The Wage Rules for Service Work: The Service Contract Act Explained

Published 2026 | TIKC NewsWire

Construction has its wage law, and so does service work. If you hold a federal service contract, staffing a help desk, cleaning a building, guarding a gate, running a cafeteria, or maintaining equipment, the Service Contract Act decides a big part of what you pay your people. Like its construction cousin, it sets a floor for wages and benefits, publishes it in a wage determination, and expects you to follow it to the letter. Pay below it, or put workers in the wrong category, and a labor shortfall quietly becomes a compliance problem.

What the Service Contract Act covers

The Service Contract Act, sometimes called the SCA or the McNamara-O’Hara Act, applies to most federal contracts over a dollar threshold whose main purpose is furnishing services through service employees. For covered work, the Department of Labor issues a wage determination listing the minimum hourly wage and the fringe benefit amount for each job classification. You must pay each service employee at least that wage and provide at least that level of benefits, or pay the difference in cash.

Where contractors slip

The mistakes mirror the ones on Davis-Bacon construction work. The first is classification: paying a worker as a lower-tier category when their actual duties fit a higher-paid one. The second is the fringe benefit obligation, which contractors underpay or miscount more often than the base wage. The third shows up at recompete time, when a new wage determination raises the rates and a contractor keeps paying the old ones. When you certify compliance you did not meet, that certification can become a false statement.

Why the fringe piece trips people up

The base wage is easy to see on a pay stub. The fringe benefit obligation is not, and that is where the shortfalls hide. The wage determination sets a dollar amount per hour you must provide in benefits like health insurance or retirement, or pay in cash if you do not. Contractors who offer skimpy benefits, or who forget to add up whether their benefits actually hit the required amount, end up underpaying without realizing it. The fix is arithmetic: add up what your benefits are worth per hour and make sure it meets the number on the determination.

What to do now

• Get the right wage determination. Find the SCA determination for your contract and location before you price the work.
• Classify to the real duties. Match each worker to the category that fits what they actually do.
• Do the fringe math. Confirm your benefits meet the required hourly amount, or pay the difference in cash.
• Watch recompetes and option years. Update to the new wage determination the moment it applies.
• Keep clean records. Document wages, classifications, and benefits so you can prove compliance.

The Service Contract Act is really a promise that the people doing the government’s service work get paid a fair local rate. Pull the right determination, classify honestly, and get the fringe math right, and you protect your workers and your contract at the same time. Treat the wage determination as the floor it is, and you stay clear of the trap. Brick by brick.

FAQ

What is the Service Contract Act?

A law requiring most federal service contracts over a dollar threshold to pay service employees at least the minimum wage and fringe benefits set by the Department of Labor in a wage determination for each job classification.

How is it different from Davis-Bacon?

Davis-Bacon covers construction labor; the Service Contract Act covers service work like custodial, security, food service, call centers, and maintenance. Both set prevailing wages and fringe benefits through wage determinations.

What is the most common SCA mistake?

Underpaying the fringe benefit obligation. The base wage is visible, but contractors often fail to confirm their benefits meet the required hourly amount, or do not pay the shortfall in cash.

What happens at a recompete?

A new wage determination often raises the required rates. Continuing to pay the old rates, then certifying compliance, can turn a wage shortfall into a false certification.

Sources

McNamara-O’Hara Service Contract Act, 41 U.S.C. 6701 et seq. (2026).

U.S. Department of Labor, Wage and Hour Division. (2026). Service Contract Act wage determinations and fringe benefit compliance.

This article is general information, not legal advice.