U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

 SCA COMPLIANCE 

 PRINCIPLES 
U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

INTRODUCTION 

DISCHARGING WAGE AND FRINGE BENEFIT 

OBLIGATIONS 

EMPLOYEE NOTIFICATION AND POSTER 

TIMELY PAYMENT OF WAGES AND FRINGE 

BENEFITS 

HOURS WORKED 

“BONA FIDE” FRINGE BENEFITS 

FRINGE BENEFIT REQUIREMENTS – 

HEALTH AND WELFARE BENEFITS 

FRINGE BENEFIT REQUIREMENTS – 

VACATION BENEFITS 

FRINGE BENEFIT REQUIREMENTS – 

HOLIDAY BENEFITS 

EQUIVALENT BENEFITS 

TEMPORARY AND PART-TIME EMPLOYMENT 

PAYMENT OF OVERTIME UNDER FLSA/CWHSSA 

RECORDKEEPING 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

INTRODUCTION 

Service Contract Act (SCA) wage determinations set forth the prevailing wages and benefits 

that are to be paid to service employees working on covered contracts exceeding $2,500. 

◊ Wages

◊◊ Wages are the monetary compensation provided employees. The minimum 

monetary wages required under the SCA are usually listed in wage 

determinations applied to covered contracts exceeding $2,500, as hourly wage 

rates for the various classes of service employees. 29 C.F.R. § 4.161. 

◊◊ Where no SCA wage determination applies to a covered service contract, such as 

those valued at $2,500 or less, the SCA requires payment of not less than the 

minimum wage under section 6(e)(1) of the FLSA to service employees engaged 

in contract work. 29 C.F.R. § 4.159. 

◊◊ If an employee works in different capacities in the performance of a covered 

contract, then the time spent the employee spends in work properly related to 

each classification should be segregated and paid according to the wage rate 

specified for each class of work . If the contractor cannot provide affirmative 

proof (employer records) of the hours spent in each class of work, then the 

contractor must pay the employee the highest of such rates in the applicable wage 

determination for all hours worked in the workweek. 29 C.F.R. § 4.169. 

◊◊ Workers with disabilities and apprentices that meet certain criteria may work on 

SCA-covered contracts at wage rates below those contained in the applicable 

SCA wage determination under an “administrative exemption” pursuant to 

section 4(b) of SCA. 29 C.F.R. §§ 4.6(o) – 4.6(p). 

◊ Fringe Benefits

◊◊ As provided in section 2(a)(2) of the SCA, fringe benefits include: 

 [M]edical or hospital care, pensions on retirement or death, compensation 

for injuries or illness resulting from occupational activity, or insurance to 

provide any of the foregoing, unemployment benefits, life insurance, 

disability and sickness insurance, accident insurance, vacation and holiday 

pay, costs of apprenticeship or other similar programs and other bona fide

fringe benefits not otherwise required by Federal, State, or local law to be 

provided by the contractor or subcontractor. 29 C.F.R. § 4.162. 

◊◊ Fringe benefits listed above are illustrative of those that may be furnished. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

◊ Two Separate Requirements – Monetary Wages and Fringe Benefits

◊◊ The SCA monetary wage requirement and the fringe benefit requirement are two 

separate requirements in the SCA. SCA §§ 2(a)(1) and 2(a)(2). 

◊◊ SCA wage determinations generally state the fringe benefit requirements after the 

listing of monetary wage rates that apply to each classification of service 

employee. 

◊◊ The fringe benefits required under the SCA must be furnished, separately from 

and in addition to the specified monetary wages, by the contractor/subcontractor 

to the employees engaged in the performance of a covered contract. 29 C.F.R. 

§ 4.170. 

◊◊ An employer must keep appropriate records separately showing amounts paid for 

wages and amounts paid for fringe benefits. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

EMPLOYEE NOTIFICATION AND POSTER 

SCA § 2(a)(4), 29 C.F.R. § 4.6(e) and FAR, 48 C.F.R. § 52.222-41(g)

◊ The SCA contract clauses require contractors on covered contracts to notify each 

service employee commencing work the contract of the minimum monetary wage and 

any fringe benefits required to be paid under the contract (in accord with the SCA wage 

determination in the contract), or post the wage determination. 

