When it comes to government contractors, there are several laws and regulations that a contractor must always keep in mind. The McNamara-O’Hara Service Contract Act of 1965 (SCA), Davis-Bacon Act of 1931, as amended (DBA), and city or county living wage laws create unique challenges for government contractors. From proper administration and record keeping, to figuring out how the fringe contribution can be used as an advantage, there are plenty of contractor compliance concerns surrounding these regulations. Read on to learn more about the laws that government contractors deal with, and how to understand, manage, and apply them!
A Brief History of the Acts
Let’s begin with the DBA. The DBA primarily covers federal construction contracts like bridges, roads, airports, and other infrastructure. The origins of the DBA go back to the Great Depression when construction projects were beginning all across the nation.
The Act prevented contractors from bringing in cheap labor from poorer parts of the country to work on projects. In the interest of protecting local workers, the federal government created prevailing wage laws to level the playing field. Prevailing wage laws look to the wages in the area where the project is taking place, to determine fair wages for workers within each specific field. Federal contractors are required to pay the applicable prevailing wage for each worker. The DBA and its enacted regulations are enforced by the Department of Labor’s Wage and Hour Division.
The SCA pertains to every service employee performing any of the Government contract work. In the mid-1960s, the SCA was adopted to apply the same general principles to services, that the DBA had put in place for construction contracts. The SCA relies on wage determinations to ensure that pay for service personnel, like a security guard or food services worker, is fair for the job classification and the area.
Though similar to the DBA, the SCA is different in some ways. One key difference is that, under the SCA, wage determinations are created based on wages at the county level, whereas, the DBA provides wage determinations at the state level.
Putting the SCA and DBA Into Context
Another difference between the SCA and DBA is the type of records that must be maintained to prove that they’re in compliance with the aforementioned regulations. Under the Service Contract Act, for example, contractors must maintain records regarding fringe benefits for seven years in case of an audit. With respect to the Davis-Bacon Act, contractors must provide certified payroll as well as written records showing fringe benefit calculations and allocations.
Which brings us to the third and final governing regulations for government contractors, city/county living wage laws. Living wage laws essentially mirror the intent of the SCA and DBA, but on a much smaller scale. These kinds of regulations will pop up in certain counties or cities, where the cost of living and other factors may differ from the rest of the area. Living wage laws require an employer to provide a benefit or an hourly cost for the city or county.
Exploring Contractor Compliance Concerns
Contractors have options when it comes to how they utilize the fringe dollar. Some choose to pay the benefit out in cash, but providing bona fide fringe benefits comes with certain tax-preferred advantages. To take advantage of the preferred tax treatment, however, employers must generally take on the administrative burden to maintain compliance.
Third-party administrators can help ease the administrative burden. Boon has the necessary experience and expertise to handle these administrative needs. That leaves contractors open to take advantage of the tax-preferential treatment permitted by the SCA, DBA, and living wage laws. We streamline compliance, so that contractors can skip the hassle.
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