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Government Contractors

Department of Labor Increases the SCA Health & Welfare Rate

The Department of Labor (“DOL”) has increased the Service Contract Act (SCA) Health & Welfare (H&W) rate from $4.02 per hour to $4.27 per hour effective June 30, 2015. The DOL memorandum can be found here.

What does this mean for government contractors? If any federal contracts are subject to the SCA, then employers need to ensure that covered employees are receiving the minimum H&W benefit per hour for the first 40 hours in a week that non-exempt employees work on a covered contract. In addition, on any firm fixed price or time & material contracts, the contractor may be subject to an equitable adjustment. Note that the increase must be applied to employees either when the Contracting Officer modifies the contract with the new rate, or upon the exercise of a contract option period or similar.

For those not familiar with the SCA or contemplating entering the federal contracting environment, every contract entered into by the Federal Government in excess of $2,500 where the principal purpose of which is to furnish services in the U.S. through the use of service employees is subject to SCA. The SCA’s basic requirement is that non-exempt workers performing on a covered contract are required to be paid specified minimum wages for their labor category and minimum fringe benefits. Additionally, the SCA requires that work not be performed in unsanitary, hazardous, or dangerous places which may impact the health and safety of covered employees.

If a contract is subject to SCA and the agency does not specify SCA in the contract, the contractor may be subject to SCA requirements which require non-exempt service workers to be paid a minimum wage in accordance with their specified labor category, and a specified H&W rate that covers designated bona fide fringe benefits. Bona fide fringe benefits may include: health insurance, dental insurance, life insurance, accidental death and dismemberment, sick leave paid (if not required by the wage determination or state requirement (i.e. California)), employer contributions to 401(k) plans, severance pay plans, paid vacation or holiday in excess of wage determination requirements, or other types of plans may be approved by the DOL.

While the above covers some of the basic requirements surrounding SCA compliance, many intricacies exist in order to comply with the regulations. For help in determining if you are meeting the new H&W rate or for more information on how to comply with the myriad of details surrounding the SCA, feel free to contact your local Cherry Bekaert GovCon professional.