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Updated SCA Health and Welfare Rates Effective July 2025

Updated SCA Health and Welfare Rates Effective July 2025

On July 7, 2025, the U.S. Department of Labor’s Wage and Hour Division issued All-Agency Memorandum 250 (AAM 250), updating the Health & Welfare (H&W) fringe benefit rates under the Service Contract Act (SCA). These annual adjustments help ensure that federal service contractors are adequately covering the cost of employee benefits while remaining compliant with wage regulations.


Under AAM 250, the following updates are effective for contracts awarded or modified on or after July 7, 2025:

  • $5.55 per hour, $222.00 per week, or $962.00 per month for standard H&W fringe benefits
  • $5.09 per hour, up to 40 hours per week, or $203.60 per week, or $882.27 per month for contracts subject to Executive Order 13706, which mandates paid sick leave
  • In Hawaii, where the Hawaii Prepaid Health Care Act applies:
    • $2.42 per hour (non-EO contracts)
    • $1.96 per hour (EO-covered contracts)

Implementation Guidelines for Contractors
In March 2025, Executive Order 14026, which had raised the minimum wage for federal contractors, was revoked by Executive Order 14236. As a result, the Department of Labor is no longer enforcing EO 14026 or its implementing regulations. Contractors should ensure they are not applying outdated EO 14026 wage rates unless specifically directed by their contracting officer.
According to AAM 250, the updated rates apply to:

  • All invitations for bids opened on or after July 7, 2025
  • Newly awarded service contracts
  • Contracts modified or extended (including exercised option years) on or after that date

Premature application of the new rates could risk the contractor’s ability to seek a price adjustment for the increased costs. Adjustments can only be made when the rates are formally incorporated into the contract, specifically through a modification issued by the contracting officer. Contractors should refer to either Federal Acquisition Regulation (FAR) clauses 52.222-43 or 52.222-44, which allow contractors to recover increased labor costs when new wage determinations are adopted depending on the contractor's labor categories and pricing model.


What Should Contractors Do?
Notify Your Contracting Officer
When you receive a Notice of Intent to exercise the next option year after July 7, 2025, or if your option was exercised after that date, check your Wage Determination (WD). If the updated H&W rates are not included, submit a written request to your contracting officer for incorporation. This will help protect your rights to price adjustments and demonstrate good faith compliance. 

Communicate Internally
If your contract is updated with the new H&W rates, notify your payroll, HR, and benefits administration teams. There may be retroactive effective dates, so updating your internal systems promptly is essential to avoid:

  • Underpayment of fringe benefits
  • Non-compliance during DOL investigations
  • Employee dissatisfaction or wage disputes

Document Your Compliance Steps 
If your contracting officer does not act on your request, retain written records of your outreach. You are only required to comply with rates that are officially incorporated in your contract. However, if the Department of Labor later determines that the rates should have been applied, you may still be entitled to a Price Adjustment.

Resources to Help You Stay Compliant
Staying ahead of regulatory changes like AAM 250 can be challenging—but the following resources can help ensure you’re taking the right steps:

Navigating the complexities of SCA compliance—especially with updates like those in AAM 250—requires precision, vigilance, and expertise. Onsi Group specializes in helping federal contractors stay compliant with evolving labor regulations by offering tailored consulting, proactive contract management support, and in-depth training courses offered through Onsi University. From interpreting wage determinations to coordinating internal updates and documentation, our team of committed experts ensures you’re not only meeting your obligations but also maximizing your ability to recover increased costs. Partner with Onsi Group to stay ahead of regulatory changes and maintain compliance with confidence.

- Author: Natalie Le

- Editor: Aaron Ramos

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