2024 Federal Contractor Minimum Wage: Rules, Rates & Compliance Guide

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Table of Contents#

1. Core Background of Federal Contractor Minimum Wage Rules
2. Current & Recent Wage Rates
3. Who Is Required to Comply? Eligibility for Contractors & Workers
4. Key Compliance Obligations for Covered Entities
5. Common Violations & Associated Penalties
6. Actionable Steps to Ensure Full Compliance
7. Frequently Asked Questions
8. References

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1. Core Background of Federal Contractor Minimum Wage Rules#

The federal contractor minimum wage policy is a separate requirement from the Fair Labor Standards Act (FLSA) minimum wage, administered by the U.S. Department of Labor's Wage and Hour Division (WHD).

Key regulatory milestones:

• 2014: EO 13658 established a $10.10 per hour minimum wage for covered federal contractors, with annual inflation adjustments
• 2021: EO 14026 raised the minimum to $15 per hour starting in 2022, and mandated annual adjustments based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-U)
• 2025: EO 14236, signed by President Trump on March 14, 2025, rescinded EO 14026. The DOL announced it would no longer enforce EO 14026 or its implementing regulations (29 CFR part 23)
• 2026: The DOL announced updated EO 13658 rates of $13.65/hour for non-tipped workers and$9.55/hour for tipped workers, effective May 11, 2026

EO 13658 remains in effect and applies to contracts subject to the Davis-Bacon Act (DBA) or the Service Contract Act (SCA) that were entered into between January 1, 2015, and January 29, 2022, and that have not been renewed or extended on or after January 30, 2022. The tipped wage credit under EO 13658 is set at 70% of the full minimum wage (reached 70% in 2018).

EO 14026 had applied to new, renewed, or extended covered federal contracts awarded on or after January 30, 2022. With its rescission, the DOL rule implementing EO 14026 (29 CFR part 23) remains on the books but is no longer enforced, and the DOL has stated it will take steps to officially rescind it.

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2. Current & Recent Wage Rates#

The WHD announces new annual federal contractor minimum wage rates no later than 90 days before the start of each calendar year. Current and recent rates are as follows:

Additional Rate Rules#

• If a state, local, or municipal minimum wage is higher than the applicable federal contractor rate, employers must pay the higher applicable wage
• Under EO 13658, tipped workers' total earnings (cash wage + tips) must equal or exceed the non-tipped federal contractor minimum wage; employers are required to make up the difference if tips fall short
• Under EO 14026 (before rescission), the tipped wage credit had been fully eliminated as of January 1, 2024, meaning tipped workers were entitled to the full base rate
• The number of contracts subject to EO 13658 has significantly decreased over the past several years, as most legacy contracts have been renewed or extended

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3. Who Is Required to Comply? Eligibility for Contractors & Workers#

Covered Contracts#

The rule applies to federal contracts valued at $2,500 or more that fall into one of the following categories:

1. Construction contracts covered by the Davis-Bacon Act (DBA)
2. Service contracts covered by the Service Contract Act (SCA)
3. Concessions contracts (e.g. operating a cafeteria, gift shop, or parking facility on federal property)
4. Contracts for the use of federal land or property to provide services to members of the public

Excluded contracts include: federal grants, Indian Self-Determination and Education Assistance Act contracts, contracts valued at less than $2,500, and contracts for seasonal recreational services on federal lands (per EO 13838, restored by EO 14236).

Covered Workers#

All non-exempt workers performing work on or in connection with a covered contract are eligible for the higher wage, including:

• Prime contractor employees
• Subcontractor employees at every tier of the contract chain
• Part-time, temporary, and seasonal workers
• Workers who support contract operations (e.g. janitorial staff cleaning a contract worksite, administrative staff processing contract paperwork) who spend 20% or more of their workweek on contract-related tasks

Workers exempt from FLSA overtime rules (executive, administrative, and professional employees paid on a salary basis) are not covered by the federal contractor minimum wage rule.

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4. Key Compliance Obligations for Covered Entities#

Prime contractors are fully responsible for ensuring compliance across all their subcontractors, so all covered entities must meet the following requirements:

1. Post required notices: Display the official WHD federal contractor minimum wage poster in a visible, high-traffic area accessible to all workers. Post translated versions if 10% or more of your workforce speaks a non-English language.
2. Include wage clauses in all contract documents: Add the federal contractor minimum wage requirement to all prime contract and subcontract agreements to ensure downstream partners are aware of their obligations.
3. Maintain detailed payroll records: Keep records of hours worked, wages paid, deductions, worker classifications, and proof of wage rate compliance for a minimum of 3 years after the contract ends.
4. Avoid improper wage offsets: Only bona fide fringe benefits (e.g. health insurance, retirement contributions, paid time off) recognized under the SCA or DBA may be counted toward a portion of the minimum wage obligation.
5. Update rates annually: Adjust payroll for all covered contracts when the WHD announces new annual rates to reflect the applicable executive order's requirements.