◊ Contractors are also required to post the “Notice to Employees Working on 

Government Contracts” (WH Publication 1313) in a prominent and accessible place at 

the worksite. WH 1313 is available at: 

 http://www.dol.gov/whd/regs/compliance/posters/sca.htm 

TIMELY PAYMENT OF WAGES AND FRINGE BENEFITS 

◊ Wages

◊◊ The SCA does not permit pay periods longer than semi-monthly (twice a 

month). Wage payments at greater intervals are not proper payments in 

compliance with SCA. 29 C.F.R. §§ 4.6(h) and 4.165(b). 

◊◊ Failure to pay for certain hours of work at the required rate cannot be offset 

by reallocating excess payments made for other hours. 29 C.F.R. § 4.166. 

◊ Fringes

◊◊ Payments to employees in cash for fringe benefits must be made promptly 

on the regular payday for wages. 29 C.F.R. § 4.165(a)(1). 

◊◊ Payments to “bona fide” fringe benefit plans may be made on a periodic 

payment basis that is not less often than quarterly. 29 C.F.R. § 4.175(d)(1). 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

HOURS WORKED 

◊ The hours worked by employees on an SCA-covered service contract are determined in 

accordance with the principles established under the Fair Labor Standards Act (FLSA), 

as set forth in 29 C.F.R. Part 785. 29 C.F.R § 4.178. 

◊ In general, FLSA hours worked by an employee include all periods in which the 

employee is “suffered or permitted” to work, whether or not required to do so, and for 

all periods of time during which the employee is required to be on duty or to be on the 

employer’s premises or to be at a prescribed workplace. 

◊ Hours worked subject to the compensation provisions of the SCA are those in which 

the employee is engaged in performing work on SCA-covered. 

◊◊ In any workweek where the contractor/subcontractor is not exclusively engaged 

in work on a covered service contract, the contractor should identify separately 

and accurately in its records, or by other means, those periods during which its 

employees are engaged in work on a covered service contract. 29 C.F.R. § 4.179. 

◊◊ In the absence of records that adequately segregate periods of covered contract 

work from non-covered work, all employees working in the establishment or 

department where such covered work is performed shall be presumed to have 

worked on or in connection with the contract during the period of contract 

performance. 29 C.F.R. § 4.179. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

“BONA FIDE” FRINGE BENEFITS 

◊ An employer may discharge his/her obligation to provide SCA fringe benefits by 

paying the specified fringe benefit contributions to an trustee or third person pursuant 

to a “bona fide” fund, plan, or trust on behalf of covered employees. Examples are life 

or health insurance, pension plan or retirement plans. 29 C.F.R. §§ 4.170 and 4.171. 

◊ To be considered a “bona fide” fringe benefit for purposes of the SCA, a fringe benefit 

plan, fund or program must constitute a legally enforceable obligation which meets the 

following criteria. 29 C.F.R. § 4.171(a). 

◊◊ The fringe benefit plan, fund or program must be specified in writing and must be 

communicated in writing to the affected employees. 

◊◊ The primary purpose of the plan must be to provide systematically for the 

payment of benefits to employees on account of death, disability, advanced age, 

retirement, illness, medical expenses, hospitalization, supplemental 

unemployment benefits, and the like. 

◊◊ The plan must contain a definite formula for determining the amount to be 

contributed by the contractor and a definite formula for determining the benefits 

for each of the employees participating in the plan. 

◊◊ Contributions must be made pursuant to the terms of such plan, fund, or program. 

Any contributions made by employees must be voluntary, and if such 

contributions are made through payroll deductions, such deductions must be 

made in accordance with 29 C.F.R. § 4.168. (No contribution towards fringe 

benefits made by the employees themselves or provided from monies deducted 

from their wages may be included or used by an employer in satisfying any part 

of any SCA fringe benefit obligation.) 

