SCA Fringe Benefit Rates Increase and Become More Complex

The U.S. Department of Labor recently released a memorandum to all contracting agencies of the federal government and the District of Columbia, in which it increased the Service Contract Act Health and Welfare Fringe Benefit rate. The new rate of $4.41 per hour applies to government contract bids or other service contracts awarded on or after August 1, 2017 (with the exception of Hawaii, for which a separate rate applies). This rate reflects a $0.14 per hour increase from the current rate.
However, for contracts covered by Executive Order 13706, a lower rate of $4.13 per hour has been set. Executive Order 13706 requires covered contractors to provide employees up to 56 hours of paid sick leave annually. The lower rate is designed to offset the cost of the required paid sick leave, which cannot be credited toward meeting the Service Contract Act Health and Welfare requirement.

Rates go into effect when a contracting agency modifies a contract covered under the Service Contract Act, by updating the Wage Determination. The new Health and Welfare rates must be included in updated Wage Determinations in all invitations for bids opened or other service contracts awarded on or after August 1, 2017. Wage Determinations reflecting the new fringe benefit rates are available at https://www.wdol.gov/.

Government contractors should review their systems for tracking Health and Welfare benefits to ensure compliance.

Contact info: Meredith S. Campbell Chair, Employment and Labor Group, Shulman Rogers mcampbell@shulmanrogers.com | T 301.255.0550 | F 301.230.2891

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