New Senate Bill to Limit Compensation

Last Thursday, March 15th, Senator's Boxer and Grassley introduced a bill in the Senate to limit allowable compensation for any contractor or subcontractor employee to that of the President of the United States. Currently, the President's compensation is set at $400 thousand. This would represent a significant reduction from the current cap of nearly $700 thousand.

The purpose of Senate Bill No. 2198 is "To implement common sense controls on the taxpayer-funded salaries of government contractors by limiting reimbursement for excessive compensation equal to the pay of the President of the United States". From her press release, Senator Boxer stated:

As Senator Grassley and I made clear in December, we will keep fighting to rein in exorbitant taxpayer-funded salaries for contractors. There is simply no reason that taxpayers should fund government reimbursements for private contractor salaries at a rate more than three times what Cabinet Secretaries earn.

"Compensation" in this context means the total amount of wages, salary, bonuses, deferred compensation and employer contributions to defined contribution pension plans. Although $400 thousand is still a lot of money, many more contractors (and subcontractors) are going to be impacted than are currently impacted by the $700 thousand compensation cap. The lower cap, if implemented, will increase the level of Government oversight in the near term and prime contractors will need to implement controls to ensure that their subcontractors are not passing along excess compensation costs.