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5. Common Violations & Associated Penalties#

The WHD conducts regular random audits of federal contractors to enforce compliance, and also investigates worker complaints. Common violations include:

• Paying covered workers less than the applicable federal contractor minimum wage
• Misclassifying workers as independent contractors or exempt salaried employees to avoid paying the higher wage
• Failing to pass wage requirements down to subcontractors
• Falsifying payroll records to hide underpayment
• Failing to make up the difference for tipped workers whose earnings fall short of the minimum wage (under EO 13658)

Penalties for Non-Compliance#

• Full back pay plus interest owed to underpaid workers
• Civil monetary penalties of up to $13,508 per individual violation (2025-2026 amount, adjusted annually for inflation)
• Termination of existing federal contracts
• Debarment from bidding on future federal contracts for up to 3 years
• Criminal penalties for intentional wage theft or fraud, including fines and potential jail time

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6. Actionable Steps to Ensure Full Compliance#

Follow these steps to avoid violations:

1. Determine which executive order applies: Review contract award dates to determine whether EO 13658 or the now-rescinded EO 14026 applies. Contracts awarded between January 1, 2015, and January 29, 2022, that have not been renewed or extended are subject to EO 13658. Contracts awarded on or after January 30, 2022, may have been subject to EO 14026 before its rescission.
2. Consult with legal counsel to understand your specific obligations given the rescission of EO 14026 and the continued applicability of EO 13658 for legacy contracts.
3. Update your payroll system to reflect the applicable rates for each contract based on the executive order that governs it.
4. Train your HR, procurement, and subcontractor management teams on eligibility and reporting requirements, and require all subcontractors to submit proof of wage compliance quarterly.
5. Conduct internal payroll audits every 6 months to identify and correct underpayment errors before they are found during a WHD audit.
6. Self-report any identified violations to the WHD: the agency often reduces or waives penalties for entities that voluntarily disclose and correct errors without a worker complaint.
7. Monitor DOL announcements for updates on the official rescission of the EO 14026 implementing regulations and any new executive orders.

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7. Frequently Asked Questions#

Q: Is the federal contractor minimum wage higher than the regular federal minimum wage?#

A: Yes. As of May 11, 2026, the federal contractor minimum wage under EO 13658 is $13.65 per hour, significantly higher than the standard$7.25 per hour FLSA minimum wage. However, this is lower than the $17.75 rate that was in effect under EO 14026 before its rescission in March 2025.

Q: Do I have to pay the federal contractor rate if my state has a higher minimum wage?#

A: You are required to pay the highest applicable rate: if your state or local minimum wage is higher than the federal contractor rate, pay the state/local rate. If the federal contractor rate is higher, pay that rate.

Q: Are subcontractors required to follow the same rules as prime contractors?#

A: Yes. Prime contractors are legally liable for subcontractor non-compliance, so all subcontractors at every tier must follow the same wage requirements.

Q: When do new annual rates go into effect?#

A: For EO 13658, rates are announced at least 90 days before they take effect. The current rate of $13.65/hour took effect on May 11, 2026. For EO 14026 (before rescission), new rates took effect on January 1 of each year.

Q: What happened to EO 14026?#

A: President Trump rescinded EO 14026 on March 14, 2025, via Executive Order 14236. The DOL announced it would no longer enforce EO 14026 or its implementing regulations. The federal contractor minimum wage for covered contracts reverted to the lower EO 13658 rates.

Q: Does the rescission of EO 14026 affect existing contracts?#

A: The DOL has stated it will no longer enforce EO 14026. However, contractors should consult legal counsel regarding their specific obligations, particularly for contracts that were awarded after January 30, 2022, and were subject to EO 14026 before its rescission.

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References#

1. U.S. Department of Labor Wage and Hour Division. Executive Order 13658: Establishing a Minimum Wage for Contractors. Retrieved from https://www.dol.gov/agencies/whd/government-contracts/minimum-wage
2. U.S. Department of Labor Wage and Hour Division. Minimum Wage for Federal Contracts Covered by Executive Order 13658, Notice of Rate Change in Effect. Retrieved from https://www.federalregister.gov/documents/2026/02/09/2026-02466/minimum-wage-for-federal-contracts-covered-by-executive-order-13658-notice-of-rate-change-in-effect
3. Jackson Lewis P.C. (2025, March). Trump Revokes Biden Federal Contractor Minimum Wage Mandate: What to Expect Next. Retrieved from https://www.jacksonlewis.com/insights/trump-revokes-biden-federal-contractor-minimum-wage-mandate-what-expect-next
4. U.S. Department of Labor Wage and Hour Division. McNamara-O'Hara Service Contract Act (SCA). Retrieved from https://www.dol.gov/agencies/whd/government-contracts/service-contracts
5. U.S. Department of Labor Wage and Hour Division. Davis-Bacon and Related Acts. Retrieved from https://www.dol.gov/agencies/whd/government-contracts/construction
6. U.S. Department of Labor Wage and Hour Division. Civil Money Penalty Inflation Adjustments. Retrieved from https://www.dol.gov/agencies/whd/resources/penalties