Understanding India’s Employment-Linked Incentive (ELI) Schemes

Explore India’s new employment-linked incentive schemes and their impact on hiring, compliance, and cost benefits for employers and employees.

Key takeaways

Scheme A targets first-time employees joining PF for the first time on or after 1 August 2025, with gross wages up to INR1 lakh/month.
Scheme B is for employers hiring additional employees, also with gross wages up to INR1 lakh/month.
Incentives are applicable across all sectors nationwide.
Scheme A offers an incentive equal to one month’s EPF wage (max INR15,000) to employees, paid in two installments.
Scheme B offers up to INR3,000/month per employee, paid to employers for a four-year period (manufacturing) and two-year period (non-manufacturing).
Eligibility for Scheme B is based on hiring above the baseline employee headcount (from 1 August 2024 to 31 July 2025).
Schemes are valid for jobs created between 1 August 2025 and 31 July 2027.
Under Scheme B, incentives are disbursed every six months.
Estimated benefit:
- INR7.2 crore for 1,000 hires in non-manufacturing.
- INR14.4 crore for 1,000 hires in manufacturing.
Employers need to manage compliance and tracking carefully to avail full benefits.

These schemes present a timely opportunity for organizations to optimize costs while contributing to formal employment growth. Puneet Gupta, Partner, EY India, provides a practical lens on how to plan, qualify, and maximize these incentives as part of long-term workforce strategy.

These schemes present a significant opportunity for businesses to manage hiring costs while supporting formal employment. With the right planning, companies can unlock long-term benefits across both compliance and workforce strategy.

Puneet Gupta

Partner, People Advisory Services – Tax, EY India

For your convenience, full text transcript of this podcast is available below.

Pallavi

Hello and welcome to another episode of EY India Insights. I'm your host, Pallavi, and today we are exploring employment linked incentives, an increasingly important part of India's employment policy landscape. Joining me is Puneet Gupta, Partner, People Advisory Services – Tax, EY India, who brings deep expertise in labor regulations, statutory compliance and employee relations. Puneet, thank you for being with us today.

Puneet Gupta

Thank you, Pallavi. Glad to be here.

Pallavi

Thank you. To start off with a very basic question, Puneet, who is covered under these employment-linked incentive schemes?

Puneet Gupta

The government has announced two new schemes effective 1 August 2025. These were announcements made on 1 July this year. They are called Scheme A and Scheme B. Scheme A covers first-time employees, employees who joined PF membership for the first time on or after 1 August 2025 and are on gross wage up to INR1 lakh per month are covered in the scheme and they will get incentive in the scheme.
Scheme B covers employers that are hiring additional employees, adding to their headcount. Again, employees with up to INR1 lakh per month gross wages. Such employees are eligible for an incentive under Scheme B.
So while the schemes are applicable for all sectors throughout the country, Scheme A focuses on first-time employees and Scheme B focuses on employers hiring additional employees.

Pallavi

Thank you, Puneet. Moving on, what is the incentive that employers actually receive under these schemes?

Puneet Gupta

Scheme A incentive is available for first-time employees. The amount of incentive will be one month’s EPF wages, which are subject to a maximum of INR15,000 per employee. An employer will get this incentive over two installments. Scheme B, where incentive goes to employers, there is a slab but the maximum incentive will be INR3,000 per employee per month.
An employer in the manufacturing sector will get this incentive for four years. An employer in the non-manufacturing sector will get this incentive for a two-year period.

Pallavi

Thank you, Puneet. Now, as every policy comes with a few conditions, what are the underlying eligibility conditions that employers must meet to avail of these incentive schemes?

Puneet Gupta

I'll focus on Scheme B, where incentive goes to employers. The two main conditions for employers to avail of an incentive under this scheme are: One, that employers should be on growth wage up to INR1 lakh per month. And two, employers should be hiring additional employees. So, they will consider employee headcount between 1 August 2024 and 31 July 2025, average of employee headcount during this period as the baseline. Employers who are hiring additional employees over and above the baseline and employee’s growth wage up to INR1 lakh per month are eligible for incentive under Scheme B.
So, the two main conditions for employers are that first, the employee should be on gross wage up to a lakh per month, and second, employees should be additional employees, additional headcount engaged in that organization.

Pallavi

Thank you, Puneet. Now, with respect to the time frame, what is the duration of these schemes and the benefit period?

Puneet Gupta

Both schemes are applicable for jobs created between 1 August 2025 and 31 July 2027. So, all first-time employees under Scheme A and all additional hires in Scheme B, hired in this period, are covered. Under Scheme A, the incentive will be given in two installments after six months and 12 months of employment to the employee.
In Scheme B, employers will get an incentive after every six months, but for two years, for employers in the non-manufacturing sector and for four years for employers in the manufacturing sector. So, let's say, you have an employee who joined in July 2027 in a service company, that organization probably will get an incentive till June of 2029.

Pallavi

Thank you, Puneet. Finally, from a business planning standpoint of view, what is the estimated quantum of benefits that an organization can expect under these schemes?

Puneet Gupta

The final incentive amount will of course be dependent on multiple factors, which is the employees; that is considered as the baseline. What are the net additional hires? For how long are the additional hires working?
But, let's say, on a broad basis, an organization hired 1,000 additional employees. For the non-manufacturing sector, the total incentive for the company could be up to INR7.2 crore. And for 1,000 additional employees in manufacturing sector, the incentive can be as high as INR14.4 crore. And obviously this can increase multifold if the hiring is of additional employees, more than a thousand every year.
So, there's still some very good incentive on the table for employers that are looking at mass scale additional hiring over the next two-year period.

Pallavi

Thank you, Puneet. This has been a very insightful conversation. Thank you so much for joining us today and sharing your valuable perspective.

Puneet Gupta

My pleasure. Thank you so much.

Pallavi

Thank you. And to all our listeners, that's all for today's episode of EY India Insights podcast. Stay tuned for more conversations with our expert on the trends shaping the world of work and business. Until next time, this is Pallavi signing off.

Presenters

Puneet Gupta

Tax Partner, EY India

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Understanding India’s Employment-Linked Incentive (ELI) Schemes

Key takeaways

Pallavi

Puneet Gupta

Pallavi

Puneet Gupta

Pallavi

Puneet Gupta

Pallavi

Puneet Gupta

Pallavi

Puneet Gupta

Pallavi

Puneet Gupta

Pallavi

Puneet Gupta

Pallavi

Presenters

Puneet Gupta

Decoding the new Employment Linked Incentive (ELI) Schemes

In this webcast, our panel of EY experts shares insights on effectively navigating the new Employment Linked Incentive (ELI) Schemes.