Federal contractor minimum wage rising to $15 an hour

President Joe Biden recently issued an executive order requiring federal contractors to pay their employees at least $15 an hour.

That minimum wage for federal contractor employees becomes mandatory starting on Jan. 30, 2022. The following year, new minimum wage rates will become effective on Jan. 1, 2023.

The order affects federal contractors as well as subcontractors and compliance with the order will be monitored by federal agencies.

The order applies to new federal contracts, solicitations, and contract renewals entered into on or after Jan. 30, 2022, but it doesn’t apply to grants, contracts or agreements with Indian tribes.

The order does not change or alter compliance with any other federal or state wage law that sets a higher minimum wage than $15 an hour.

Tipped employees can receive a cash wage that’s less than the minimum wage rate. For tipped employees working for a federal contractor, the cash wage rate was will rise to $10.50 an hour starting on Jan. 30, 2022.

On Jan. 1, 2023, the cash wage for tipped employees will be 85 percent of the minimum wage rate for federal contractors. Employers have to ensure tipped workers are earning compensation that’s at least as much as the minimum wage. That may require increasing tipped workers’ cash rate to ensure their cash wages and tips combined at least equal the minimum wage.