By Neena Shukla, CPA, CFE, CGMA, FCPA, CTP

As a government contractor, understanding your obligations under the Service Contract Act (SCA) is essential. However, the complexity of the act can make it difficult to navigate. In this blog post, we will provide you with an overview of the SCA, including its requirements and challenges when implementing the standard. We will also discuss how compliance can be achieved and the risks associated with noncompliance.

What is the Service Contract Act (SCA)?

The Service Contract Act (SCA) is a federal law that establishes minimum wage and benefit standards for employees working on federal contracts. The SCA applies to service contracts, such as janitorial, security, or maintenance services, among others. This act requires contractors to pay workers no less than the prevailing wage and benefit standards in the locality where the services are performed.

Challenges When Implementing the Standard

One of the biggest challenges when implementing the SCA standard is determining the prevailing wage rate. The government publishes wage determinations periodically, and contractors must ensure that they are using the most up-to-date wage determination. Another challenge is ensuring that benefits meet the minimum standards. Contractors must not only provide the required benefits but also track them and provide the government with records of compliance.

Compliance and Risks

Noncompliance with the SCA can result in significant fines and penalties. Contractors may be subject to retroactive payment for the difference between what they paid the employees and the required rates. The government can also terminate a contract if the contractor is found to violate the SCA. Contractors can also face negative publicity and loss of future business opportunities.

What are the Requirements?

The requirements under the SCA can vary depending on the type of service contract. However, some of the main requirements include:

  • Payment of prevailing wages and benefits
  • Accurate record-keeping of employee wages and benefits.
  • Posting of wage determinations at the job site.
  • Submission of certified payroll to the government.

In conclusion, the Service Contract Act is a complex and important law that impacts government contractors. Noncompliance can result in significant financial and reputational damages. However, with the right tools and systems in place, contractors can achieve compliance with the SCA and reduce their risks. By keeping up to date with the latest wage determinations and ensuring accurate recording and submission of employee records, contractors can not only meet their obligations under the law but also enhance their reputation and secure future contracts.