Federal contractor minimum wage increasing to $15 per hour

Posted April 30, 2021 

Federal contractors will pay a minimum wage of $15 per hour under an executive order signed by President Biden on April 27, 2021. The new rate will take effect on January 30, 2022, for new contracts. It will apply to existing contracts when they are extended.

This change only impacts federal contractors and subcontractors. The country’s standard minimum wage remains $7.25 per hour, although the federal contractor increase may put more pressure on private sector employers to raise wages.

Who is a federal contractor?

A company that does business with the federal government is a federal contractor. A company may have a contract to build roads or bridges, run a restaurant in a federal building, or provide cleaning services to a federal agency.

Federal contract workers may be employed as cleaning professionals and maintenance workers in government buildings, or work as nursing assistants in veteran hospitals. Others work in cafeterias and other food service facilities. Others are laborers who build and repair federal infrastructure.

Under a previous executive order, workers providing recreational services on federal lands were exempt from the federal contractor minimum wage. The new executive order removes this exemption.

Inflation-adjusted increase

The current federal contractor minimum wage is $10.95 per hour. As with the current federal contractor minimum wage, the new $15 per hour minimum wage will be adjusted for inflation each January 1. The first inflation-adjusted increase takes effect on January 1, 2023.

Tipped federal workers

The new executive order also impacts the minimum wage for government-employed tipped workers, gradually bringing it to the rate paid to non-tipped workers.

The rate for tipped workers employed under federal contracts will increase from $7.65 to $10.50 per hour in 2022. The next year it will increase to 85 percent of the federal contractor minimum wage and will be equal to the federal contractor minimum wage in 2024.

The country’s standard tipped employee minimum wage remains $2.13 per hour.

Posting implications

Federal contractors will continue to need a new minimum wage poster each year. The new executive order incorporates existing federal contractor minimum wage regulations, including those requiring a posting.

The next posting change will take effect on January 30, 2022, when the $15 rate takes effect. Annual updates will be required, as the rate will be adjusted for inflation.

This article was written by Terri Dougherty of J. J. Keller & Associates, Inc.