◊◊ Generally, the contractor’s contributions must be paid irrevocably to a trustee or 

third person, no less often than quarterly, pursuant to an insurance agreement, 

trust or other funded arrangement (except as indicated below with regard to 

certain “unfunded” fringe benefit plans). 

◊◊ Unfunded fringe benefit plans: 

 With the exception of fringe benefit plans to provide vacations and holidays, 

unfunded "self-insured" plans under which a contractor typically pays insurance 

claims out of pocket to cover fringe benefit obligations are normally not 

considered “bona fide” plans or equivalent benefits for purposes of SCA. 

 29 C.F.R. § 4.171(b). A contractor must request approval by the WHD 

Administrator for an unfunded self-insured plan. 29 C.F.R. § 4.171(b)(2). 

◊ The following are not “bona fide” fringe benefits (nor can they be considered 

equivalent benefits for SCA purposes): 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

◊◊ Benefit plans or trusts which are disapproved by the Internal Revenue Code as 

not satisfying the requirements of the Internal Revenue Code or which do not 

meet the requirements of the Employee Retirement Income Security Act of 1974. 

29 C.F.R. § 4.171(a)(5). 

◊◊ Any benefit required by any other federal law or by any State or local law, such 

as unemployment compensation, workers’ compensation, or social security. 

 29 C.F.R. § 4.171(c). 

◊◊ Board, lodging or other facilities for which the cost or value, determined in 

accordance with regulations under the FLSA contained in 29 C.F.R. Part 531, is 

creditable toward the monetary wages specified under the SCA. 29 C.F.R. 

§§ 4.167 and 4.171(d). 

◊◊ Facilities primarily for the benefit or convenience of the contractor or the cost of 

which is properly a business expense of the contractor, such as relocation 

expenses, travel and transportation expenses incident to employment; incentive or 

suggestion awards, recruitment bonuses; tools and other materials and services 

incidental to the employer’s performance of the contract and the carrying on of 

his business; and the cost of furnishing, laundering, and maintaining uniforms 

and/or related apparel or equipment where employees are required by the 

contractor, the SCA contract, by law, or by the nature of the work, to wear such 

items. 29 C.F.R. §§ 4.168 and 4.171(e). 

◊◊ Contributions by contractors for such items as social functions or parties for 

employees, flowers, cards, or gifts on employee birthdays, anniversaries, etc. 

(sunshine funds), employee rest or recreation rooms, paid coffee breaks, 

magazine subscriptions, and professional association or club dues. 

 29 C.F.R.§ 4.171(f). 

◊ Fringe benefits and overtime pay: 

◊◊ CWHSSA requires that on contracts to which it applies, any laborer or mechanic. 

including any guard or watchmen. who performs over 40 hours of contract work 

in a workweek must be compensated “at a rate not less than one and one-half 

times the basic rate of pay for all hours worked in excess of 40 hours in the 

workweek”. The basic rate of pay excludes “bona fide” fringe benefits and cash 

equivalent payments. 

◊◊ 29 C.F.R. § 778.215 and 29 C.F.R. §§ 4.177(e) and 4.182 discuss the parallel 

exclusion of fringe benefits from the “regular rate” for overtime purposes under 

the FLSA. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

 FRINGE BENEFIT REQUIREMENTS – 

HEALTH AND WELFARE BENEFITS 

◊ The health and welfare fringe benefit requirement for the covered service employees is 

indicated in the applicable contract wage determination. 

◊ There are three types of health and welfare fringe benefit requirements under the SCA: 

◊◊ “Fixed cost” per employee health and welfare benefit requirement – Where 

the SCA wage determination states this type of fringe benefit, it is required to be 

paid for each individual employee and the benefit is computed on the basis of “all 

hours paid for” up to 40 per week and 2080 per year. 29 C.F.R. § 4.175(a). 

