Employees are vital for any business, and the cost of their social security, especially the contribution to the Employee Provident Fund, is a crucial consideration that pre-dates the hiring decisions. To increase employment generation the Union Budget 2024-2025 the Government will implement the following 3 schemes for ‘Employment Linked Incentive’.
The said incentives will be based on enrolment in the EPFO, and focus on recognition of first-time employees, and support to employees and employers.
The proposed scheme envisages incentives at a specified scale directly to the employee and the employer for their EPFO contribution in the first 4 years of employment. All additional employment within a salary of INR 1 lakh per month will be counted. The Government will reimburse employers up to INR 3,000 per month for 2 years towards their EPFO contribution for each additional employee.
Outline of Schemes of the scheme are given below:
- Employment Linked Incentive Scheme A: First Timers
- One month’s wage as subsidy (maximum INR 15,000)
- Applicable to all sectors
- First timers have a learning curve before they become fully productive; subsidy is to assist employees and employers in hiring of first timers.
- Applicable to all persons newly entering the workforce (EPFO) with wage/salary less than `1 lakh per month.
- Subsidy will be paid to the employee in three instalments
- Employee must undergo compulsory online Financial Literacy course before claiming the second instalment.
- Subsidy to be refunded by employer if the employment to the first timer ends within 12 months of recruitment.
- Expected to cover approximately one crore persons per annum.
- Scheme will be for 2 years
- Employment linked Incentive Scheme B: Job creation in manufacturing
- Applicable for substantial hiring of first time employees in the manufacturing sector
- All employers which are corporate entities and those non-corporate entities with a three year track record of EPFO contribution will be eligible.
- Employer must hire at least the following number of previously non-EPFO enrolled workers:
- 50 or
- 25% of the baseline (previous year’s number of EPFO employees)
[whichever is lower]
- Incentive will be paid for four years partly to the employee and partly to the employer as follows:
| Year | Incentive (as % of wage / salary, shared equally between employer & employee) |
| 1 | 24 |
| 2 | 24 |
| 3 | 16 |
| 4 | 8 |
- Employer must maintain threshold level of enhanced employment throughout, failing which subsidy benefit will stop.
- Employee must be directly working in the entity paying salary/wage (i.e. in-sourced employee).
- Employees with a wage/ salary of up to `1 lakh per month will be eligible, subject to contribution to EPFO.
- For those with wages/salary greater than `25,000/month, incentive will be calculated at `25,000/month.
- Subsidy to be refunded by employer if the employment to first timer ends within 12 months of recruitment.
- This subsidy will be in addition to benefit under Part-A
- Scheme will be for 2 years
- Employment Linked Incentive Scheme C: Support to employers
- Applicable to an employer who:
- Increases employment above the baseline (previous year’s number of EPFO employees) by at least two employees (for those with less than 50 employees) or 5 employees (for those with 50 or more employees) and sustains the higher level, and
- For employees whose salary does not exceed `1,00,000/month
- New employees under this Part need not be new entrants to EPFO
- For two years Government will reimburse EPFO employer contribution up to INR 3,000/month to the Employer for the additional Employees hired in the previous year.
- If the employer creates more than 1000 jobs:
- Reimbursement will be done quarterly for the previous quarter
- Subsidy will continue for the 3rd and 4th year on the same scale as Employer benefit in Part-B
- Not applicable for those Employees covered under Part-B.
- This subsidy will be in addition to benefit under Part-A.
- Scheme will be for 2 years
The above Scheme is significant for any establishment while planning their hiring strategy and is a key development on the employment law and practice front to watch.
