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The Service Contract Act & Davis-Bacon Act

The Service Contract Act and Davis-Bacon Act requires minimum wages and benefits paid to all hourly employees charging time directly to a federal service contract as part of a total compensation plan. These amounts are subject to audit by the Department of Labor, Defense Contract Audit Agency, or other agency audit procedures. Failure to prove compliance may subject the contractor to debarment from all government contracts for up to three years.

The Service Contract Act requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor's collective bargaining agreement. The Department of Labor issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies. These determinations are incorporated into the contract.

Vacation, Holiday and other elements of total compensation are listed as separate line items on the Area Wage Determination, which you must account for separately and apply to full-time and part-time employees.

The Davis-Bacon Act, as amended, requires that each contract over $2,000 to which the United States or the District of Columbia is a party for the construction, alteration, or repair of public buildings or public works shall contain a clause setting forth the minimum wages to be paid to various classes of laborers and mechanics employed under the contract. Under the provisions of the Act, contractors or their subcontractors are to pay workers employed directly upon the site of the work no less than locally prevailing wages and fringe benefits paid on projects of a similar character.

The Davis-Bacon Act requirements differ from the Service Contract Act in certain areas, such as, weekly-certified payroll and minimum fringe-dollar amounts list on the Area Wage Determination by labor category, which may range from zero to twenty plus dollars per hour. This complicates the fringe-dollar management, administration and accounting beyond the Service Contract Act. You must track every time segment worked by each employee by type of work and labor category; on every separate contract subject to geographic location in order to report pay and benefits properly.

The Service Contract Act and Davis-Bacon Act contracts require "fringe dollars" to provide employee benefits. These fringe dollars are defined by prevailing wage determinations and the benefits costs are charged directly to the contract. By partnering with Insured Benefit Plans, we will help you develop and implement a benefit strategy that is tailored to your specific needs.

How can we benefit you?

  • Save on payroll assessment taxes
  • Submit more competitive bids
  • Offer medical, dental, vision, disability and life insurance
  • Submit more competitive bids
  • Stay in compliance DOL, IRS and State regulations
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