The U.S. Department of Labor has released its annual memorandum regarding the rate for Service Contract Act (SCA) Health and Welfare Fringe Benefits. The new rate of $4.41 per hour (up from the 2015-2016 rate of $4.27 per hour) is required in all government contract bids or other service contracts awarded on or after August 1, 2017.
As prescribed by the regulations, the benefit rate is derived from the latest Bureau of Labor Statistics (BLS) Employment Cost Index (ECI), summary of Employer Cost for Employee Compensation (ECEC). The rate will be posted on the Wage Determinations Online (www.wdol.gov) and Wage and Hour Division (WHD) (www.dol.gov/whd) websites.
SCA benefit change notices are not sent directly to contractors or subcontractors, so we wanted to make sure our SCA contractor clients were aware of this rate increase. A copy of the memorandum can be viewed here.
A significant item of note in this year’s All Agency Memorandum 225 (AAM 225) is the introduction of a special reduced health and welfare fringe benefit rate of $4.13 per hour for employees performing on contracts covered by Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors.
Additionally, a special rate of $1.91 per hour is set for Hawaii, which takes into account that state’s mandatory health insurance coverage. However, an employer may use this lower rate only if it actually makes contributions for employees under the Hawaii Prepaid Health Care Act.
The obligation to pay employees prevailing wages and benefits in compliance with the SCA requirements falls to contractors and subcontractors, who are liable for any violations. However, it is the contracting agency’s obligation to provide correct and updated WDs to the prime contractor, and the prime contractor’s responsibility to flow-down updated WDs to their subcontractors.
Government contractors should check routinely to determine if new WDs have been provided to them by contracting agencies into their contracts. If the agency has not provided an updated WD as required, contractors should request that the agency do so and be sure to document their compliance efforts.
GSA’s counsel is working to provide official guidance on this new wrinkle in the memorandum and will be released upon completion. If you have questions about these changes and how they impact your contract(s), call us at 1.800.250.2741 or email us at email@example.com.