Budget 2024: All you need to know about the new Employment-Linked Incentive Scheme

As the Union Budget 2024 is announced with only eight more months of the current financial year left for the implementation of the policies, Finance Minister Nirmala Sitharaman said that part of the funds allocated for the Employment Linked Incentive (ELI) has already been issued to the Ministry of Labour and Employment, and Ministry of Corporate Affairs.

While Rs. 2,000 crores has been provided to the corporate affairs ministry for enabling internships to youth across 500 companies, the labour ministry has received Rs. 10,000 crore for the enactment of the other policies announced under the ELI scheme.

But what is this new Employment Linked Incentive scheme? Let’s take a look:

Scheme A: First month’s wage subsidy to be offered by the government

• A first-time employee with a monthly salary of up to Rs. 1 lakh is eligible to get up to Rs. 15,000 in three installments. However, for drawing the second installment, the candidate is required to undergo an online Financial Literacy course.
• The subsidy is to be refunded by the company if the employment of the candidate terminates in less than 12 months period.
• The scheme which is expected to cover about 1 crore employees will last for 2 years.

Scheme B: Job creation in manufacturing

• Employers in manufacturing with a minimum of a three-year track record of EPFO contribution will be eligible. However, the employer must hire at least 50 previously non-EPFO workers or 25% of the baseline (the previous year’s number of EPFO employees), whichever one is lower.
• EPFO-registered direct payroll (in-sourced) employees with a monthly salary of up to Rs. 1 lakh will be eligible.
• Subsidy will paid for four years and will be divided between the employee and the employer equally. It will be calculated as 24% of the salary or wage for 1 and 2 years each, 16% for 3 years and 4% for 8 years.
• The employer will enjoy this subsidy in addition to the one listed under Scheme A, but will have to refund the subsidy amount if the said employee’s tenure terminates within a year.

Scheme C: Support to employers

• Any company that increases employment from the baseline by at least two employees (for those with less than 50 employees) or 5 employees (for those with 50 or more employees) will be eligible.
• For two years the government will reimburse EPFO employer contributions of up to Rs. 3,000 per month. However, if a company generates more than 1000 jobs, reimbursement will be done quarterly for the previous quarter.
• Those being covered under Scheme B will not be able to avail of this scheme but those availing of Scheme A may enjoy this as an additional benefit.
• In terms of the eligibility of the employees, people with less than Rs. 1 lakh monthly salary but not necessarily new entrants to EPFO will be eligible under this scheme.

In addition, the FM also announced:

• Skilling Programme and Upgradation of Industrial Training Institutes: Under this policy, the central government (Rs. 30,000 crore) in collaboration with the state government (Rs. 20,000 crore) and companies (Rs. 10,000 crore from CSR funds) will deploy Rs. 60,000 crore to upgrade 1000 Industrial Training Institutes (ITIs). It will cover 200 hubs and 800 spoke (ITIs), redesign existing courses, launch new courses, and augment the capacity of 5 national institutes. It is expected to benefit 20 lakh students. 
• Internship Policy: The government aims to place 1 crore interns across the top 500 companies with a stipend subsidy of Rs. 5,000 per month and one-time assistance of Rs. 6,000, while the rest of the training cost is expected to be borne from the company’s CSR funds. The company is expected to provide the person an actual working experience on a skill in which the company is directly involved. At least half the time should be in actual working experience/job environment, not in the classroom. However, candidates belonging to IIT, IIM, IISER, CA, etc streams or those with at least one government-employed family member will not be eligible.

Commenting on this initiative, Pankaj Lochan, chief human resources officer of Navin Fluorine International said, “Interning at top companies boosts employability by equipping youths with real-world problem-solving skills, experience in diverse teams, and practical application of their knowledge, making them more attractive to future employers. Such long-term internship provides hands-on experience and real-world exposure, helping interns develop practical skills and understand industry dynamics, bridging the gap between theoretical knowledge and actual application.”