New SCA Health and Welfare Rates Effective July 2024

On July 16, 2024, the U.S. Department of Labor’s Wage and Hour Division circulated an All-Agency Memorandum (AAM) announcing the new Health and Welfare (H&W) rates under the Service Contract Act (SCA). AAM’s like these are used by the Department of Labor to announce changes or adjustments in an effort to help contracting agencies and the regulated community comply with regulations the department enforces. In its latest All Agency Memorandum 246 (AAM 246), the new H&W rate has increased to $5.36 per hour from the previous rate of $4.98 per hour. Additionally, for contracts subject to Executive Order 13706, which mandates paid sick leave, the previous rate of $4.57 has increased to $4.93 per hour.

AAM 246 states that all invitations for bids opened, and service contracts awarded on or after July 16, 2024, need to include the updated Health and Welfare (H&W) rates. Contractors should not rush to implement these new rates without first taking appropriate steps. Unless your contract is awarded, modified or extended after July 16th, this new rate is not applicable to your contract. Moreover, paying these rates prior to having them incorporated into your contract could jeopardize your organization’s ability to obtain a price adjustment for the increase. Your contracting officer could implement the new rates using pen-and-ink changes to your (properly incorporated) Wage Determinations (WD). This kind of change would trigger your organization’s ability to request a Price Adjustment either through FAR 52.222-43 or 52.222-44, whichever is incorporated into your contract.

If your contracting officer does not take action to incorporate the new rates, you should wait until the next option year to follow up on the request. Should your contracting officer still fail to update the contract with the new rates, you are not obligated to adjust to the new rates immediately. However, if during an investigation, the U.S. Department of Labor later determines that the new rates should have been applied, you will be entitled to a Price Adjustment. You are only ever liable or responsible to adhere to the regulatory standards that are specifically incorporated or referenced within the four corners of your contract.

Still unsure exactly what you should do or what you should consider? We got you! By taking the following steps, you will be able to generate evidence of acting in good faith in case of an investigation by the Department of Labor Wage and Hour Division.

What Contractors Should Do:

1. Notify Your Contracting Officer: Upon receiving the “Notice of Intent” to exercise your organization’s next option year on the contract, check to see if these rates are included. If not, ensure you notify the contracting office of the new H&W rates and request or ask if they can be implemented into your contract. Doing this will “paper your file”, showing that you did, in fact, request contracting to include the new rates and any failure to do so resides fully with the contracting office. This also helps contracting stay aware of these changes and allows for a better partnership going forward. Lastly, you are doing what is right for your contract employees serving on this contract!
2. Monitor SAM.gov: Stay updated by regularly checking SAM.gov for the official upload of the new wage determinations by the Department of Labor for each of your contract’s locations. Keep these ready for when your company receives the next “Notice of Intent” to exercise the contracts next option year. Be sure to see if contracting already included the update, and if not, you can request that the WD be updated accordingly.
3. Communicate with Team Members: If your contracting office has incorporated the new rates, ensure your team members are aware of the new H&W rates that need to be updated in your systems along with the effective date of the changes. There is a chance that the new incorporations could have a “retroactive” date preceding the date of the modification or incorporation. Failing to do so can negatively affect the employees, causing loss wages, underpayment of Fring Benefits (including H&W), and setting your organization up for violations during an investigation.
4. Compliance Trainings: Participate in Onsi University’s compliance courses to stay up to date with the new regulations and rates. These courses are designed to equip you with the knowledge to ensure you are complying with SCA and other Prevailing Wage Requirements.

Navigating updates to the SCA H&W rates can be complex, but staying informed and proactive is crucial for maintaining compliance. At Onsi Group and Onsi University, we are committed to supporting you through this transition. Our team of experts are committed to providing the necessary support and assisting with incorporating the new rates, ensuring that you manage these updates confidently and maintain compliance. Our customized services and courses are specifically designed to equip your team with the knowledge and tools required for a seamless adjustment to updated regulations.

If you need further assistance or have any questions, feel free to contact us here.

Author: Joshua Hinckley

Co-authors: Aaron Ramos & Britney Reyes