Government Contract Labor Compliance

Contractors often overlook compliance with labor regulations.

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. The reality of complying with prevailing wage rules is an ongoing administrative burden that requires fluid collaboration between Accounting, Finance, Contracts, HR, and Legal departments.

    Say the word compliance to a government contractor and it is unlikely that labor compliance will be the first thing to spring to mind. 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 ensure that they provide the correct combination of the appropriate wages, benefits, vacation, and holidays to employees. When the SCA & DBA regulations were created, Congress could not have predicted the workforce of the 21st century, where employees no longer clock-in and clock-out at 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 and consequences of non-compliance can be harsh, ranging from issuing employee back payments, to contractor suspension or worse, debarment.

    Find out more about how Baker Tilly helps contractors:

    • Perform a Compliance Self-Assessment
    • Properly Classify Employees
    • Assess Back Payment Liability
    • Support DoL Investigations
    • Update Process Design and Documentation
    • Perform Ongoing Compliance Reconciliations

    Perform a Compliance Self-Assessment

    Before the auditors arrive, contractors should perform a self-assessment of their overall compliance, including compliance with the Service Contract Labor Standards (otherwise 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

    Properly Classify Employees

    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 internal 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:

    • Identify covered employees
    • Map employees to prevailing wage categories
    • Prepare conformance requests

    Assess Back Pay Liability

    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

    Support Department of Labor Investigations

    Before an audit begins, we help contractors identify the internal and external resources that 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. We believe that understanding the details of our client’s circumstances, allows us to help our clients 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

    Update Process Design and Documentation

    Because prevailing wages impact all parts of the contract life cycle, effective prevailing wage compliance cannot be assigned to one individual or department. An effective system of internal controls will involve accounting, finance, human resources, contracts, legal, and even the bid and proposal department. We help clients:

    • Design Policies and Procedures 
    • Train functional units on their role in SCA compliance
    • Prepare detailed process workflows

    Perform Ongoing Compliance Reconciliations

    Employers with SCA contracts must ensure that they provide the appropriate wages, benefits, vacation and holidays to employees, in a very specific manner which often does not align to common business practices. Baker Tilly’s SCA Robotic Process Automation (RPA) service 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

    Baker Tilly combined advanced RPA technical capabilities with extensive SCA knowledge and expertise to design and deploy an SCA RPA solution that offers many benefits, including:

    • A cost effective, timely method of maintaining compliance
    • Streamlined data requests
    • Flexibility. Clients may use the Baker Tilly RPA solution for any combination of wage, benefit, holiday, and vacation compliance calculations. Clients determine how often the calculations are performed and have the flexibility to perform calculations at different intervals, (i.e., Health & Welfare calculations performed monthly while vacation calculations are performed annually.)
    • Confidence the calculations are accurate
    • Informed business decisions surrounding SCA through analytics and key performance indicators (KPIs)

    The Business Impact

    • Beyond the peace of mind that comes from timely and accurate SCA compliance, leveraging the Baker Tilly SCA RPA 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

    Interested in learning more?

    Take our survey to provide more information to see how we can help you

    Take the survey

    arrowCreated with Sketch.