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:
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.
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.
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.
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.
Fee based can mean an employee is paid per service, (e.g., like a consultant.).
Offering the option of benefits (for the purposes of this answer we will assume benefits include the option to participate in a healthcare plan) and providing cash in-lieu when the value of benefits falls below the minimum health and welfare due is SCA compliant. However, in order to be ACA compliant, the contractor must offer “affordable” healthcare to all employees who work more than 30 hours per week. “Affordable” in this instance means employee participation in healthcare is less than 9.5% of their household income.
Contractors who do not provide bona fide benefits that meet the minimum H&W rate are required to pay the remaining difference in cash. Health insurance is not the only benefit that will reduce H&W due to the employee. Benefits such as employer paid dental, vision, life insurance, profit sharing, employer 401K contributions, STD, LTD, education assistance, paid sick leave, paid jury duty, and bereavement can help to reduce H&W due to covered employees.
If salaried employees are non-exempt, they are eligible to receive health and welfare in accordance with the prevailing wage determination. This health and welfare obligation can be satisfied by bona fide benefits or cash in-lieu.
Bona fide fringe benefits include, but are not limited to the following: health insurance, dental, vision, life insurance, profit sharing, employer 401K contributions, STD, LTD, education assistance, paid sick leave, paid jury duty, and bereavement.
Yes, SCA wages and H&W must be reported separately in the pay records and on the pay stub. If the two are reported together it allows the possibility of DOL making a claim that a contractor did not pay H&W.
For more information on this topic, or to learn how Baker Tilly government contractor specialists can help, contact our team.