Employement Linked Incentive Scheme

First Time Employment scheme:-

The first scheme under Employment linked incentive scheme is the “First time Employment Scheme”. This scheme covers all newly joined employees in the formal sectors who receive a direct benefit transfer of one month’s salary in three instalments of up to Rs 15000.00,if the beneficiary is enrolled in EPFO.

For claiming the second instalment the beneficiary is supposed to undertake a compulsory online Financial Literacy course.

The salient features of this scheme are the following:

• Newly joined employees in all sectors may apply.
• All employees who have joined newly for a job and received a wage or salary of less than Rs 1Lakh per month and enrolled for EPFO may apply for this scheme.
• The subsidy of up to Rs 15000 will be paid to the employee directly in 3 installments.
• The employee has to mandatorily undertake a Financial Literacy course before receiving the second installment.
• If the employment ends within a year, the employer will refund the subsidy to the employee.
• The scheme is live for employees for 2 years after enrolment with the EPFO.

The subsidy provided under this scheme helps employees and encourages first-time employees to employers. The first-time employment scheme has benefitted around 200Lakhs youth over 2 years. First-time employees will have a learning curve before becoming fully productive, under this scheme.

HOW THE EPFO ENROLMENT BENEFIT THE FIRST TIME EMPLOYEMENT SCHEME:-

Under the First time Employment scheme, EPFO enrolment is mandatory to receive the subsidy. A  subsidy of upto 15000 will be provided to only newly joined employees who have enrolled with the EPFO.

JOB CREATION IN MANUFACTURING INDUSTRIES:-

The scheme under the Employment Linked Incentive Scheme is the “Job Creation in Manufacturing Scheme”. This scheme encourages more and more hiring of first-time employees in the manufacturing sector. The subsidy given under this scheme is over and above the incentive offered under the first-time employment scheme. Concerning the EPFO contribution made in the first 4 years of employment an incentive will be provided at a specified scale to both employee and the employer.

The incentive will be awarded partly to both employee and employer for 4 years as follows:-

Followings are the features of this scheme :-

1. All employers, both non–corporate and corporate, with a three-year record in EPFO contribution will be eligible.

2. Applicable to first-time employees in the manufacturing sector.

3. The employer must employ at least 25% of the baseline of non-EPFO enrolled workers(the previous year’s number of EPFO Employees) or 50 previously non-EPFO enrolled workers, whichever is lesser.

4. Employee has to work directly for the employer who pays them salary ie. In-sourced employee.

5. The employer will not receive the subsidy; in case he does not maintain the borderline level of enhanced employment.

6 . The incentive will be calculated at Rs25000 per month for employees whose salary exceeds Rs25000 per month.

7. Subject to EPFO contribution, Employees with a salary of up to Rs 1 lakh per month will be eligible for this scheme.

8 . The scheme is applicable to an employee for 2 years after the enrolment with the EPFO.

9.In case employment ends within 12 months of recruitment, the employer refunds the subsidy to the employee.

The scheme is expected to benefit 30Lakh youth joining any job and their employers and the scheme will subsidize additional employment in the manufacturing sectors.

SUPPORT TO EMPLOYERS: –

Support to Employers scheme is the third scheme under the employment-linked incentive scheme. This is an employer-focused scheme and covers every additional employment within Rs. 1 lakh salary per month in all sectors.

FEATURES OF THIS SCHEME IS AS FOLLOWS:

1. The scheme applies to all employers who:

• Employees’ salaries should not be more than Rs. 1 Lakh per month.
• Extends employment above the bottom line (the previous year’s EPFO employee number) by at least 2 employees (for companies with less than 50 employees) or 5 employees (for entities with 50 or more employees) and maintains the higher level.
• Fresh enrollment to EPFO is not encouraged for new employees

2. When the employer generates more than 1000 jobs, the following will apply:

• The subsidy will continue for the third and fourth years on the same scale as

employer benefits given under the job creation for manufacturing scheme.

• Reimbursement will be done quarterly for the previous quarter.

3 . The Government will reimburse EPFO contributions paid by the applicable employers for additional employees hired in the previous years up to Rs3000 per month for 2 years.

4. Subsidy under this scheme is provided in addition to the subsidy provided under the first time employment scheme.

5.This scheme is not included for employees benefitted under the Job creation for manufacturing scheme.

