New Minimum Wage Requirements for Federal Contract Workers

The U.S. Department of Labor’s Wage and Hour Division recently announced an important update that impacts federal contractors and subcontractors.

On September 30, 2024, the DOL published the annual minimum wage adjustment under Executive Order 14026, which applies to workers performing work on or in connection with covered federal contracts. Beginning January 1, 2025, the minimum wage rate will increase from $17.20 to $17.75 per hour. This wage increase affects both tipped and non-tipped employees, as well as workers with disabilities.

Background on Executive Order 14026

Executive Order 14026 was signed by President Biden on April 27, 2021. The new minimum wage requirement is likely to influence prevailing wage rates across various industries, as these rates will need to meet or exceed the new federal minimum wage. Executive Order 14026 covers workers performing work on federal contracts in the following areas:

• Procurement contracts for construction covered by the Davis-Bacon and Related Acts (DBA);
• Service contracts covered by the Service Contract Act (SCA);
• Concessions contracts, including those excluded from the SCA under certain regulations;
• And contracts involving federal property or lands to provide services for federal employees, their dependents, or the general public.

What This Means for Employers

If your business is involved in federal contracts, it’s important to take note of this increase and understand how it may affect your workforce and contract bidding process.

1. Review and Adjust Prevailing Wage Rates: The minimum wage increase under Executive Order 14026 is expected to affect prevailing wage rates, even for contracts where the wages are already higher than the new minimum. Employers should review and adjust their wage structures to remain compliant and competitive.
2. Stay Aware of State and Local Requirements: In addition to the federal minimum wage, employers must also be mindful of state and local minimum wage laws when bidding on or performing under federal contracts. These additional requirements may impact your overall payroll and pricing strategies.
3. Subcontractor Compliance: This update applies to both prime contractors and subcontractors. Ensuring that all parties working on federal contracts are compliant with the new minimum wage is essential for avoiding legal and financial penalties.

Executive Order 13658 Minimum Wage Update

For federal contracts that were entered into, renewed, or extended prior to January 30, 2022, the previously issued Executive Order 13658 minimum wage requirements will apply. As of January 1, 2025, the minimum wage under this order will increase from $12.90 to $13.30 per hour, and the minimum hourly cash wage for tipped workers performing on or in connection with covered contracts will increase from $9.05 to $9.30 per hour.

Next Steps for Employers

• Assess Your Contracts: Employers who are federal contractors or subcontractors should review all applicable contracts to determine whether they fall under Executive Order 14026 or Executive Order 13658 and make necessary adjustments to wage rates.
• Update Payroll Systems: Ensure that your payroll systems are updated to reflect the new minimum wage rates effective January 1, 2025.
• Coordinate with Subcontractors: If you are a prime contractor, ensure that all subcontractors are informed and compliant with these new wage requirements.

For any additional questions or assistance, please reach out to our team. We’re here to help guide you through these changes.

For More Information

If you have any questions, please contact our HR team at 210–775–6082, toll-free at 1–888–757–2104, or hr@gbizadvisors.com.