Service Contract Labor Standards (SCLS) Minimum Health & Welfare Amounts Increased

At a Glance:

• For contracts not covered by Executive Order (EO) 13706, the health & welfare (HW) fringe rate increased from $4.80 to $4.98 per hour.
• For contracts covered by EO 13706, the HW increased from $4.41 to $4.57 per hour.
• The current Wage Determination (WD) applies until the Contracting Officer incorporates a new WD into the contract. To be eligible for an equitable adjustment, it is not recommended to apply the new HW until the WD is incorporated into the contract.

Aprio’s GSA Schedules Consulting Team can help you identify eligible price increases and address SCLS compliance questions.

The Full Story:

In June 2023, the Department of Labor (DOL) Wage and Hour Division (WHD) increased the prevailing health and welfare (HW) fringe rate under the Service Contract Labor Standards (SCLS). For contracts not covered by Executive Order (EO) 13706, Establishing Paid Sick Leave for Federal Contractors, the HW increased from $4.80 to $4.98 per hour.

For contracts covered by EO 13706, the HW increased from $4.41 to $4.57 per hour. For employees in Hawaii covered by the Hawaii Prepaid Healthcare Act (HPHCA), the HW increased to $2.15 per hour for contracts not covered by the EO and $1.74 per hour for contracts covered by EO 13706.

To determine if EO 13706 applies to your contract, look for FAR clause 52.222-62 in your contract.

What do I need to do for my SCLS-covered contracts?

Before rushing to increase wages or benefits for workers on SCLS-covered contracts, the Contracting Officer (CO) must incorporate a new wage determination (WD) into the contract through an official modification before the updated rates impact the contract.

Price adjustments may not be granted to service contractors that increase employee wages or health and welfare rates before the new WD is incorporated into the contract.

Contracting Officers should incorporate the most recent WD when exercising a contract option, extending a contract, or changing the scope of work in a way that significantly affects labor standards requirements – but not less than every two years. Although it is not the contractor’s responsibility to request that a new WD be incorporated, contractors should be proactive and reach out to the CO when approaching a contract option.

What increases am I entitled to when a new Wage Determination is incorporated?

Depending on the type of contract FAR 52.222-43 — Fair Labor Standards Act and Service Contract Labor Standards – Price Adjustment (Multiple Year and Option Contracts) or FAR 52.222-44 — Fair Labor Standards Act and Service Contract Labor Standards – Price Adjustment may apply. Adjustments are limited to the actual increases in wages and fringe benefits and the associated increases in social security and unemployment taxes and workers’ compensation insurance. General and administrative costs, overhead, and profit are not included.

How does this impact my GSA Multiple Award Schedule (MAS) contract?

The General Services Administration (GSA) is responsible for incorporating new Wage Determinations (WDs) for Multiple Award Schedule contracts. Annually GSA incorporates new WDs via a mass modification issued to all MAS contract holders. GSA last incorporated new WDs in the mass modification for solicitation refresh #16 (A856) in May 2023.

Because GSA recently incorporated new WDs, the HW increase described above does not apply to MAS contracts and associated task orders. Task orders cannot incorporate WDs different from those incorporated into the MAS contract. The current WDs applicable to MAS contracts and task orders can be found here.

The Bottom Line

If an SCLS-covered contract is coming up for extension, look for a new wage determination that incorporates the updated HW and be prepared to request any eligible equitable adjustments.

If you need assistance identifying eligible price increases or other SCLS compliance questions, please contact Aprio’s GSA Schedules Consulting Team.

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