The Wage and Hour Division (WHD) of the U.S. Department of Labor recently published an advanced notice of an upcoming increase to the minimum wage rate for federal contractors. The new rate of $17.75 per hour will replace the current rate of $17.20 per hour and take effect on January 1, 2025. The timing of this announcement is in accordance with the Executive Order (EO) 14026 requirement for the WHD Administrator to publish new minimum wage rates at least 90 days before they take effect to allow time for implementation.
For context, EO 14026 was signed by President Biden on April 27, 2021. The EO mandated an annual cadence for adjustments to the hourly minimum wage paid by federal contractors to their employees who are performing work on covered contracts. The first wage adjustment to $15 per hour took effect on January 30, 2022. Wage rate increases have been implemented annually ever since. Additionally, as of January 1, 2024, the EO has effectively phased out exceptions to the minimum hourly wages for tipped workers.
EO 14026 also outlined the methodology by which new minimum wage rates must be calculated. This methodology directs the Secretary of Labor to use Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), published by the Bureau of Labor Statistics (BLS), comparing current year data from the with data from the prior year. Specifically, the average CPI-W for the most recent year (calculated by averaging the figure for all four quarters) is compared to that of the previous year (also averaged across all four quarters) to determine the annual percentage increase. This figure is then rounded to the nearest multiple of $0.05 to arrive at the new EO 14026 minimum wage rate. For further details on the methodology, please refer to the full announcement published in the Federal Register.
As a next step, DCI recommends federal contractors discuss this new wage rate with key stakeholders to ensure timely implementation by January 1, 2025.
