On June 29, 2020, the Wage and Hour Division (WHD) of the U.S. Department of Labor announced that the prevailing health and welfare fringe benefits issued under the McNamara-O’Hara Service Contract Act (SCA) will remain at the current rate of $4.54 an hour. SCA fringe rates are derived from data provided by the U.S. Bureau of Labor Statistics and, despite the lack of change, will be displayed on the U.S. Government website and the Department of Labor’s Wage and Hour Division (WHD) website.
A Brief History of SCA Fringe Rates
The WHD determines SCA compliance for government contractors by calculating the contractor’s average fringe benefit cost for all service employees working on a contract. There is a second means of determining the fringe that is determined on an employee-by-employee basis.
In 2004, the WHD posted an ‘All Agency Memorandum Number 197’ that announced an increase to the fringe benefit rate for all wage determinations and stated that the WHC would retain the two different methods for determining compliance. That policy will continue through this year.
Additionally, Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors (EO 13706) requires certain employers that contract with the federal government to provide their employees with up to 56 hours of paid sick leave family. These hours are also applicable to family care and absences resulting from domestic violence, sexual assault, and stalking. The SCA health and welfare benefits level for employees performing on contracts covered by EO 13706 will be $4.22 for each hour performed on an applicable contract, up to 40 hours per week.
Contractor compliance and cost-effectiveness go hand-in-hand, when it comes to fringe benefits. The advantage goes beyond providing a competitive edge to a contractor and their business, to provide the opportunity of benefits, an obvious boon to employees.
At Boon, we have 35+ years of subject matter expertise in SCA contracts and building better benefits within the designated fringe rate. We understand that compliance presents a particular challenge to government contractors and our business is to remove that obstacle to clear a path for contractor success.
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Sources Regarding SCA Fringe Rates
Please find further information, regarding the 2020/2021 SCA fringe rate at the sources listed below.
All Agency Memorandum Number 232: https://www.dol.gov/agencies/whd/government-contracts/service-contracts/sf98/aam232
Wage and Hour Division: https://www.dol.gov/agencies/whd
Wage Determination: https://beta.sam.gov/
The Basics of the Service-Contract Act: https://boongroup.wistia.com/medias/joq1svhwb5
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