Service Contract Act

Overview: McNamara-O'Hara Service Contract Act (SCA)
The Service Contract Act (SCA) of 1965 was passed to provide labor standards for service employees of contractors and subcontractors providing services to federal agencies for contracts in excess of $2,500.00.

The SCA requires that government contractors pay their covered service contract employees a minimum wage rate and a standard fringe benefit rate.  Wage rates are based on the locality where work is being performed while the health & welfare (H&W) fringe benefit rate is at a standard rate.  In addition, service contract employees are also entitled to a minimum number of vacation and holiday hours which are also based on the locality where the work is being performed. 

The wage rate paid by the employer must be at or above the minimum rate determined by the U.S. Department of Labor (DOL) for the labor category of work being performed.  The minimum wage rates and fringe benefits requirements are set forth in Wage Determinations (WDs) published by DOL.  Every locality (whether state, county, municipality) has at least two WDs and each calculates the H&W fringe benefit differently.  If the service employees are subject to a Collective Bargaining Agreement (CBA), then the CBA’s wage rate and fringe benefit requirements are applicable to the covered service employees.

Contracting agencies are required to incorporate both the SCA clause and the applicable WD/CBA into the service contract between the government and the prime contractor.  Prime contractors are responsible for incorporating both into its subcontracts.

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