Service Contract Act (SCA) Fringe Update 2023

Every year the Department of Labor (DOL) Wage & Hour Division reviews the cost of health coverage to determine if or how much the Health & Welfare (H&W) should increase or stay the same as the prior year. This year, the DOL issued Memo Number 243 announcing the new fringe rate for SCA-covered contracts effective June 27, 2023, applicable on the next anniversary date of multi-year current SCA-covered contracts or at the beginning of the covered contract option period, as well as appropriate new SCA covered contracts:

 

• $4.98 per hour (increased from $4.80) 
• $4.57 per hour for EO 13706 contracts (increase from $4.41) 
• $2.15 per hour for Hawaii Prepaid Healthcare Act (HPHCA) employees 
• $1.74 per hour for Hawaii Prepaid Healthcare Act (HPHCA) employees on EO 13706 contracts 

 

Compliance with the Service Contract Act is just one of the major domestic requirements necessary for any contractor. The McNamara-O’Hara Service Contract Act (SCA) of 1965 is one of the most important laws that contractors must comply with domestically for federal service contracts over $2,500. The SCA requires hourly service employees charging work hours directly to a domestic federal service contract to be paid wages and provided with bona fide fringe benefits or the fringe rate equivalent paid out in cash, including all current and future DOL Update Memos issued that change the fringe rates.

 

For contractors working under the Service Contract Act, fringe benefit compliance, proper reporting and administration, and subcontractor compliance are all vital to avoiding penalties that could cost contractors more than just profits.

 

When working with the federal government, you must understand these requirements and have a proper plan in place. The AssuredPartners Government Contractor Solutions team is there to help.