Service Contract Act Fringe Rate Increases for 2025: What Government Contractors Need to Know

The U.S. Department of Labor (DOL) has released updated Service Contract Act (SCA) health and welfare fringe benefit rates, effective July 7, 2025, through All Agency Memorandum No. 250. These rates apply to contracts covered under the McNamara-O’Hara Service Contract Act and represent an increase in required employer contributions toward employee health and welfare benefits.

New SCA Fringe Benefit Rates

As announced in the memorandum, the following fringe benefit rates apply:

• $5.55 per hour (increased from $5.36)
• $5.09 per hour for contracts subject to Executive Order 13706 (increased from $4.93)
• $2.42 per hour for Hawaii Prepaid Healthcare Act (HPHCA) employees
• $1.96 per hour for HPHCA employees performing work covered by Executive Order 13706

The updated 2025 SCA fringe rate and All Agency Memorandum 250 are available on SAM.gov and the DOL’s Wage and Hour Division website.

When Does the New Fringe Rate Apply?

The new rate becomes effective for a specific contract only after the contracting officer formally incorporates it. This typically happens:

• On the anniversary date of a multi-year contract, or
• At the start of the next contract option period after July 7, 2025.

Contractors should confirm with their contracting officer when the adjustment takes effect and update cost proposals and pricing accordingly.

What This Means for Government Contractors

These fringe rate increases can impact labor cost calculations, pricing, and overall contract competitiveness. For government contractors, especially those managing multiple SCA-covered contracts, understanding and accurately applying these rates is critical to maintaining compliance and profitability.

Our AssuredPartners Government Contracting team specializes in helping contractors navigate these changes. We work with clients to:

• Analyze how fringe rate adjustments affect total compensation costs
• Develop compliant strategies for managing SCA and Executive Order 13706 obligations
• Ensure your benefits programs remain competitive while meeting DOL requirements

Partner With a Team That Understands GovCon

Fringe rate updates are just one of the many compliance challenges federal contractors face. Whether you’re pricing new work or managing renewals, the AssuredPartners GovCon team can help you make informed decisions that protect your margins and support compliance.