Government Contract Labor Compliance
Baker Tilly’s government contracting team helps contractors navigate labor compliance requirements to avoid the harsh consequences of non-compliance.
Government Contract Labor Compliance
On the surface, compliance with prevailing wage requirements is simple – provide a minimum wage and benefits to covered employees. However, in practice, contractors struggle with correctly identifying, classifying and compensating employees. Complying with prevailing wage rules is an ongoing administrative burden that requires fluid collaboration. Accounting, finance, contracts, HR and legal are all involved in compliance.
It is unlikely that labor compliance is top of mind to most government contractors. In fact, contractors may not even realize that their contracts incorporate prevailing wage requirements. Yet, compliance is complicated and the consequence of failing to comply are significant.
Employers with contracts incorporating prevailing wage clauses must provide the correct combination of wages, benefits, vacation and holidays to employees. When the SCA and DBA regulations were created, Congress couldn’t have predicted the workforce of the 21st century. Employees no longer clock in and out of the same project site, on the same contract every day. These requirements no longer dovetail with the way employees work and companies provide benefits.
However, the regulations remain. The consequences of non-compliance can be harsh, from issuing employee back payments, to contractor suspension or worse, debarment.
Find out more about how Baker Tilly helps contractors:
Before the auditors arrive, contractors should perform a self-assessment of their overall compliance. This includes the Service Contract Labor Standards (known as the Service Contract Act), the Davis Bacon Act and Collective Bargaining Agreements. The roles and responsibilities of the contracting officer, the Department of Labor and the contractor are often misunderstood, complicating compliance. Prior to an audit, Baker Tilly’s government contracts practice can help:
- Conduct a proactive risk assessment
- Evaluate whether benefits provided are bona fide
- Determine contract coverage
- Determine and remediate risks related self-insured benefit plans
- Identify and resolve unintended red flags
Employers must carefully categorize employees to identify those who are covered by prevailing wages. Not every employee on a covered contract is covered by prevailing wage requirements. And unfortunately, identifying covered employees is only step one of the process. Contractors must “map” their job positions to the prevailing wage labor categories, a task more difficult than it should be. Baker Tilly’s government contracts practice assists contractors with:
- Identifying covered employees
- Mapping employees to prevailing wage categories
- Preparing conformance requests
Sometimes, despite best attempts to comply, contractors may find themselves historically non-compliant. Leveraging our experience with the Department of Labor, Baker Tilly government contracts practice can:
- Conduct a proactive risk assessment to determine audit risk
- Evaluate costs, analyze systems and review policies and procedures to determine compliance with contract requirements
- Identify, quantify and remediate potential risk areas
- Calculate detailed by-person back pay amounts
- Manage the self-disclosure process with the Wage and Hour Division
Before starting an audit, we help contractors identify the internal and external resources necessary. These resources will work with the auditors and respond to information requests. Audits can last anywhere from several weeks to months (or even years), which can create significant strain on contractor resources.
During the audit, we address contentious issues by first gathering the facts. Understanding our client’s circumstances allows us to help manage the dialogue and successfully resolve difficult issues. In this regard, we:
- Establish a disciplined audit liaison and audit request management protocol
- Provide full- or part-time “surge support” during the audit
- Provide ad-hoc support to client audit response teams and facilitate communications with government auditors
- Identify and resolve audit issues in real time
- Coach client personnel working with the government audit team
- Draft communications to investigators
Because prevailing wages impact the entire contract life cycle, effective prevailing wage compliance cannot be assigned to one individual or department. An effective internal controls system will involve accounting, finance, HRs, contracts, legal and even the bid/proposal department. We help clients:
- Design policies and procedures
- Train functional units on their role in SCA compliance
- Prepare detailed process workflows
Employers with SCA contracts must ensure they provide the appropriate wages, benefits, vacation and holidays to employees. However, they must do so in a very specific manner that does not align to common business practices. Baker Tilly’s prevailing wage digital solution simplifies (and may improve) employer compliance where:
- Employees work on multiple contracts in a pay period, whether SCA covered or not
- Employees work on contracts with differing wage determination requirements
- Employees work remotely
- Employees can pick and choose from different benefits, complicating the calculation of the hourly value of benefits provided
- Employers maintain standard holiday and vacation policies but must demonstrate compliance with the SCA minimums
We combined robotic process automation (RPA) technical capabilities with extensive prevailing wage knowledge to design and deploy a solution that offers:
- A cost effective, timely method of maintaining compliance
- Streamlined data requests
- Flexible RPA solution for any combination of wage, benefit, holiday and vacation compliance calculations. Clients determine frequency of calculations and can perform them at different intervals (Health & Welfare monthly, vacation annually)
- Confidence the calculations are accurate
- Informed business decisions through analytics and key performance indicators
The business impact
Beyond the peace of mind that comes from timely/accurate SCA compliance, the Baker Tilly prevailing wage digital solution allows clients to:
- Reduce the cost of compliance with SCA. Clients no longer need to dedicate internal resources to the effort or pay consultants on an hourly basis
- Utilize KPIs for strategic decision making surrounding benefits to be provided and fringe rates when bidding SCA projects
- Issue employee statements, which underscore management’s commitment to compliance and reduces the risk of a Department of Labor investigation
Prevailing wage automated reconciliation survey
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