion of a financial literacy program is mandatory for the second installment

Financial Benefits:

One month’s EPF wage (up to ₹15,000) in two installments

First installment: After 6 months of continuous service

Second installment: After 12 months of service and completion of the financial literacy program

A portion is deposited in a fixed savings account to encourage saving habits

Target Beneficiaries: 1.92 crore first-time employees

Part B: Incentives for Employers

This component incentivizes employers to create additional jobs:

Employer Benefit Structure:

₹1,000 per month for employees with salaries up to ₹10,000

₹2,000 per month for employees with salaries ₹10,001–₹20,000

₹3,000 per month for employees with salaries ₹20,001–₹1,00,000

Duration of Benefits:

2 years for all sectors

Additional 2 years (total 4 years) for the manufacturing sector

Minimum Hiring Requirements:

Firms with fewer than 50 employees: at least 2 additional employees

Firms with 50 or more employees: at least 5 additional employees

Minimum 6 months of service required

Implementation Mechanism and Digital Infrastructure

Payment System

A digital system has been adopted to ensure transparency and prevent misuse:

For Employees (Part A):

Direct Benefit Transfer (DBT) via Aadhaar Bridge Payment System (ABPS)

For Employers (Part B):

Direct payment to PAN-linked accounts

Real-time monitoring and verification

Learning from Previous Schemes

Considering the corruption and fake claims reported in the Aatmanirbhar Bharat Rozgar Yojana (ABRY), ELI has adopted an advanced digital mechanism.

Sectoral Impact and Focus Areas

Priority to Manufacturing Sector

Extended 4-year benefit for manufacturing

Higher incentive structure

Coordination with existing PLI (Production Linked Incentive) schemes

Applicable Across All Sectors

The scheme is applicable across all sectors, enabling widespread job creation.

Strategic Importance for UPSC Preparation

Economic Policy Dimension

This scheme is a supply-side intervention in the labor market, addressing unemployment through:

Lowering hiring costs for employers

Providing income support to new employees

Encouraging formal sector employment

Governance and Implementation

Digital-first approach (Aadhaar-based verification)

Direct Benefit Transfer mechanism

Coordination among EPFO, employers, and employees

Expansion of Social Security

With mandatory EPFO registration:

Formalization of the workforce

Expansion of social security coverage

Financial inclusion (financial literacy)

Critical Analysis and Challenges

Potential Concerns

Distribution Inequality:

Greater benefits likely for large companies

Concentration in industrially developed areas

Implementation Challenges:

Demand-side limitations

Skills mismatch

Trade Union Perspective

Major trade unions like CITU have criticized the scheme, calling it a "deceptive way to transfer public funds to employers."

Comparison with Global Schemes

Global Examples:

USA: Job Retention Credit, Payroll Protection Program

Germany: Kurzarbeit wage subsidy

UK: Furlough Scheme

Indian Context:

Aadhaar-based verification

EPFO integration

Focus on manufacturing

Expected Outcomes and Success Metrics

Quantitative Targets

3.5 crore jobs in two years

1.92 crore first-time employees

₹99,446 crore investment

Qualitative Improvements

Increase in formal sector employment

Expansion of social security coverage

Skill development

Frequently Asked Questions (FAQs)

Q1: What is the total budget for the ELI scheme?

Answer: ₹99,446 crore for two years (2025–2027).

Q2: How will first-time employees benefit?

Answer: Employees registered with EPFO for the first time, earning up to ₹1 lakh, will receive up to ₹15,000 in two installments.

Q3: What are the benefits for employers?

Answer: ₹1,000–₹3,000 per month for each additional employee, for 2 years (4 years for manufacturing).

Q4: What is the scheme’s timeline?

Answer: Applicable to jobs created between 1 August 2025 and 31 July 2027.

Q5: How is this scheme different from previous ones?

Answer: ELI uses advanced digital verification (Aadhaar-EPFO integration) and focuses specifically on first-time employees and the manufacturing sector.

Q6: What is mandatory for employees?

Answer: Activating UAN, linking Aadhaar with bank account, and completing the financial literacy program.

Exam Preparation Strategy

Static vs. Current Affairs

Static:

Employment policy frameworks

Social security systems

EPFO structure

Current Affairs:

Recent policy announcements

Implementation challenges

Stakeholder responses

Key Takeaways for UPSC Aspirants

The Employment-Linked Incentive (ELI) scheme is a fundamental shift in India’s approach to job creation, moving from traditional guarantee programs to a market-based incentive structure. For UPSC aspirants, this scheme is important from multiple perspectives:

Policy Innovation: Demonstrates targeted intervention through digital technology

Implementation Complexity: Dual structure addressing both demand and supply sides

Stakeholder Role: Responses from various parties highlight the complexity of policy implementation

Economic Integration: Links to PLI schemes and labor reforms

Why this blog matters for your exam strategy:
A deep understanding of the ELI scheme will give you an edge not only in policy questions but also in analytical and current affairs topics. It is a must-know topic for UPSC and State PCS exams.