◊◊ “Average cost” health and welfare fringe benefit – Where the SCA wage 

determination states this type of fringe benefit, the employer contribution is 

required to average at least $3.16 per hour computed on the basis of all hours 

worked by service employees employed on the contract (or portion of the 

contract to which the wage determination applies). 29 C.F.R. § 4.175(b). 

◊◊ Pursuant to section 4(c) of the SCA, collectively bargained fringe benefits are 

required to be paid by a successor contractor under a contract to furnish 

substantially the same services as a predecessor contractor. 29 C.F.R. § 4.53. 

◊ A single nationwide health and welfare rate method has been established for 

determining the health and welfare fringe benefit requirement incorporated in SCA 

wage determinations. Since June 1, 1997, adjustments to the single rate for the health 

and welfare fringe benefits listed on prevailing wage determinations are made annually. 

29 C.F.R. § 4.52(b); All Agency Memorandum No. 188 (May 22, 1997). 

“Fixed Cost” Per Employee Health and Welfare Fringe Benefit

◊ Most SCA wage determinations require health and welfare benefits to be paid on a per 

hour per employee basis. Such wage determinations state the health and welfare fringe 

benefit requirement as a simple rate. Annual adjustments are based on new data. For 

example, on June 1, 2009, the amount specified for upcoming contracts was raised 

from $3.16 to $3.35 per hour. Thus, wage determinations issued on or about June 1, 

2007, listed the “fixed cost” health and welfare fringe benefit amount as “$3.16 an 

hour, $126.40 a week, or $547.73 a month.” 29 C.F.R. § 4.175(a). 

◊ This method requires health and welfare benefits in terms of a fixed contribution per 

hour on behalf of each service employee working on the contract. Under this type of 

wage determination, the specified health and welfare benefit is due each service 

employee on the basis of “all hours paid for,” including paid vacations, holidays, and 

sick leave, up to a maximum of 40 hours per week and 2,080 hours per year. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

◊◊ Under this type of wage determination, the actual benefits may differ among 

employees, so long as the total amount paid by the contractor for fringe benefits 

(and/or cash equivalents) provided to each individual, on an hourly basis, totals at 

least the fringe benefit rate specified in the contract wage determination for the 

work the individual performs for all his/her paid hours up to 40 per week. 

◊◊ The type(s) and amount of benefits (if any), or cash equivalents to be provided is 

strictly a matter to be decided by the employer. 

◊◊ Employees excluded from participation in a fringe benefit plan must be furnished 

equivalent bona fringe benefits or be paid a cash equivalent payment during the 

period that they are not eligible to participate in the plan. On the other hand, it is 

not required that all employees participating in a fringe benefit plan be entitled to 

receive benefits from the plan at all times. For example, an employee who is 

eligible to participate in an insurance plan may be prohibited from receiving 

benefits from the plan during a 30-day waiting period. Contributions made on 

behalf of these employees would be creditable against the contractor’s fringe 

benefit obligations. 29 C.F.R. § 4.175(c)(1). 

◊◊ Example: Bi-weekly Payroll - $3.16 per hour paid up to 40 hours a week per 

each employee: 

 Cost of Cash in 

Employee Hours Fringe Lieu of Total Compensation

 Paid For Benefits Fringes

Libby 80 $162.80 $90 $252.80 (/ 80 = $3.16) 

Jean *100 $180.80 $72 $252.80 (/ 80 = $3.16) 

Ann 20 0 $63.20 $ 63.20 (/ 20 = $3.16) 

Tim 80 $252.80 0 $252.80 (/ 80 = $3.16) 

Tom 60 $160.00 $29.60 $129.60 (/ 60 = $3.16) 

 * Note 20 hours of overtime excluded from payments. 

“Average Cost” Health and Welfare Fringe Benefit

 

◊ In rare instances an average cost (even-numbered) wage determination applies. Such 

wage determinations apply only where an even-numbered wage determination applied 

to the preceding contract with the same agency contracts for the same services at the 

same location 

◊ The $3.16 per hour health and welfare benefit is an average cost fringe benefit 

requirement computed on the basis of “all hours worked.”

