Employement Linked Incentive Scheme

First Time Employment scheme:-

The first scheme under the Employment linked incentive scheme is the “First Time Employment Scheme”. This scheme covers all newly joined employees in the formal sectors. These new joinees receive a direct benefit transfer of one month’s salary in three installments of up to Rs 15000.00. For this beneficiary has to be enrolled in EPFO.

For claiming the second instalment the beneficiary is supposed to compulsorily undertake an online Financial Literacy course.

The salient features of this scheme are the following:

• Newly joined employees in all sectors may apply.
• Newly joined employees consequently received a wage or salary of less than Rs 1Lakh per month. Explicitly employees enrolled for EPFO may apply for this scheme.
• The subsidy of up to Rs 15000 will be paid to the employee correspondingly 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 furthermore refund the subsidy to the employee.
• The scheme is explicitly live for employees for 2 years after enrolment with the EPFO.

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

HOW THE EPFO ENROLMENT BENEFITS THE FIRST TIME  EMPLOYMENT SCHEME:-

Under the First time Employment scheme, EPFO enrolment is explicitly  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 second scheme under the Employment Linked Incentive Scheme is the “Job Creation in Manufacturing Scheme”. This scheme especially encourages the 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. Considering 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. Employees must work directly for the employer who pays them salary, i.e., In-sourced employee.

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

6 . The incentive will be calculated generally 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 subsequently will be eligible for this scheme.

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

SUPPORT TO EMPLOYERS: –

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

FOLLOWING ARE THE  FEATURES OF THIS SCHEME:

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 thereby 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 correspondingly 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 consequently leads to a higher expenditure rate, ultimately boosting consumption. Finally, it stimulates demand for various products and services. The ELI scheme shares to the economy’s overall growth by promoting job creation.

2. Generate Employment Opportunities: -The main aim of the ELI scheme is to boost businesses by hiring more employees. This is done especially in sectors where there is a chance of potential growth. The Government correspondingly 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 a skilled workforce. The ELI scheme thereupon encourages companies 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: – As a matter of fact, between urban or rural areas or between states, India’s economic growth is always non-uniform with significant disparity. The ELI scheme is markedly formulated to encourage uniform regional growth. To address the regional imbalance, the scheme incentivizes businesses to create employment, especially in economically underdeveloped regions.

5. Boost specific sectors: – The ELI scheme often focuses especially on major industries that are important for India’s long-term growth. Especially the major industries are manufacturing, Agriculture, healthcare, and IT. The scheme furthermore 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 finally leads to higher disposable incomes for households which in turn leads to enhanced consumer expenses. This consequently creates a cascading effect as higher demand for Goods and Services leads to business growth, further boosting the economy. The ELI scheme further 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 asks companies to employ people from disadvantaged or marginalized groups, such as individuals from marginalized or rural communities. This finally encourages inclusive growth by making sure that the 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 large number of youths entering the workforce every year, the ELI scheme is very crucial. The scheme helps reduce unemployment and offers opportunities for a huge population by creating new job opportunities.

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

6. Support for Key Industries: The  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 promotes jobs but also boosts the country’s global competitiveness in these sectors.

CHALLENGES AND WAY FORWARDS:-

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

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

aligning the system is necessary to consequently 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 also temporary jobs to avail the incentives. It is important to make sure that jobs created are provided for a long time and also are sustainable.

CONCLUSION: –

In conclusion, For a Country like India, the Employment Linked Incentive(ELI) Scheme is a vital tool for promoting job creation and thereby attacking unemployment. The scheme helps to reduce unemployment and concurrently supports the country’s economic growth. The country’s Economic growth is henceforth 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. It has to be done correspondingly with an intent to make sure that the jobs provided are with good salaries, sustainable, and for all groups of society.

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