In the spring of 2021, President Biden issued Executive Order 14026 (EO 14026) requiring a $15 per hour minimum wage for government contractors. The increase was met with varied reactions to the potential impact that the Order would have on the government contracting community. Now that the Order is in full effect, all of the speculation has begun to culminate in actual impact and action within the space.
The Basics of EO 14026
The Biden administration issued EO 14026 on April 27, 2021, which requires all government contractors to pay a minimum wage of $15 per hour. For context, the current national minimum wage for employees outside of the government contracting space is $7.25 per hour. On January 30, 2022 the Order and increase went into full effect while still allowing agencies time to adjust their contract solicitations and contracts before the final deadline on March 30, 2022.
Click here to read more about the impact of EO 14026 on government contractors.
EO 14026 and Employee Retention
Questions of employee retention and hiring challenges and advantages have been central across all industries, including the government contracting community. Within the government contracting space, many believe that the minimum wage increase may help contractors attract talent in the current competitive market. The contrasting view hinges on a total compensation approach to attracting talent.
Hourly workers in the United States’ commercial industries – the top competitor to government contractors, in terms of hiring – do not have the same opportunity for hourly benefits rates or sick leave as their counterparts in the government contracting space. Wages are just one factor in the overall picture, which brings a degree of criticism to the Biden administration’s emphasis on the minimum wage.
Select States Mount a Response
In early February 2022 five states – Arizona, Idaho, Indiana, Nebraska, and South Carolina – sued the Biden administration, claiming that the minimum wage increase is an overstep of presidential authority. In a classic conflict of federal authority versus state’s rights, the states claim that EO 14026 violates the Procurement Act and the Spending Clause of the United States Constitution. The outcome of the suit is yet to be determined.
Cost Saving Solutions to Drive Competitiveness
The government contracting space is constantly changing but we are here to help our clients navigate those shifts. We evaluate the needs of every contractor client, to ensure the benefit solution we craft is cost-effective and competitive! In a moment that calls for adaptability, we’re here as a flexible collaborator.
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