New Fringe Rate and Existing Contracts: What to Know

Increase in Fringe: How does it affect you?

Complying with prevailing wage laws and fringe benefit regulations is a must for any government contractor. With the recent release of the All Agency Memorandum no. 225 last July 25, you may be wondering how it impacts the existing provisions under the Service Contract Act.

To guide you on the new fringe rate and existing contracts, here’s what you need to know.                                                                      

Updating the New Fringe Rate

The Wage and Hour Division of U.S. Department of Labor released the All Agency Memorandum Number 225 was released last Jul 25 2017 by the. It provides the yearly update on the Service Contract Act Health and Welfare Fringe Benefit.

The memorandum covers all contracting agencies of the federal government and the District of Columbia. The latest update mentions a change in the rate under SCA for 2017. Specifically, the prevailing health and welfare fringe benefits rate issued under the SCA is now increased to $4.41 per hour.

Calculating the Fringe Benefit Rate

The change in rate still follows the regulations prescribed under the McNamara-O’Hara Service Contract Act. The fringe benefit rate is taken from the most current Bureau of Labor Statistics Employment Cost Index (BLS ECI), summary of Employer Cost for Employee Compensation (ECEC).

Implementation Guidelines

The memorandum specified that the new higher health and welfare benefit rate was effective August 1 2017. Last August 1, the updated benefit rate was posted on the Wage Determinations Online website ( and the Wage and Hour Division website (

The released All Agency Memorandum Number 225 does not provide further guidelines on how the fringe benefit rate change will be applied.

The posted updated wage and fringe benefit determinations do not automatically apply on existing contracts agreed upon prior to August 1.  The posted rate will only apply when the new determination is modified into the contract.

Modifying Existing Contracts

The contracting agency should initiate the process of modifying existing contracts to accommodate the new wage determination. This process is covered by the Federal Acquisition Regulation (FAR), the Fair Labor Standards Act, and the Service contract Labor Standards – Price Adjustment.

­Under 52.222-43 Fair Labor Standards Act, the contract price, contract unit price labor rates, or fixed hourly labor rates may be adjusted to comply with any increase or decrease in the wage. Otherwise, it is deemed applied by operation of law.

For firm-fixed price and labor-hour contracts, the contracting agency should initiate the process of adjustment prior to the anniversary date of multiple year contracts, or at the beginning of the renewal option period. By either of those times, the contract should reflect the updated wage and fringe benefit determination.

Ensure Service Contract Act Compliance with ARCHER JORDAN

Navigate and adjust for the updated fringe benefit rate with the help of experienced and expert professionals. As a third party administrator providing fringe benefits to government contractors and hourly hires, ARCHER JORDAN can help you ensure your compliance with the 2017 Service Contract Act health and welfare fringe benefit rate.

Our decades of experience can help you smoothly transition to the new rate in a timely manner. Contact ARCHER JORDAN today!

3 handbook cover images.

For Government Contractors

Our Contract Compliance
Handbook Series will help ensure your company is fully compliant and positioned to win and secure more bids!


AD & D
Affordable Care Act
AK Prevailing Wage
AL Prevailing Wage
AR Prevailing Wage
AZ Prevailing Wage
CA Prevailing Wag
CA Prevailing Wage
CA Prevailing Wage 401k
Call Centers
CO Prevailing Wage
Compliance Tips
Critical Illness
CT Prevailing Wage
Davis Bacon Act
DE Prevailing Wage
Department of Labor
Disability Insurance
Employee Benefits
Employee Training
Employer Tips
Farm Labor Plan
Fixed Indemnity
FL Prevailing Wage
Fringe Benefits
GA Prevailing Wage
Government Contracting
Government Contractors
Health and Welfare Wrap
Healthcare Benefits
HI Prevailing Wage
Hospitality Benefits
Hourly Seasonal Workers
Hourly Workforce
Human Resources
ID Prevailing Wage
IL Prevailing Wage
IN Prevailing Wage
IO Prevailing Wage
KS Prevailing Wage
KY Prevailing Wage
LA Prevailing Wage
Limited Medical
MA Prevailing Wage
Major Medical Insurance
McNamara-O’Hara Act
MD Prevailing Wage
ME Prevailing Wage
MI Prevailing Wage
MN Prevailing Wage
MO Prevailing Wage
MS Prevailing Wage
MT Prevailing Wage
NC Prevailing Wage
ND Prevailing Wage
NE Prevailing Wage
NH Prevailing Wage
NJ Prevailing Wage
NM Prevailing Wage
NSRMCA Members
NV Prevailing Wage
NY prevailing wage
OH Prevailing Wage
OK Prevailing Wage
OR Prevailing Wage
PA Prevailing Wage
Part Time Employees
Podcast Guest Appearances
Prevailing Wage
Prevailing Wage Workers
Restaurant Group Benefits
Retirement Plans
RI Prevailing Wage
SC Prevailing Wage
SCA Audits
SCA Compliance
SD Prevailing Wage
Seasonal Workers
Service Contract Act
Small Business
State Prevailing Wage
SUB Plan
Supplemental Benefits
Supplemental Unemployment
Third Party Administrator
TN Prevailing Wage
Trust Services
TX prevailing wage
UT Prevailing Wage
VA Prevailing Wage
Violations – SCA
Voluntary Benefits
WA Prevailing Wage
WI Prevailing Wage
Workplace Health
Workplace Safety
WV Prevailing Wage
WY Prevailing Wage