◊◊ The term “all hours worked” includes overtime hours and is not limited to 40 

hours per week or 2,080 hours per year for each employee; the term “all hours 

worked” does not include paid leave hours, such as for vacations, holidays, or 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

sick leave. Also, it does not include unpaid leave time, such as that provided 

under the Family and Medical Leave Act. 

◊◊ Under the average cost concept, the fringe benefits provided by the contractor 

may vary among individual service employees, and compliance is achieved when 

the actual cost of these benefits divided by the total hours worked by service 

employees in a payment period equals or exceeds the amount required by the 

wage determination. 29 C.F.R. § 4.175(b). 

◊ The types and amounts of benefits, if any, to be provided, and the eligibility 

requirements for service employees to participate in a fringe benefit plan, are decided 

by the contractor. 

◊ If the contractor’s contributions average less than the amount required by the wage 

determination during a payment period, then the contractor must make up the 

deficiency by providing cash equivalent payments to all service employees who 

worked on the contract during the payment period. 

◊ Cash equivalent payments under average cost fringe benefit requirements can only be 

made in an amount determined to be deficient after payments have been made to the 

fringe benefit plans, and the payments must be made equally to all covered service 

employees. 

Examples: 

 (a) $3.16 average cost requirement - compliance through fringe benefit plan 

contributions only: 

 Employer

Employee Hours Contributions

 Worked for Fringe Benefits

 Libby 250 $900 

 Jean 150 $450 

 Ann 250 $900 

 Tim 50 0 

 Tom 100 $350

 800 $2600 

 $2600 (total contributions)/800 (total hours) = $3.25 average 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

 (b) $3.16 average cost requirement - compliance through fringe benefit plan 

contributions and cash payments: 

Employer

Employee Hours Contributions

 Worked for Fringe Benefits

 Libby 250 $650 

 Jean 150 $450 

 Ann 250 $650 

 Tim 50 0 

 Tom 100 $250

 800 $2,000 

 $2000 (total contributions)/800 (total hours) = $2.50 average 

Libby 250 x $.66 $165 

Jean 150 x $.66 $ 99 

 Ann 250 x $.66 $165 

 Tim 50 x $.66 $ 33 

 Tom 100 x $.66 $ 66

 800 $528 

 Total contribution: $2000 (fringe benefits) + $528 (cash) = $2528 

 $2528 (contributions)/800 (hours) = $3.16 

Collectively Bargained Fringe Benefits 

◊ Section 4(c) of the SCA provides that no contractor or subcontractor under a contract 

which succeeds a contract subject to the SCA, under which substantially the same 

services are furnished, shall pay any service employee under such contract less than the 

wages and fringe benefits (including accrued wages and fringe benefits and any 

prospective increases in wages and fringe benefits) provided for in a collective 

bargaining agreement (CBA) to which such service employees would have been 

entitled if they were employed under the predecessor contract. 29 C.F.R. § 4.1b. 

◊ In almost all cases, the DOL issues a wage determination that recognizes the 

application of the fringe benefits (and wages) contained in the predecessor contractor’s 

CBA. However, section 4(c) of the SCA is self-executing, and can apply regardless of 

whether such a contract wage determination was issued or incorporated in the contract. 

Certain administrative requirements and limitations may affect application of the 

predecessor contractor’s negotiated wages and fringe benefits. 29 C.F.R. §§ 4.1b(b). 

◊ Section 4(c) of the SCA does not require a successor to follow terms of the CBA other 

than the wage and fringe benefit provisions. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

◊ Where section 4(c) applies, the successor contractor may discharge the obligation to 

furnish fringe benefits by any combination of bona fide fringe benefits and equivalent 

cash payments (as is the case where no predecessor’s CBA is involved). 

