The central government on Tuesday approved an Employment Linked Incentive (ELI) scheme with an outlay of ₹99,446 crore to create 3.5 crore jobs over the next two years through social security schemes run by the retirement fund body EPFO.

The ELI scheme to support job generation, enhance employability and social security across all sectors, with special focus on the manufacturing sector, was approved by the Union cabinet in a meeting chaired by Prime Minister Narendra Modi, information and broadcasting minister Ashwini Vaishnaw said.

The two-pronged scheme will provide incentives to employees as well as employers to boost job creation.

The first component aims to benefit an estimated 1.92 crore first-time employees working in the formal sector. They will get one month’s wage up to ₹15,000 in two installments. Employees with salaries of up to ₹1 lakh will be eligible. The benefits of the scheme would be given to jobs created between August 1, 2025 and July 31, 2027.

The first installment will be paid after six months of service, while the second installment is payable after 12 months and completion of a financial literacy programme by the employee. To encourage the habit of saving, a portion of the incentive will be kept in a savings instrument or deposit account for a fixed period, a PIB release said.

The second component seeks to incentivise employers to generate additional employment by providing up to ₹3,000 per month, for two years, for each additional employee with sustained employment for at least six months. For the manufacturing sector, incentives will be extended to the third and fourth years as well.

Establishments, which are registered with the EPFO, with less than 50 employees will be required to hire at least two additional employees, while employers with 50 or more employees will have to hire five additional employees on a sustained basis for at least six months. All payments to the first time employees will be made through Direct Benefit Transfer mode using the Aadhar Bridge Payment System. Payments to the employers will be made directly into their PAN-linked accounts.

Labour economist K.R. Shyam Sundar, an adjunct professor at MDI Gurgaon, said the criteria of ₹15,000 wage a month is a standard wage criteria being followed by the government for over a decade for welfare schemes like pension. This should be revised keeping in view inflation and economic context.

“We do not know the compliance and grievance mechanisms for implementation of the scheme. We also do not know the basis for estimation that these many people would benefit. There should be a clear cut mechanism on these aspects for the success of the scheme,” Sundar said.

CII director-general Chandrajit Banerjee said, “ELI is a step towards boosting employment and formalising India’s workforce. The ELI scheme opens doors for first-time job seekers. It empowers employers to expand their workforce.”

Ficci president Harsha Vardhan Agarwal said the association welcomes the ELI scheme as a transformative initiative aligned with the vision of Viksit Bharat.