If you specialize in services, you are well aware that there are several labor regulations surrounding your workers, especially if you offer those services to the federal government. As a GSA Schedule contractor, you have already gone through the phases of getting your solutions awarded to your contract, but you must also ensure you are keeping up and complying with the latest regulations. One of these is the Service Contract Act (SCA), or often referred to as the Service Contract Labor Standards (SCLS).
Under the SCA, there are certain Wage Determinations (WDs) you need to follow depending on the nature of your services and the locality in order to remain compliant. Since the Department of Labor (DOL) recently updated some Health and Welfare Fringe Benefit Rates in June of 2023, let’s dive into what the SCA is, how to find your applicable Wage Determinations, and how these rates are calculated.
What is the Service Contract Act (SCA)?
First, let’s talk about what the SCA is and how it fits into federal contracting. The Service Contract Act (SCA), formerly known as the McNamara-O’Hara Service Contract Ac of 1965, sets minimum wage and benefit standards for employees who work on federal service contracts. This legislation was created to ensure businesses who work on federal contracts pay their workers fair wages and benefits comparable to the locality where the work is performed.
Who Does the SCA Apply to?
The SCA applies to federal services contracts that exceed $2,500. According to the Federal Acquisition Regulation (FAR) Subpart 22.10, these contracts must contain mandatory provisions regarding minimum wages and fringe benefits, safe and sanitary working conditions, notification to employees of the minimum allowable compensation, equivalent Federal employee classifications, and wage rate.
Contracts that fall under the SCA include, but are not limited to cleaning services, maintenance services, food services, custodial services, and others. You can check out a full list in the SCA Directory of Occupations.
However, there are some exceptions. These include:
- Any contract for construction, alteration, or repair of public buildings or public works, including painting and decorating
- Any work required to be done in accordance with the provisions of 41 U.S.C. chapter 65
- Any contract for transporting freight or personnel by vessel, aircraft, bus, truck, express, railroad, or oil or gas pipeline where published tariff rates are in effect
- Any contract for furnishing services by radio, telephone, or cable companies subject to the Communications Act of 1934
- Any contract for public utility services
- Any employment contract providing for direct services to a federal agency by an individual or individuals
- Any contract for operating postal contract stations for the U.S. Postal Service
SCA Increases Health and Welfare Fringe Benefit Rates
In June 2023, the DOL announced an increase in the Health and Welfare Fringe Benefit Rates for those affected by the Service Contract Act wage determinations. Health and Welfare Fringe Benefit Rates include life, accident, health insurance place, sick leave, pension plans, etc.
The low-level (employee-by-employee) benefit is now $4.98 per hour or $199.20 per week or $863.20 per month. The high-level (average cost) benefit rate is now $4.98 per hour. If you receive a wage determination after June 27, 2023, that does not contain the new Health and Welfare rate of $4.98, we suggest you contact the Wage and Hour Division (WHD) of the DOL. More information about the rate raise can be found on the WHD site.
How Are SCA Wage Determinations Calculated?
With these changes, you may be wondering how the SCA wage determination (WD) rates are decided. A WD is a set of wages, fringe benefits, and work rules that the DOL has ruled to be prevailing in a given locality.
The DOL’s SCA WD rate is calculated to ensure employees working on government contracts receive fair wages and benefits. It’s determined by considering established wage rates and fringe benefits for a given labor category in the locality where the work is performed. What exactly does this mean? Here’s a general outline of how the rate is calculated:
- Determine the applicable wage determination: The DOL issues WDs for specific localities, occupations, and industries. The WD also lists the prevailing wage rates and fringe benefits for various job classifications in that area.
- Identify the job classification: Match the job duties and responsibilities of the employee to the appropriate job classification listed in the WD.
- Determine the prevailing wage rate: Based on the job classification, find the corresponding prevailing wage rate in the WD. This rate represents the minimum hourly wage that must be paid to the employee.
- Determine the fringe benefits: In addition to the prevailing wage rate, the SCA requires employers to provide a minimum level of fringe benefits to their employees. The WD will list the required fringe benefit amount per hour for each job classification.
- Calculate the total SCA rate: Add the prevailing wage rate and the fringe benefit amount to determine the total SCA rate for each employee.
Keep in mind that specific rules and exceptions may apply depending on a host of contract circumstances, but this is the general way rates are determined.
How Do You Find the Current SCA Wage Determination Rates?
You can research the current WDs on SAM.gov’s Wage Determinations page using WD number, SCA Identifier, or category. The DOL also publishes a Prevailing Wage Resource Book outlining everything you need to know about wage determination requirements, SCA directory of occupations, and obtaining SCA wage determinations.
Keeping Up with GSA Schedule Regulations
Hopefully after this blog you have a better understanding of the SCA (or SCLS as it’s referred to) and how to find your Wage Determinations. Unfortunately, this isn’t the only regulation you have to keep up with as a GSA contractor. From sales reporting to modifications and remitting your Industrial Funding Fee (IFF), your contract requires a lot of maintenance to keep it running smoothly. If you want to learn more about contract maintenance, check out our link below, or one of our consultants would be happy to help you stay on top of your GSA Schedule.
