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McNamara-O'Hara Service Contract Act Compliance Overview


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The McNamara-O’Hara Service Contract Act (SCA) applies to every contract entered into by the United States or the District of Columbia, the principal purpose of which is to furnish services in the United States through the use of service employees. Contractors performing on such Federal service contracts in excess of $2,500 must observe minimum wage and safety and health standards, and maintain certain records. Service employees on covered contracts in excess of $2,500 must be paid not less than the monetary wages and fringe benefits contained in wage determinations issued by the U.S. Department of Labor (DOL) for the contract work.

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McNamara-O'Hara Service Contract Act Compliance Overview

  1. 1. SCA Compliance Principles
  2. 2. OverviewHow does Service Contract Act (SCA) work?Fringe benefit plans •Benefits •Sick •Holiday •Jury Duty •BereavementHow vacation works
  3. 3. How Does SCA Work?Health & Welfare (H & W)•Life, accident, and health insurance plans, sick leave, pensionplans, civic and personal leave, severance pay and savings andthrift plans.•Minimum employer contributions must cost an average of $3.59*per hour computed on the basis of all hours worked (or paid, asspecified in your WD) by service employees employed on thecontract.*or the prevailing rate in your Wage Determination (WD)
  4. 4. How does SCA work?Odd Numbered Wage Determinations•Compliance with the H&W rate on all "odd numbered" StandardWage Determinations (e.g., WD No. 2005-2103) requires payment ofthe minimum H&W rate for each hour paid for each employee, upto a maximum of 40 hours per week. [See 29 CFR 4.175(a)]•Under this type of wage determination, the specified health andwelfare benefit is due each service employee on the basis of “allhours paid for,” including paid vacations, holidays, and sick leave,up to a maximum of 40 hours per week and 2,080 hours per year. 
  5. 5. How does SCA work? How Does SCA Work?Even Numbered Wage Determinations•Compliance with the H&W rate on all "even numbered" StandardWDs (e.g., WD No. 2005-2104) requires the contractor tocontribute an average of the stated H&W rate per hour, computedon the basis of all hours worked by each employee. [See 29 CFR4.175(b)]•The term “all hours worked” includes overtime hours and is notlimited to 40 hours per week or 2,080 hours per year for eachemployee; the term “all hours worked” does not include paid leavehours, such as for vacations, holidays, or sick leave. Also, it doesnot include unpaid leave time, such as that provided under the
  6. 6. How does SCA work?Option OneEmployer pays H&W in cash ($3.59* per hour)•Cash payments in lieu of fringe benefits must be paid on regularpay date (29 C.F. R. 4.165(a))•If employer pays in cash, you must itemize the H&W on aseparate line item on the pay stub* Or the prevailing rate in your WD
  7. 7. How does SCA work?Option TwoProviding fringe benefits, such as:•Medical insurance•Dental insurance•Vision insurance•Life insurance•LTD/STD insurance
  8. 8. How does SCA work?Important fact!Under SCA, the contractor may not credit excess wage paymentagainst the fringe benefit (FB) obligation.
  9. 9. How does SCA work?Reconciliation•Weekly, Monthly, or Quarterly•Provide employee statements•Quarterly reconciliation is the best method
  10. 10. How does SCA work?Important fact!The employer does not have to offer sick leave.However, if the employer does offers sick leave, it can be appliedto the Health &Welfare dollars.
  11. 11. How does SCA work?Holiday Fringe Benefits (29 C.F.R. 4.174)•Holiday pay is required under SCA•Employee entitled to holiday pay if works in the holiday workweek•Employee not entitled to holiday pay if holiday not named in WD (i.e. government closed by proclamation)•Paid holidays can be traded for another day off if communicated to employees•Part-time employees receive holiday on a pro-rata basis
  12. 12. How does SCA work?Jury Duty and Bereavement – not required•If employer does provide jury duty or bereavement pay, the actual dollars paid can be applied to Health & Welfare.
  13. 13. How does SCA work?Vacation requirements•Vacation is required under SCA.•Employee receives vacation hours after they have worked 1 fullyear.•If employee leaves before their 1 year anniversary date they donot receive vacation pay.•If employer chooses to show accrued vacation on paystubs, theemployee will be entitled vacation pay if they terminate prior totheir 1 year of service.
  14. 14. How does SCA work?Anniversary Date (12-months Service)•Upon 1 year anniversary the employer puts vacation hours inemployee vacation balance.•If 6 months later employee terminates, the employer must payout vacation balance. Employee does not get vacation pay for the6 months worked over the 1 year.•Incumbents – original start date on contract must begrandfathered for vacation balances. Keep this in mind whenbidding on SCA contracts.
  15. 15. Contact InformationJackie Asencio, President /