When it comes to government contractor priorities, compliance tops the list. When working on federal contracts, contractors become subject to a host of rules, regulations, and laws – each vitally important and mandatory. Whether a contractor is the prime contractor on a project or a subcontractor, compliance has to trickle from the top all down to the bottom. If any contractor falls out of compliance, the consequences can be severe. That’s why Boon offers compliance solutions that cover all the bases!
Compliance Responsibility Flows From Top to Bottom
A subcontractor is subject to any regulations that govern the prime contractor when that subcontractor enters the performance of any service in connection to a government contract. Per the Service Contract Act, it is the responsibility of the prime contractor to ensure that all hourly workers working on the contract, including all subcontractors’ employees, are paid the proper prevailing living wage and fringe rate.
Many subcontractors do not have access to the professionals and compliance solutions that a prime contractor may employ. This makes the burden of compliance all the greater, as so much of that administration and reporting falls upon the prime contractor and any resources at their disposal. Benefits administration and proper reporting can be a headache all on its own, without the added stress of auditing and ensuring compliance by all subcontractors. If a subcontractor falls out of compliance, the prime contractor suffers the consequences and assumes responsibility for any penalties and back wages owed. That’s a lot to handle!
The Consequences of Non-Compliance
The consequences of non-compliance can be detrimental to a contractor’s business. In 2021 alone, the Wage and Hour Division of the Department of Labor (DOL) recovered more than $48 million in back wages due to over 21,000 employees working on federal contracts. The offending businesses incurred enormous penalties, owed massive amounts in back wages, and, worst of all, many are barred from working on federal contracts in the future.
Take, for example, a recent DOL lawsuit against the prime contractor Clean Harbors Environmental Services (Clean Harbors). In January 2022, the DOL filed suit against Clean Harbors to ensure that its subcontractors paid 3,964 employees working at 88 sites in Iowa. Investigations into Clean Harbors’ subcontractors found that the subcontractors had violated the Service Contract Act by failing to pay workers according to the applicable wage determination. Workers were being paid less than the required prevailing wage and fringe benefit due to a miscalculation. The result was $3,348,543 in prevailing wages, overtime, and fringe benefit back wages due – with Clean Harbors taking full responsibility.
Other Compliance Concerns for Contractors
Beyond “top to bottom” compliance worries, there are several other compliance concerns that government contractors must grapple with. Audits by the Department of Labor, for example, can be stressful ordeals that are nerve-wracking in the best case scenarios and reveal major compliance pitfalls in the worst. The DOL recently announced its plans to add 100 investigators to its team to support enforcement efforts – including investigations of prevailing wage compliance for federal contractors.
Maintaining compliance with fringe contribution requirements and expenditures hinges on proper reporting and careful administration. Every fringe dollar must be accounted for. Benefit elections, hours worked, and paying the correct wage must be tabulated for every individual employee. The burden of proper reporting and maintaining compliance falls squarely on the shoulders of the prime contractor, which means that many contractors find themselves facing the intimidating task of managing benefits administration. That sounds exhausting!
Compliance Solutions Geared Toward Contractor Success
For 35+ years, Boon has been innovating fringe benefit and compliance solutions designed specifically to meet the needs of the government contractor. We are constantly adapting our fringe benefit options to meet the current needs of the industry and to be compliant with the laws and regulations governing federal contractors.
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