Mahenoor Imam
BACKGROUND
As India transitions towards a developed country, economic growth is accelerating faster, creating productive and formal employment opportunities for its growing workforce, particularly its young population. As per PLFS Annual Report 2025, Youth (age 15-29) unemployment rate has declined 9.9% in 2025 from 10.3% in 2024, While the manufacturing sector improved from 11.6% to 12.1% in 2025, still leave a substantial gap between the size of India’s workforce entering the labour market each year and the pace of formal job creation.
Against this backdrop, the government of India in the budget 2024-25 announced Employment Linked Incentives (ELI) as part of the “Prime Minister’s Package for Employment and Skilling”, to support employment generation, enhancing employability and social security across all sectors, especially in the manufacturing sector.
After Cabinet approval on 01 July 2025, it was renamed on 25 July 2025 as “Pradhan Mantri Viksit Bharat Rozgar Yojana”, a flagship initiative, launched by the Hon’ble Prime Minister Shri Narendra Modi in August 2025, being implemented over a two-year period from 1 August 2025 to 31 July 2027, with an outlay of Rs 99,446 cr incentive package to create 3.5 crore jobs over two years, out of these 1.92 Crore beneficiaries will be the first timers to the workforce, implemented by the Ministry of Labour and Employment through the Employees Provident Fund Organisation (EPFO).
The scheme has been designed to stimulate employment creation by providing incentives to employees and employers. Its core objective is to promote the generation of sustained additional employment, increase formalization of the workforce and enhance employability.
FUNCTIONING
The scheme consists of two core components- Part A for the first time employee and Part B for employers . Part A targets first time employees with EPFO registration, whose monthly salary is up to Rs1 lakh, providing one month of EPF wage up to Rs 15,000 in two installments- 6 months and 12 months of service. Additionally, the second installment is linked with the completion of the financial literacy programme; part of the incentive is retained as a savings instrument to encourage savings. Payments via DBT mode using ABPS, expected to boost 1.92 Crore beneficiaries
While Part B offers employment generation in all sectors with an additional focus on the Manufacturing Sector. Employers get an incentive of Rs 3,000 monthly for 2 years for each additional employee, in condition of up to Rs 1 Lakh monthly salary, provided employment for at least 6 months. Manufacturing units can receive the employment incentive in 3rd and 4th year as well. EPFO-registered establishments must hire at least 2 additional employees if they have fewer than 50 workers, or 5 if they have 50 or more, payments made directly in PAN-linked accounts, expected to boost 2.59 Crore beneficiaries.
Employer Incentives Based on EPF Wage Slabs
| EPF Wage Slabs of Additional Employe | Benefit to the Employer(per additional employment per month) |
| <= Rs.10,000* | Up to Rs. 1,000 |
| >Rs. 10,000 and <= Rs. 20,000 | Rs. 2,000 |
| > Rs. 20,000 (up to gross wage < = Rs. 1 Lakh/month | Rs. 3,000 |
“The initial guidelines (15 August 2025) did not specify the calculation mechanism for Part B incentives; this was subsequently addressed through a Standard Operating Procedure (SOP) issued on 18 November 2025.”
Implementation Progress: Scheme rolled out across all States and Union Territories, Official landing page Operationalized, Core framework, operating guidelines, and FAQs released, Help Desk/Toll-Free Numbers: 14480 / 1800-180-1850 established, Steering Committee constituted; first meeting held in September 2025, The Secretary (L&E) chaired Interministerial meeting to strengthen outreach and implementation across labor-intensive Ministries, HLEM chaired meeting of State Labour and Industry Ministers in July & August 2025, Parliamentary Consultative Committee meeting on the Scheme convened in August 2025. State Cross Functional team consisting of officers from EPFO, ESIC and CLC constituted for implementation & Outreach Activities. Extensive media and outreach activities across States and UTs with industry collaboration. 14,266 Outreach initiatives 7,744 Workshops and meetings 6,522 Social media engagements
Implementation and Incentive Payment Process
- Online registration: To receive the incentives, an establishment has to register through the EPFO Unified Employer Portal. While registering, it must provide its GST number and details of a bank account linked with its PAN.
- Starting month for incentives: The month in which an establishment crosses the required employment threshold for the first time will be treated as the first eligible month for receiving the incentive.
