Why in News?

The Union Cabinet has approved an Employment-Linked Incentive (ELI) scheme with a budget of ₹99,446 crore, as announced in the 2024–25 Union Budget.

Aimed at boosting job creation, especially in the manufacturing sector, the ELI scheme is part of the Prime Minister’s broader five-scheme employment package, which also includes internships with major companies and youth skill development initiatives.

What’s in Today’s Article?

• Key Provisions of the Employment-Linked Incentive (ELI) Scheme
• Employers’ Response to the Employment-Linked Incentive (ELI) Scheme
• Trade Union Response and Concerns on the ELI Scheme

Key Provisions of the Employment-Linked Incentive (ELI) Scheme

• Implementation duration: August 1, 2025 – July 31, 2027
• Implementing Agency: Employees Provident Fund Organisation (EPFO)
• Goal: Create over 3.5 crore jobs in two years
• Expected Beneficiaries: 1.92 crore newly employed individuals
• Employee Benefits
  • Eligibility: Salaries up to ₹1 lakh/month
  • Incentive: One-month EPF wage (up to ₹15,000)
  • Disbursal:
    • 1st instalment after 6 months of service
    • 2nd instalment after 12 months
  • Mode: Direct bank transfer
  • Savings Component: Part of the benefit will go into a fixed deposit account, withdrawable later
• Employer Incentives
  • Eligibility: Establishments registered with EPFO
  • Support: Up to ₹3,000/month for each new employee retained for at least 6 months, for two years
  • For manufacturing firms, the incentives extend to the 3rd and 4th years as well

Employers’ Response to the Employment-Linked Incentive (ELI) Scheme

• Employers have called the ELI scheme a “laudable initiative” that encourages first-time employment and sustained job creation, especially in manufacturing.
• They highlighted the scheme’s potential to boost labour-intensive sectors and transform India’s employment ecosystem.
• Industry experts stressed the need to include micro and small manufacturing units, especially those with fewer than 20 employees, under the scheme’s benefits.
  • They proposed shifting the scheme to the Ministry of MSME and using a structured reimbursement model based on payroll growth.
• Experts suggested a direct monthly subsidy to both employer and employee, tied to continued employment, for simpler and wider adoption.

Trade Union Response and Concerns on the ELI Scheme

• The Bharatiya Mazdoor Sangh (BMS) has welcomed the scheme but called for expanding social security and improving job quality.
• The other 10 central trade unions have criticised the scheme, citing risks and past experiences.
• Fear of Misuse of Funds
  • Unions fear that the ELI scheme could divert workers' savings to subsidise employers.
  • They referenced the 2020 Production-Linked Incentive (PLI) scheme, where benefits reportedly went to large firms without meaningful job creation.
• Concerns Over EPFO’s Role
  • EPFO is a custodian of employee savings, not a job-creating body.
  • Unions question how it can implement an incentive scheme without dedicated government funding.
• Call for a Separate Implementation Body
  • There is growing demand for the creation of a specialised agency to administer the scheme, instead of placing the responsibility on EPFO, which lacks the mandate and mechanism for employment generation.
• Other Concerns
  • Quality vs Quantity Trade-off - Firms may focus on hiring more rather than hiring skilled or productive workers.
  • Short-Term Gains - Risk of firms inflating hiring temporarily to gain benefits, without long-term employment commitment.
  • Implementation Challenges - Requires robust verification mechanisms to prevent misuse and false reporting of employment data.
  • Skewed Sectoral Impact - May benefit larger firms with better compliance systems, leaving out MSMEs that employ a majority.