Govt clears ambitious ₹1.07 lakh crore Employment Linked Incentive scheme to boost formal jobs, manufacturing

The Union Cabinet today approved the Employment Linked Incentive (ELI) scheme, which has an outlay of ₹1.07 lakh crore. During the Cabinet briefing, Minister of Information and Broadcasting, Ashwini Vaishnaw said that the scheme aims to create and sustain additional formal employment, promote employability and the formalisation of the workforce, complement the National Manufacturing Mission, and enhance the social security of workers.

“ELI will be focused on the manufacturing sector. Part 1 is for the first-timers and the second for sustained employment support,” Vaishnaw said on Tuesday.

In a bid to reduce the advantage experienced professionals often have over first-time workers, Part A of the scheme offers a wage subsidy for new employees. The subsidy amounts to one month’s wage, capped at ₹15,000. It is available to first-time employees earning up to ₹1 lakh per month and will be paid in two instalments, once after six months and again after twelve months.

This benefit applies across all sectors and is designed to encourage employers to hire fresh talent. The scheme will remain in effect for two years, from 1 August 2025 to 31 July 2027.

“The predicament of employers, whether to hire a first-timer or someone experienced, will be done away with,” Vaishnaw said.

Under Part B, the incentives are targeted at employers, particularly in the manufacturing sector. Employers can receive incentives proportional to wages, capped at a maximum of ₹3,000 per employee each month, for a period of two years. These payments will be made every six months. For the manufacturing sector, the incentive scheme will continue into the third and fourth years as well.

To qualify, employers must hire additional employees beyond a defined baseline. Establishments with fewer than 50 employees must hire at least two new workers, while those with 50 or more must hire a minimum of five. The incentive scheme will be in effect from 1 August 2025 to 31 July 2027.

There will be three different slabs determining the incentives, which will be released by the labour ministry in subsequent days.

“Continuous employment improves skill and brings certainty to mind. Both company and employee can grow in a sustained manner,” Vaishnaw said.

Responding to the announcement, Anish Shah, Immediate Past President of FICCI, commended the scheme and welcomed the government's focus on incentivising job creation, particularly in the manufacturing sector.

“By incentivising first-time workers, boosting manufacturing, and encouraging employer participation, it reflects smart, inclusive policymaking. Its emphasis on dignity, security, and formalisation aligns deeply with industry aspirations. We commend the Government’s vision and commitment to creating meaningful jobs at scale,” Shah said.