- Payment cycles: During the first six months, the incentive will be calculated and paid together as a cumulative amount. Only employees who complete the required qualifying period within these six months will be included in the calculation. After this initial period, payments will be made every month. The total incentive will be recalculated, and any amount already paid will be deducted to determine the amount payable for that month.
- Duration of the incentive: The incentive for each additional employee will normally be available for 24 months. For establishments in the manufacturing sector, this period is extended to 48 months. The period starts from the month in which the incentive for that particular additional employee becomes payable. If an establishment does not qualify for an incentive in a particular month, the overall incentive period will not be extended.
- Role of EPFO in calculating incentives: EPFO will verify whether an establishment and its employees meet the eligibility requirements. It will then calculate the incentive automatically through the IT system developed for the scheme, using the Electronic Challan-cum-Return (ECR) data submitted by the establishment.
- Requirement for Part A beneficiaries: A first-time employee receiving the Part A incentive must remain continuously employed with the same employer for the required period. If the employee leaves the organisation and subsequently joins another establishment, they will not be eligible to receive the second instalment of the incentive.
- Replacement of employees: If an employee leaves an establishment and is replaced by another employee, the employer can continue to receive the incentive for the remaining period of the original additional employment. However, the replacement employee and establishment must meet all the other eligibility requirements under the scheme.
- Establishments with pending Section 7A proceedings: Establishments facing an ongoing inquiry under Section 7A of the EPF Act or Para 26B of the EPF Scheme will not be eligible for Part B incentives. The incentive will also be withheld if the inquiry has been completed but an appeal against the order is pending, or if the order has not been challenged but the establishment has not yet complied with it.
- Special provisions for exempted establishments: Establishments that operate their own Private Provident Fund Trust can also receive incentives, provided they fulfil certain conditions. These include filing the required monthly returns, submitting ECRs for the period from August 2024 to July 2025 to establish the baseline employment level, and ensuring that all existing and newly hired employees have Aadhaar-authenticated UANs. The Aadhaar authentication can be completed through Facial Authentication Technology available on the UMANG mobile application. (EY India Tax Alert, 19 November 2025).
PERFORMANCE
Data placed before the Lok Sabha in early 2026 (Unstarred Question No. 3842) put the enrollment 55.9 lakh first-time employees and 1.14 crore re-joinees had been enrolled under the scheme. Since incentives are released only after the completion of six months of continuous employment, these figures primarily indicate the scale of enrolment at this stage rather than completed incentive payments.
The reach of the scheme can also be seen through the number of establishments registered across the country. As of 31 January 2026, 4,39,502 establishments had registered under PMVBRY. Maharashtra recorded the highest number of registered establishments at 70,200, followed by Tamil Nadu (45,985), Karnataka (40,565), Gujarat (37,155), Manipur (35,374), West Bengal (26,765) and Delhi (20,849). Rajasthan had 19,937 registered establishments, while Andhra Pradesh had 11,219. The state-wise variation indicates differences in the uptake of the scheme across states and provides scope for examining whether registration levels correspond with the size of the formal employment base and industrial activity in different regions.
As per Rajya Sabha Unstarred Question, parliamentary data shows that the scheme has reached both major industrial states and smaller states. By July 2026, ₹744.58 crore had been disbursed to 13.18 lakh first-time employees under Part A across the country.
Implementation can also be seen in smaller states. In Manipur, ₹17.65 lakh was given to 513 first-time employees, while 25 establishments received ₹23.08 lakh for creating 405 additional jobs under Part B. Rajasthan also showed good participation, with 19,975 establishments registered under the scheme. It had 1,49,349 new joinees and 3,62,144 re-joinees. The higher number of re-joinees compared to new joinees raises questions about how much of the employment is actually new.
In June 2026, the government organised an incentive distribution programme for PM-VBRY. Prime Minister Narendra Modi announced ₹2,400 crore in incentives, with events held at around 200 locations across the country. Appointment letters were also given to newly recruited workers, showing the government’s focus on bringing workers into formal employment.
However, the data also shows some limitations in measuring the scheme’s overall impact. A Business Standard analysis reported that 62.56 lakh first-time employees had been covered in the first year, which is about 32.6% of the target of 1.92 crore. It also reported 48.5 lakh additional jobs through around 1.86 lakh employers between August 2025 and June 2026. However, it is still unclear how many of these jobs are genuinely new and sustained. There are also concerns about weak labour demand, low private investment and whether the employer incentive is enough to encourage hiring, especially among smaller firms.