◊ As the successor is not permitted to pay less than the fringe benefits (and wages) to 

which employees would have been entitled under the predecessor contractor’s CBA, 

any interpretation of the wage and fringe benefit provisions of the CBA, where its 

provisions are unclear, must be based on the intent of the parties to the CBA, provided 

that such interpretation is not violative of law. Thus, some principles discussed in 

regulations 29 C.F.R. §§ 4.170 – 4.177 regarding specific interpretations for the fringe 

benefit provisions of SCA prevailing wage determinations may not be applicable to 

wage determinations issued pursuant to section 4(c). (Similarly, some principles 

discussed in 29 C.F.R. § 4.167, regarding wage payments, may also not be applicable 

in section 4(c) successorship situations.) 

◊ In 29 C.F.R. § 4.163, regulatory guidance is provided specifically concerning 

compensation standards, including fringe benefits, under section 4(c) of the SCA. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

FRINGE BENEFIT REQUIREMENTS – 

VACATION BENEFITS 

◊ Vacation fringe benefits can be determined from the language of the fringe benefit 

provision in the wage determination. 

 Example: 

 “One week paid vacation after one year of service with a contractor or 

successor.” 29 C.F.R. § 4.173(a). Two factors must be considered for vacation 

benefits under this wage determination requirement: 

 ◊◊ The total length of time an employee has been in the employer’s

service, both performing commercial work and performing on the 

federal contract, and 

 ◊◊ The total length of time an employee has been employed in any 

capacity in the continuous service of any predecessor 

 contractor(s) who carried out similar contract functions at the 

 same federal facility. 

◊ By requiring prospective contractors who employ the same personnel to provide the 

same vacation benefits as an incumbent contractor, equity in bidding is achieved – 

otherwise the incumbent contractor would be at a distinct disadvantage when bidding. 

 Note: Not less than 10 days before contract completion, the incumbent prime 

contractor must furnish the contracting officer a list of all service 

employees who were on the contractor or subcontractor’s payroll during the 

last month of the contract, together with the employees’ anniversary dates 

of employment (when employment began with the incumbent as well as 

with any predecessor contractors). A copy of this list is provided to the 

successor contractor. 29 C.F.R. § 4.6(l)(2). 

◊ Vacation need not be paid immediately but must be provided at a mutually agreed 

upon time or payment made before the next anniversary date of employment, 

termination of employment, or completion of the current contract, whichever 

occurs first. 29 C.F.R. § 4.173(c)(2). 

◊ If an employee’s rate increases during the period of the contract, the rate applicable to 

computation of any required vacation benefits is the hourly rate in effect in the 

workweek in which the paid vacation (or the cash equivalent) is provided, unless the 

wage determination specifies otherwise. 29 C.F.R. § 4.173(e). 

◊ Whether the previous contract was covered by a wage determination is immaterial. 

◊ The contractor by whom a person is employed at the time the vacation vests (i.e., the 

employee’s anniversary date of employment) is liable for the full fringe benefits. 29 

C.F.R. § 4.173(d). 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

◊ There is no accrual or vesting of vacation eligibility before the employee’s anniversary 

date and no segment of time smaller than one year need be considered in computing the 

employer’s vacation liability, unless specifically provided for in the wage 

determination. 29 C.F.R. § 4.173(c)(1). 

◊◊ For example, if an employee entitled to one week paid vacation after one year of 

service has worked thirteen months for an employer (or one month with a 

successor contractor after one year with the predecessor contractor) is separated 

without receiving any vacation benefit, he would be entitled to one week of paid 

vacation. The employee would not be entitled to the additional fraction of onetwelfth of one week’s paid vacation for the month he worked in the second year 

unless so stated in the applicable wage determination. 

Continuous service

◊ If an employee’s total length of service adds up to one year, he/she would be eligible 

for one week’s vacation. However, such service must have been rendered continuously 

for a period of not less than one year for vacation eligibility. 29 C.F.R. § 4.173(b). 

