Everything You Need to Know About the Service Contract Act

What are the requirements of the Service Contract Act?

The McNamara-O’Hara Service Contract Act, or simply known as the SCA, is a law that was passed in January 1966. It was later on amended in 1972 and 1976. Currently, is currently being administered by the Department of Labor’s Wage and Hour Division (WHD). It was enacted to close the gap in labor standards protection between supply contracts and construction contracts.

The SCA primarily determines the wages and employment benefits that are to be paid by contractors to service employees working on contracts that exceed $2,500. Since these guidelines are stipulated by the law, it is important that every employer and contractor that hires service contracts must be aware of its requirements.

Service Contract Act Requirements for Wages of Service Contracts

1. The minimum wages required under the SCA are listed in the wage determinations applied to contracts that are worth more than $2,500, as hourly rates for the different classes of service employees.

2. If the contract is valued at $2,500 or less, the SCA requires that the wage must not be less than the FLSA minimum wage.

3. If an employee works in different capacities that fall under different classifications, then the time that the employee works for each capacity must be recorded. It must be paid accordingly to each specified class. If the contractor cannot show an employee’s segregated timekeeping, then he will be paid under the classification with the highest rate.

4. Wages must be paid in periods no longer than twice a month.

Service Contract Act on Fringe Benefits

Fringe benefits include the following benefits but are not limited to:

•   medical and hospital care

•   retirement pensions

•   death benefits

•   compensation for occupational injuries or illness

•   life insurance

•   disability and sickness insurance

•   accident insurance

•   vacation and holiday pay

•   apprenticeship costs and other plans and programs

Contractors and employers are allowed to hire third parties to come up with bona fide fringe benefit plans suitable for their service contracts. This practice assures employers that they are giving their employees their due employment benefits as mandated by the law, while they can focus more on running their business.

It is the contractor’s duty to keep appropriate separate records of the amount paid for the employees’ wages, and the amount paid for their fringe benefits.

Hire ARCHER JORDAN for your SCA approved fringe benefits!

ARCHER JORDAN is a team composed of experienced insurance, finance, and technology experts. We can help you come up with the fringe benefits that suit the needs of your service employees. Our years of experience in the field of employment benefits can assure you that the highly specialized programs we create comply with the law. Work with us, and we will take care of your employees’ benefits, so you can focus on growing your business.