Source: Author’s compilation based on Ministry of Labour & Employment data, Lok Sabha Questions & Answers, as on 31 January 2026.
Impact of PM-VBRY:
- Employment Generation:Around 62.56 lakh first-time employees were enrolled against the 1.92 crore two-year target (32.6%). No official year-1 target exists, but assuming even progress over 24 months, ~96 lakh would be expected by now — actual enrollment is only ~65% of that pace. The Ministry argues disbursement shouldn’t be judged on a 12-month basis since payments run till FY31, which is fair for spending, but doesn’t excuse the enrolment shortfall.
- Formalisation: The scheme has expanded EPFO-linked formal employment and social-security coverage, bringing a large number of first-time workers into the formal workforce.
- Sustained Employment: The 6-month and 12-month eligibility conditions encourage retention. However, evidence on long-term job sustainability is still limited as the scheme is relatively new.
- Employer Participation: Around 1.86 lakh employers generated 48.5 lakh additional jobs. However, experts note that participation is stronger among larger formal employers, while MSMEs face compliance and capacity constraints.
- Implementation & Inclusiveness: Disbursement has begun at scale, but women accounted for only about 28.6% of first-time beneficiaries. Administrative hurdles and uneven participation remain key challenges.
EMERGING ISSUES
- A key concern is whether wage incentives actually create new jobs or support hiring that would have happened anyway. Labour economist Santosh Mehrotra argues that job creation mainly depends on demand in the economy. The ₹1,000–₹3,000 monthly incentive may not be enough to strongly influence employers and may explain why Rajasthan shows more re-joinees (3.62 lakh) than new joinees (1.49 lakh). Skill mismatch is another concern, as the scheme focuses more on job creation than improving employability.
- PMVBRY’s ₹99,446 crore outlay saw slow utilisation: PIB confirms ₹2,400 crore disbursed by 19 June 2026, rising to ₹2,814 crore (2.83%) by August 2026 (Business Standard, citing labour ministry data). This reflects three factors: staged payments (released only after 6/12 months’ employment), delayed rollout (Part B’s calculation SOP came only in November 2025), and enrollment shortfall (32.6% of target reached). So low disbursement reflects design plus real delay not purely low uptake, questions remain about the financing system and the role of EPFO in an employment-generation scheme.
- PM-VBRY depends on proper ECR filing, correct baseline data, Aadhaar authentication and timely registration. Errors or delays can prevent employers and workers from receiving incentives. The earlier ABRY also faced similar issues, especially among small businesses related to awareness, documents and the portal.
- The scheme has several monitoring systems, including CAG and internal EPFO audits, along with a grievance mechanism. However, there is still no CAG performance audit or independent impact evaluation. This makes it difficult to assess whether the scheme is creating genuinely additional jobs or whether some firms are hiring temporarily to receive incentives.
- PM-VBRY aims to increase employment among MSMEs and women, but participation remains uneven. Smaller firms face more compliance requirements, while women made up only about 28.6% of first-time beneficiaries. This raises concerns about whether the scheme is reaching groups that face greater barriers to formal employment.
- The scheme requires UAN activation, Aadhaar authentication, face authentication and bank-account linking. These requirements can create difficulties for workers with limited digital access or skills. The extension of deadlines for UAN activation and Aadhaar-linked bank accounts also shows some challenges with these digital requirements.
- PM-VBRY requires coordination between the Central Government, EPFO, states and employers. The need for repeated Centre–State meetings and efforts to increase state participation suggests that implementation has not been uniform. There is also a debate over whether EPFO, which mainly manages social security, should be responsible for an employment-generation scheme.
WAY FORWARD
PMVBRY has a clear focus on creating formal jobs, but its first year shows that some changes are needed:
- Firstly, the scheme should include more skilling support through ITIs and the PM Internship Scheme, along with the employment incentive.
- Secondly, the registration and compliance process should also be made easier for MSMEs, especially for ECR filing, Aadhaar authentication and baseline calculations.
- Thirdly, the government should provide clearer and regular data on actual disbursements, not just registrations. A proper review of the scheme after one year can help identify what is working and what needs to change.
- Finally, PMVBRY should be supported by measures that increase labour demand, such as better access to credit for MSMEs and stronger industrial growth. Better coordination between MoLE, EPFO and state labour departments cn also help improve implementation.
