Context: The Union Cabinet has approved the Employment Linked Incentive (ELI) Scheme, a flagship initiative under the Union Budget 2024-25, aimed at addressing the challenges of unemployment and jobless growth.
Relevance of the topic:
Prelims: Key Highlights of Employment Linked Incentive (ELI) Scheme.
Mains: Significance of Employment Linked Incentive (ELI) Scheme.
Employment-Linked Incentive (ELI) Scheme
- With an outlay of ₹99,446 crore, ELI Scheme aims to incentivise the creation of more than 3.5 crore jobs over two years.
- ELI Scheme is a part of the Prime Minister’s package of five schemes to facilitate employment, skilling, and other opportunities for 4.1 crore youth.
- Objectives:
- Create additional employment in the formal sector and sustain it.
- Promote employability and formalisation of the workforce.
- Complement National Manufacturing mission.
- Enhance social security of the workforce.
Key Highlights of the Scheme:
Benefits for first-time workers:
- ELI scheme will benefit individuals entering the workforce for the first time and registered with the Employees’ Provident Fund Organisation (EPFO).
- Eligible employees, those earning up to ₹1 lakh/month, will receive an EPF-based wage incentive of up to INR 15,000 disbursed in two stages.
- The first half will be paid after six months of continuous service, while the second half will be released upon completing one year of service and a financial literacy program.
Incentives for employers generating jobs:
- Companies registered with EPFO that hire additional staff earning up to ₹100,000 per month will receive a monthly incentive of up to ₹3,000 per employee for a period of two years.
- For manufacturing units, this support will continue through the third and fourth years as well.
- Eligibility criteria include the hiring of at least two new employees by establishments with fewer than 50 employees, and a minimum of five new hires for those with 50 or more employees.
- All new hires must remain continuously employed for at least six months to qualify.
- Coverage Period: Valid for jobs created between August 1, 2025, and July 31, 2027.
Significance of the Scheme:
- Addresses the challenge of jobless growth by directly linking fiscal incentives to net employment generation.
- Encourages a shift from informal to formal employment, thereby enhancing social security coverage, tax base, and compliance with labour laws.
- Targets first-time entrants, helping reduce structural unemployment and leveraging demographic dividend in the economy.
- Encourage employers to create sustained new employment, particularly in the manufacturing sector.
- Boosts aggregate demand via higher household income and consumption.
- Supports labour-intensive manufacturing, enhancing employment elasticity.
