Cabinet approves Employment Linked Incentive Scheme - What Employers should Know?

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Objective: Job Creation, Employability, and Social Security

Scheme Period: Jobs created between 1 August 2025 and 31 July 2027.

Benefit for Employer: Incentive of upto INR 3,000/- per month directly in PAN-linked account, for 2 years, for each additional employee with sustained employment for at least 6 months, in the manner provided herein below:

1. Incentive of upto INR 1,000/- per month will be given for additional employee with EPF wage upto INR 10,000/- on a proportionate basis.

2. Incentive of INR 2,000/- per month will be given for additional employee with EPF wage of more than INR 10,000/- and upto INR 20,000/-.

3. Incentive of INR 3,000/- per month will be given for additional employee with EPF wage of more than INR 20,000/- and upto INR 1,00,000/-.

Sector in Special Focus: For the manufacturing sector, the incentive for employer will be extended to 3rd and 4th years as well.

Benefit for Employee: One month’s wage upto INR 15,000/- in two installments (1st instalment after 6 months of service and 2nd instalment after 12 months of service and completion of financial literacy programme by employee) - as a Aadhar based Direct Benefit Transfer. To encourage the habit of saving, a portion of the incentive will be kept in a savings instrument of deposit account for a fixed period and can be withdrawn by the employee at a later date.

Eligible Employer: Establishments, which are registered with the Employees’ Provident Fund Organisation/EPFO, will be required to hire at least:

• 2 additional employees (for employers with less than 50 employees) or

• 5 additional employees (for employers with 50 or more employees),

on a sustained basis for at least 6 months.

Eligible Employee: First time employee registered with EPFO with salaries upto INR 1,00,000/-.

LexFulcrum Comment: This scheme offers a package which is beneficial for both employer and employee. This welcome move by the Government of India not only focus on employment generation but also encourage its continuation with staggered payment of the scheme benefit, thereby enabling both employer and employee to explore long-term engagement. The special focus on the manufacturing sector aims as bolstering India’s manufacturing cababilities.