REFERENCES
Press Information Bureau. (2025, July 1). Cabinet approves Employment Linked Incentive (ELI) Scheme. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2141129®=48&lang=2
Press Information Bureau. (2025, July). Cabinet approves renaming of ELI scheme as Pradhan Mantri Viksit Bharat Rozgar Yojana https://www.pib.gov.in/PressReleasePage.aspx?PRID=2206145®=48&lang=2
Press Information Bureau. (2025, December 30). Year end review 2025 – Ministry of Labour & Employment. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2209767®=48&lang=2 (verified — confirms PMVBRY launch date, outlay, and progress figures as of Dec 2025)
Press Information Bureau. (2026, March 27). Periodic Labour Force Survey (PLFS) Annual Report, 2025 [January 2025–December 2025]. Ministry of Statistics and Programme Implementation. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2246009®=48&lang=2 (verified — source for youth unemployment and manufacturing-sector employment share figures)
Press Information Bureau. (2026, August 1). Pradhan Mantri Viksit Bharat Rojgar Yojana (PM-VBRY): Expanding formal employment, securing India’s workforce [PIB Backgrounder]. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2292862®=48&lang=2 (verified — official one-year review backgrounder; itself lists further primary sources, see below)
Ministry of Labour and Employment. (n.d.). PMVBRY scheme guidelines. EPFO. https://pmvbry.epfindia.gov.in/wp-content/themes/epfo-child/assets/images/PMVBRY-Final.pdf
Lok Sabha Secretariat. (n.d.). Unstarred question annexure on PMVBRY. Sansad. https://sansad.in/getFile/loksabhaquestions/annex/187/AU1392_4I7wJ2.pdf?source=pqals
Rajya Sabha Secretariat. (n.d.). Unstarred question annexure on PMVBRY. Sansad. https://sansad.in/getFile/annex/270/AU1536_GzvOyc.pdf?source=pqars
Press Information Bureau. (n.d.). [PMVBRY-related release]. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2275419®=48&lang=2
Press Information Bureau. (n.d.). [PMVBRY-related release]. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2148270®=48&lang=2
Press Information Bureau. (n.d.). [PMVBRY-related release]. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2275547®=48&lang=2
Prime Minister’s Office. (2026, June). PM to disburse incentives worth around ₹2,400 crore under PM-VBRY on 19 June. pmindia.gov.in. https://www.pmindia.gov.in/en/news_updates/pm-to-disburse-incentives-worth-around-%E2%82%B92400-crore-under-the-pradhan-mantri-viksit-bharat-rozgar-yojana-on-19-june/
Employees’ Provident Fund Organisation. (n.d.). PMVBRY official portal. https://pmvbry.epfindia.gov.in/
Employees’ Provident Fund Organisation. (n.d.). PMVBRY scheme details. https://pmvbry.epfindia.gov.in/pmvbry-scheme/
Ministry of Labour and Employment. (n.d.). PMVBRY guidelines and SOPs. https://pmvbry.labour.gov.in/guidelines
Employees’ Provident Fund Organisation. (n.d.). PMVBRY live dashboard. http://pmvbry.epfindia.gov.in/dashboard/
Sansad. (n.d.). Lok Sabha questions and answers. https://sansad.in/ls/questions/questions-and-answers
EY India. (2025, November 19). SOP for calculation of incentive under PMVBRY Employment Linked Incentive Scheme [Tax alert]. https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/alerts-hub/2025/11/sop-for-calculation-of-incentive-under-pmvbry-employment-linked-incentive-scheme.pdf
KPMG India. (n.d.). GOI issues guidelines on Employment Linked Incentive Scheme [Flash news]. https://www.in.kpmg.com/taxflashnews/KPMG-Flash-News-GOI-issues-guidelines-on-Employment-Linked-Incentive-Scheme-1.pdf
Business Standard. (2026, August 16). PM-VBRY scheme meets a third of first-time jobs target in first year. https://www.business-standard.com/economy/news/pm-vbry-scheme-meets-a-third-of-first-time-jobs-target-in-first-year-126081600494_1.html
ABOUT THE CONTRIBUTOR
Mahenoor is a postgraduate in Political Science from University of Calcutta, Kolkata. She is a former UPSC Civil Services Aspirant. Her interests lie in governance, social equity and welfare policy, with a focus on the gap between policy design and on-ground implementation.
ACKNOWLEDGEMENTS
The author thanks the IMPRI review team Khushi and Ninchen Tamang their comments and guidance on this Policy Update.
DISCLAIMER
All views expressed in the article belong solely to the author and not necessarily to the organisation.