6. This scheme is applicable for 2 years after joining employment.

This scheme is planned to help additional employment of around 50 Lakhs persons. In Budget 2024, 3 new Employment linked incentive schemes are announced and Government is committed to provide incentives and subsidies to employers and employees.

Ultimately these newly introduced schemes will encourage the hiring process by employers and also benefit employees, thus boosting the employment opportunities for the youth.

OBJECTIVE OF ELI SCHEME IN INDIA: –

1.Support Economic Growth:-Improved employment leads to higher expenditure rate, which in turn ultimately boosts consumptions and stimulates demand for various products and services. The ELI scheme shares to the overall growth of the economy, by promoting job creation.

2.Generate Employment opportunities: -The main aim of the ELI scheme is to boost businesses by hiring more employees. It is done especially in the sectors where there is chances of potential growth. The Government aims to motivate companies to expand their workforce by offering financial support. Consequently, it creates more job opportunities for India’s growing population.

3.Encourage skill development: -Various industries in India, especially in Manufacturing and Technology need skilled work force. The ELI scheme encourages company to employ and train new employees. Thereby it scale up the overall skill level of the workforce and make India more competitive in Global markets.

4.Promote regional Development: – Between urban or rural areas or between states, India’s economic growth is always non uniform with significant disparity. The ELI scheme is formulated to encourage uniform regional growth. To address regional imbalance, the scheme incentivizes businesses to create employment in economically underdeveloped regions.

5.Boost specific sectors: – The ELI scheme often focuses on major industries that are important for India’s long term growth. The major industries are manufacturing, Agriculture, healthcare and IT. The scheme aims to reinforce these industries and support India’s wide economic goal.

KEY BENEFITS OF ELI SCHEME IN INDIA:-

1. Acceleration of Economic Growth: A boost in employment leads to higher disposable incomes for households which in turn leads to enhanced consumer expenses. This creates a cascading effect as higher demand for Goods and Services leads to business growth, further boosting the economy. The ELI scheme plays a pivotal role in this cycle of economic development.

2. Regional development: One of the exemplary features of India’s ELI scheme is its focus on promoting job creation in underdeveloped regions. The scheme helps reduce regional inequalities and support balanced economic growth across the country by offering additional incentives for businesses operating in backward and rural regions.

3. Inclusive Growth: The ELI scheme ask companies to employ people from disadvantaged or marginalized groups, such as individual from marginalized or rural communities. This finally encourages inclusive growth by making sure that benefits of job creation are distributed among various sections more broadly.

4.Reduction in Unemployment: The ELI scheme encourages businesses to employ more workers and thus attack unemployment. In India’s growing population which includes a huge number of youth entering into work force every year, the ELI scheme is very crucial. The scheme helps reduce unemployment and offers opportunities for huge population by creating new job opportunities.

5.Enhancing workforce Skills: The ELI scheme not only promotes Job creation but also skill development. Many job created under ELI scheme require training, which helps to enhance the skill level of India’s work force. Various Industries like manufacturing and IT needs skilled work force.

6.Support for Key Industries: ELI scheme helps strengthen industries like manufacturing, healthcare, IT, Technology etc. that are important to India’s long term development by focusing on high growth sectors. This not only promote jobs but also boost country’s global competitiveness in these sectors.

CHALLENGES AND WAY FORWARDS:-

1. Funding problem: -Justified budget allocation is needed to offer financial incentives to businesses. It is a big challenge to make sure that the Government has sufficient resources to continue the scheme in the long term.

2. Administrative load: – Keeping an eye on adherence to the ELI scheme and justifying Job creation can pose an administrative load for both businesses and the Government.

aligning the system is necessary to ensure the smooth execution of the scheme.

3. Threat of Short-Term Job Creation: – There is a possibility that businesses may create low-quality and temporary jobs just to avail the incentives. It is important to make sure that jobs created are provided for a long time and also are sustainable.

CONCLUSION: –

For Country like India, Employment Linked Incentive(ELI) Scheme is a vital tool for promoting job creation and thereby attack unemployment. The scheme helps to reduce unemployment and concurrently supports the country economic growth. Country Economic growth is supported by providing financial incentives to businesses that create new jobs and employ new people. To optimize the benefits, the scheme has to be executed carefully with an intent to make sure that the job provided are with good salary, sustainable and for all groups of society.

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