On April 27, 2021, President Biden announced Executive Order (EO) 14326. This will establish an hourly minimum wage for workers on Federal contracts such as trades, laborers, clerical, some medical positions, and much more. Beginning January 30, 2022, federal agencies will start incorporating the $15 minimum wage in new contract solicitations and will be required to have it incorporated in all contracts by March 30, 2022. Any ongoing contracts will have the wage requirement at the option.

How Will This Executive Order Impact Tipped Employees?

Tipped employees on federal contracts will also receive a minimum wage increase to $10.50 per hour. The wage will increase within 85% of the minimum wage in 2023 and will again increase to reach $15 by 2024 to equal the minimum wage for untipped employees.

To ensure annual inflationary increases, the EO establishes the requirement to index the minimum wage to an inflation measure, such as the Consumer Price Index for Urban Wage Earners and Clerical Workers. Between now and January 30, 2022, contractors can anticipate the release of new Department of Labor Service Contract Act Wage Determinations (WD) to include new minimum wage. It is recommended that you include annual escalations in your RFQ/RFP pricing responses to cover the increases in the minimum wage annually.

How Can Federal Contractors Prepare for the Minimum Wage Increase?

Review our post that helps understand The Service Contract Labor Standards. It is vital that contractors understand the requirements and regulations of the Wage Determinations Under the McNamara-O’Hara Service Contract Act . Federal contractors providing non-exempt personnel under a federal contract are required to pay employees a Base Rate, Health & Welfare, and provide Holiday & Vacation established in the applicable wage determination. Failure to provide the established minimum in the WD can result in penalties.

Coley has over 20 years’ experience in helping our clients accelerate government contracting success, staying compliant and navigate all aspects of the Federal marketplace. For support on Wage Determinations and other any additional questions, please contact Coley at [email protected] or directly by phone: 210-402-6766.

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