This sector is characterized by low wages, piece-rate work, and often poor working conditions. The main compliance risk is the failure to meet the State Minimum Wage floor and the use of the piece-rate system to escape accurate EPF/ESIC calculation, often in violation of the legal definition of 'wages'.

The Sago processing and Silver anklet (Sankagiri) industries are deeply entrenched in the unorganized and cottage industry space. The challenge is establishing the employer-employee relationship and enforcing statutory contributions where work is often performed at home or in very small, non-factory establishments.

The NWC will specifically target the widespread practice in the Powerloom sector of structuring low basic wages. The new definition of 'wages' will force piece-rate wages to be calculated upwards for EPF/ESIC purposes, dramatically increasing contribution costs and leading to significant operational changes.

Steel plants and ancillary units in Salem depend heavily on contract labour for maintenance, material handling, and logistics, making them highly vulnerable to EPF and ESIC non-compliance by contractors. To prevent retrospective liabilities for the Principal Employer, a Bi-Annual EPF/ESIC Health Check is essential. Every labour contractor should undergo an external compliance audit twice a year, with the report submitted directly to the Principal Employer. Any contractor failing to meet statutory requirements should face immediate contract suspension or termination, ensuring a zero-tolerance compliance environment.

Salem’s sago and cottage industry sectors include hundreds of small, home-based, and unregistered units that struggle to meet EPF and ESIC registration requirements. Extending statutory coverage to these micro-units is essential under NWC 2025 but administratively difficult for individual workshops. A Cluster Registration Model solves this problem by working with local industrial associations—such as sago producers—to create a “Common Code” or “Master Group” registration. This allows dozens of tiny units to be brought under a single administrative umbrella, simplifying compliance, streamlining filings, and ensuring statutory coverage for an otherwise informal workforce.