Editor's note: After publication of this article, on November 5, 2024, the Ninth Circuit Court of Appeals blocked Executive Order 14026, which increased the minimum wage paid by federal contractors to their employees in connection with covered federal contracts. Click here to read our article on this development.
The U.S. Department of Labor (DOL) has released the new minimum wage rates for federal contractors for 2025.
For work on or in connection with contracts covered by Executive Order 14026, the minimum wage will increase to $17.75 per hour for both tipped and non-tipped employees. As explained by the DOL, “This Executive Order minimum wage generally applies to workers performing work on or in connection with federal contracts that are entered into, renewed, or extended (pursuant to an option or otherwise) on or after January 30, 2022.”
For work on or in connection with contracts covered by Executive Order 13658 — which generally covers contracts before January 30, 2022 — the minimum wage will increase to $13.30 per hour. The required minimum wage for tipped employees will increase to $9.30 per hour.
Now is the time for HR to contact the program managers and contract managers to alert them of the increase so a Request for Equitable Adjustment (REA) can be made. Doing so timely ensures that the company continues to be paid equitably when labor expenses increase due to a compliance obligation. If an REA is not approved prior to January 1, 2025, the contractor is still required to abide by the Executive Order. Backpay from the government customer is not guaranteed, and many contracts have a stipulation that these requests must be made in writing 30 days before the anticipated change in billing.
If the city or state where the work is being performed has set a higher minimum wage than the Executive Order, then the highest amount will become the prevailing wage. This also includes contracts with wage determinations, Service Contract Act, and Davis-Bacon Act contracts. For example, Colorado’s minimum wage is $14.32. For employees performing work on or in connection with contracts covered by Executive Order No. 13658 in Colorado, Colorado’s minimum wage would be the prevailing wage. A contractor should not wait unit the next option year is exercised to make an REA.
If you have any questions or need assistance with understanding what minimum wage rate to implement, please email Employers Council.
Kirsten Ellis is a human resources consultant for Employers Council.