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Common Problems with the Service Contract Act (SCA) Requirements

Posted on August 6, 2014
Amy DozierWritten by Amy Dozier | Email author

Common Problems with the Service Contract Act (SCA) RequirementsThere are thousands of government contractors who hold service contract act contracts, yet so many of them are confused about the requirements. It’s understandable; the requirement guidelines are complicated and difficult to navigate.  As an HR Consultant, I often interpret the guidelines for many of our federal contracting clients to ensure they are in compliance.  Here are a few tips to help clarify some of the most frequent misunderstandings I have heard about the McNamara-O’Hara Service Contract Act of 1965.

Classifying Service Contract Act Employees

  • All non-exempt employees on a Service Contract Act (SCA) contract must be mapped to the Wage Determination (WD).
  • Slot employees based on their actual duties.
  • If the job classification is not available on the WD, contractors must request a conformance with a proposed rate for the labor category.

Service Contract Act Wage Determination

  • Use the Wage Determination (WD) provided in the contract.  If the WD needs to be updated, work with your Contracting Officer to get a contract modification before applying a new or different WD.
  • You should post the WD in a prominent place at the worksite.

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Service Contract Act Vacation and Holidays

  • Read the Fringe Benefits section following the Occupational Listing.  Different WD’s, even on the same contract, may have different Health & Welfare, Vacation, and Holiday requirements.
  • Incumbents are due vacation based on the length of service as per the WD.  The length of service is the length of service with the predecessor contractors in the performance of similar work at the same Federal facility, not just the length of service with you as the new contractor.  If you are taking over an SCA contract with incumbents, the predecessor contractor is required to provide you with a list of incumbents and their length of service so you can determine the accurate vacation due to each incumbent.
  • Vacation is vested on the employee’s anniversary date and must be used or paid out by the next anniversary date.  The SCA does not allow carry over vacation even if your normal company policy does.
  • Part-time employees are entitled to pro-rated vacation and holidays.
  • Temps and independent contractors are entitled to a vacation and holidays or cash equivalent.

Service Contract Act Benefits

  • You can meet the Health and Welfare requirements by providing bona fide fringe benefits or cash equivalent; however, make sure you know how the Affordable Care Act will affect this practice. 
  • You cannot offset an hourly rate paid in excess of what is required under the WD in order to satisfy fringe benefit obligations.
  • If you are self-insured, make sure you meet the minimum requirements and get your plan approved by the DOL.  It is recommended to set aside assets in an escrow account to ensure those funds are spent on bona fide fringe benefits.

Are you meeting all of these requirements? 

It’s ok to say no; you are not the only one.  Now that you know, though, make sure you are in compliance with your SCA Contract before the DOL comes knocking on your door. It’s critically important that HR, Finance & Accounting, Proposals, Contracts, and your Program Managers are all familiar with the requirements of the Act.  For further peace of mind, consider hiring a third party specialist to perform a compliance audit to get you on track to meet all of your government contracting requirements.

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  1. by Mike on August 20, 2014 at 8:50 am

    Hello Amy,
    Great article. As an HR practitioner, I know that management reserves the right to schedule vacation for the employees. In most cases, management grants the dates requested by the employee. I was wondering whether management can schedule SCA leave for SCA covered employees as well? I look forward to your input!

  2. by Amy Dozier on August 25, 2014 at 1:44 pm

    Great question, Mike! As an employer, your company policy may state that management has the right to schedule vacation for employees; however, there are no laws addressing this issue. With that being said, I do not normally recommend this practice be standard policy. Taking away an employee’s ability to manage their own time could lead to low levels of employee engagement.

    Title 43 Subtitle A Part 4.173 of the the Service Contract Act states “The vacation may be scheduled according to a reasonable plan mutually agreed to and communicated to the employees. A “reasonable” plan may be interpreted to be a plan which allows the employer to maintain uninterrupted contract services but allows the employee some choice, by seniority or similar factor, in the scheduling of vacations.”

    If you have a particular issue you are facing with SCA employees, please feel free to reach out for further assistance. Helios has experts in absence management who can assist you with strategizing and addressing issues in leave management.

  3. by Bridget Burke on October 27, 2016 at 10:04 am

    Can insurance benefits be withheld from my vacation pay?

  4. by TJ on January 19, 2017 at 8:42 pm

    I do not see why insurance benefits would not be able to be withheld from your vacation pay. If they did not withhold the funds, then you would need to pay the funds out of pocket to ensure that you are meeting your per month deductible!

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