Government Contractor Employees Earning Minimum Wage Will Receive a 2.4% Increase in January

Last week, the President's decision to forgo a cost of living pay raise for Federal Government employees in 2019 made national news. Other than the Federal workforce and related organizations (e.g. AFGE), not too many gave the decision a passing thought. These decisions however have a way of reverberating back to the public who need an efficient Government bureaucracy, including Government contractors who rely on Government employees to solicit, award, and administer their contracts. The impact may not be felt immediately but it impacts the Government's ability to attract and retain (emphasis on retain) a capable workforce. Spend any time at all with Government employees and you'll soon hear them bemoaning the loss of employees who left for better pay, better working conditions, and better appreciation. They too are looking for an exit. Who's going to fill their shoes? Someone with inexperience, likely. We recently encountered a contracting officer making million dollar decisions, with six months of experience under her belt.

Contractors certainly have their share of anxieties over Government foibles but one thing they don't have to worry about is the Government restricting pay raises (as long as the raises are reasonable). In fact, in some cases, the Government mandates certain pay raises. A few years back, the President issued an executive order setting a minimum wage for contractor employees working under Government contracts. The minimum wage adjusts every year based on a prescribed formula. It started at $10.10 per hour and is currently $10.35 per hour. Beginning in January 2019, the minimum wage increases to $10.60 per hour (a 2.4 percent increase).

Now we don't know how many contractor employees are affected by this Executive Order. We suspect that in the aggregate, the number of contractor employees earning minimum wages is significant but as a percentage of the contractor workforce, not significant. Employees on contracts covered by Davis-Bacon or the Services Contracting Act are already earning more than minimum wage. It seems most likely that minimum wage personnel are those paid for with non-appropriated funds, such as concessionaires on military bases. In any event, if you are a contractor with minimum wage employees, you will need to factor this pay raise into future budgets.