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Service Contract Act and Davis Bacon Act compliance: Hourly wages questions and answers

April 17, 2015

In a recent Deltek webinar, titled “Compliance Check-in: A Guide to SCA & DBA Compliance”, Baker Tilly government contractor advisors discussed multiple facets of the Service Contract and Davis Bacon acts. To clarify hourly wages concerns, the following questions were addressed:

1. What are the requirements to pay out vacation to an employee after one year?

Vacation, as stipulated by the wage determination, for a covered-employee vests on the employee’s anniversary date and is due to the employee (used by the employee with any unused balanced paid out) no later than the following anniversary date.

2. If the H&W portion is increased, can the contractor decrease the employees pay rate to recover the amount of the health and welfare (H&W) increase if the resulting pay rate is above the wage determination (WD) or The Fair Labor Standards Act of 1938 (FLSA) minimum wage amount?

A contractor is only required to pay the wage rate as specified by the prevailing wage determination. A contractor may reduce the wage rates to align with the WD; however, wages in excess of WD rate may not be used as a credit against H&W due. Please note than any reduction in wages will likely cause some amount of discontent among covered-employees and should be managed carefully.

3. And if it is acceptable to reduce the pay rate, would the contractor still be able to request a funding adjustment to recover the additional H&W cost?

When a new wage determination (WD) is incorporated into a contract, contractors have 30 days to file a request for equitable adjustment to recoup costs associated with any increase in wages or H&W due to the new WD.

4. How do you handle Independent Contractors (specifically vacation and holiday requirements) who work on a sporadic basis on an SCA contract?  The type of work they perform would be considered non-exempt and therefore subject to SCA.

Holiday or vacation pay obligations to temporary and part-time employees working an irregular schedule of hours may be discharged by paying such employees a proportion of the holiday or vacation benefits due full-time employees based on the number of hours each such employee worked in the workweek prior to the workweek in which the holiday occurs, or with respect to vacations, the number of hours which the employee worked in the year preceding the employee’s anniversary date of employment.

5. Does "fee-based" mean an employee is paid hourly instead of salary?