The U.S. Department of Labor (DOL) recently issued a notice of proposed rulemaking to implement President Biden’s Executive Order 14026, requiring federal contractors to pay a $15 per hour minimum wage to employees working on federal contracts starting Jan. 30, 2022. The DOL’s proposed rule creates the standards and procedures to implement and enforce the executive order. DM Payroll Solutions explores the proposed rule’s provisions below.

Currently, the minimum wage for employees working on federal contracts is $10.95 per hour and the tipped minimum wage is $7.65 per hour. The proposed rule intends to:

1. Increase the hourly minimum wage for federal contractors to $15 per hour starting Jan. 30, 2022.
2. Index the minimum wage to an annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. Wages will be rounded up to the nearest $0.05.
3. Remove the tipped minimum wage for federal contractors by 2024. Starting Jan. 30, 2022, the tipped minimum wage will be $10.50 per hour. On Jan. 1, 2023, the wage will be 85% of federal contractor minimum wage in effect (rounded up to the nearest $0.05) and on Jan 1. 2024, the tipped minimum wage will conform to the federal contractor minimum wage.
4. Reinstate minimum wage protection to outfitters and guides operating on federal lands.

The comment period for the proposed rule ends on Aug. 27, 2021.

Prepare for the Increase

In the event the proposed rule is implemented and the minimum wage for federal contractors is increased, be prepared to make the adjustments in your payroll processing system to avoid expensive compliance penalties.

DM Payroll Solutions stays on top of the latest tax laws on our clients’ behalf and will make these adjustments automatically in the system. If you’re not a current DM Payroll Solutions client and need help managing your workforce’s pay increases, contact us today.