Compliance
Understanding Service Contract Act Wage Determinations: A Plain-English Guide for Small Contractors
How to find, read, and comply with Service Contract Act wage determinations, including the conformance process when your classification isn't listed.
Most small contractors first encounter the Service Contract Act the same way: they win a federal service contract, open the award documents, and find a 12-page wage determination attached. Some classifications they recognize. Some they don't. The hourly rates are higher than what they were planning to pay. Fringe benefits are listed separately. By the time they understand what they're looking at, they've already priced the bid — sometimes incorrectly.
This article walks through SCA wage determinations from the ground up: what they are, how to find them, how to read them, what to do when your job role isn't listed, and what happens if you get it wrong.
1.What the Service Contract Act Is
The Service Contract Act (SCA), formally the McNamara-O'Hara Service Contract Act of 1965, is a federal law that requires contractors performing service work for the federal government to pay their employees minimum wages and fringe benefits set by the Department of Labor for the locality where the work is performed.1
Who it applies to: Federal service contracts valued over $2,500. This covers a wide range of work — janitorial, security, food service, grounds maintenance, building maintenance, IT services, staffing, healthcare support, and dozens of other service categories.
Who enforces it: The Department of Labor's Wage and Hour Division (WHD).
The core obligation: Pay the wage rates and fringe benefits listed in the wage determination attached to your contract. The rates are not optional. They are not negotiable with the contracting officer. They cannot be reduced because your bid came in low.
You may also see SCA referred to as SCLS (Service Contract Labor Standards). This is the same law under modernized terminology used in newer FAR references and DOL publications.2
The SCA does not apply to construction contracts (those fall under the Davis-Bacon Act) or to contracts for the manufacture or furnishing of materials (those fall under the Walsh-Healey Public Contracts Act). For service contractors bidding federal work, the SCA is the wage compliance framework that governs your labor costs.
2.What's in a Wage Determination
A wage determination (WD) is a document published by the DOL Wage and Hour Division. For one specific locality — typically a county, group of counties, or metropolitan area — it lists everything a contractor needs to know about minimum labor costs:3
- Job classifications, drawn from the DOL Directory of Occupations (examples: Janitor, Window Cleaner, Security Guard I, Computer Operator I, Food Service Worker)
- Minimum hourly wage rate for each classification
- Required fringe benefits — the health and welfare (H&W) hourly contribution
- Paid holiday requirements — typically 10-11 federal holidays per year
- Paid vacation requirements — typically scaling with years of service
- Effective date and revision history
Each WD has a unique identifier — for example, 2015-4265, Revision 26 — and a specific effective date. When a WD is revised, the new version supersedes the old one for contracts awarded or extended after the revision date.
The most important concept to internalize: the rates in a wage determination are minimums, not maximums. You can pay more than the listed rate. You cannot legally pay less. The H&W fringe benefit must be paid in addition to the base wage, either as cash on top of the wage or as bona fide benefits (health insurance, retirement contributions) of equivalent value.
Keep reading — free
Sign up for free access to the rest of this article, plus the full BidVictor library and updates when new articles publish.
No credit card. Cancel anytime.