◊◊ The term continuous service does not require the combination of two entirely 

separate periods of employment. Whether or not there is a break in continuity 

so as to deprive an employee of his or her vacation entitlement is dependent 

upon the facts in a particular case. 

 ◊◊◊ The primary consideration in making a determination of “break in 

service” is what caused the interruption and why did it occur, not the 

length of time of the break. 

 ◊◊◊ In cases where employees have been granted leave with or without pay by 

their employer, or are otherwise absent with permission for such reasons 

as sickness or injury, or otherwise perform no work because of reasons 

beyond their control, there would not be a break in service. (Example of 

situation where a break has not occurred - employee absent for five 

months due to illness but employed continuously for three years.) 

 29 C.F.R. § 4.173(b). 

◊◊ If an employee quits or is fired for cause, a break in service would have occurred 

even if the employee was rehired at a later date. However, a contractor may not 

discharge and rehire at a later date in order to evade vacation fringe benefits 

requirements. 29 C.F.R. § 4.173(b)(2). 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

FRINGE BENEFIT REQUIREMENTS – 

HOLIDAY BENEFITS 

◊ An employee’s entitlement to holiday pay vests by working in the workweek in which 

the named holiday occurs, or is on paid sick leave or vacation leave. 29 C.F.R. 

§§ 4.174(a)(1) – (2). 

◊ Unless there is a provision in the wage determination to the contrary, an employee must 

receive the holiday fringe benefits even though he/she worked only part of the week in 

which the holiday occurred. 

◊ An employee need not be paid for a holiday that occurs earlier in the workweek prior to 

his/her hiring, provided the holiday does not occur during the first week of the contract. 

29 C.F.R. § 4.174(b). 

◊ A contractor need not provide holiday pay to any employee who does not perform any 

work in the workweek in which the holiday occurred provided that the employer did 

not lay off the employee during that workweek to avoid having to pay for the holiday. 

29 C.F.R. § 4.174(a)(2). 

◊ If the SCA wage determination applicable under a contract does not include a paid 

holiday provision for any day declared by the President of the United States to be a 

holiday, the contractor is not required to pay covered service employees for that day 

off, even if they do not work that day. For example if the building where they work is 

closed because of a presidential declaration affecting federal employees on a Friday, 

December 26, and the contract wage determination does not indicate that holiday pay is 

required for the day, holiday pay would not be required under SCA. Such pay would 

be a matter of discretion for the contractor, and contract payments for such time not 

worked would be a procurement matter within the purview of the contracting agency. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

EQUIVALENT BENEFITS 

The employer may discharge the obligation to provide specified fringe benefits (including 

vacation and holiday pay) by: 

◊ Furnishing at least the benefit amount listed on the contract wage determination 

for each employee to a third party or trustee, such as for life or health insurance 

and/or a pension plan, or by 

◊ Furnishing equivalent combinations of bona fide fringe benefits (the types of 

fringe benefits may be different for individual workers), or by 

◊ Making equivalent payments in cash to the employee. “Equivalent” means equal 

in terms of monetary cost to the employer, or by 

◊ Providing any combination of bona fide fringe benefits and cash payments 

needed to meet the fringe benefit requirements under the contract. 

Cash equivalents for fringe benefits 29 C.F.R. § 4.177. 

◊ Examples of cash equivalents: 

 ◊◊ If a wage determination requires health and welfare benefits of $3.16 per 

hour, that fringe benefit obligation may be discharged by paying the 

employee $3.16 per hour in cash in addition to his/her monetary wage, if 

separately stated in the employer’s records. 

 ◊◊ If a wage determination requires a successor contractor to pay the fringe 

benefits set forth in a collective bargaining agreement which has a health 

and welfare benefit of $2.30 per hour, and a pension benefit of $1.50 per 

hour, the fringe benefit obligation may be discharged by paying the 

employee $3.80 per hour in cash in addition to his/her monetary wage, if 

separately stated in the employer’s records. 

◊ Cash equivalents for fringe benefits stated in terms other than a cash amount: 

 ◊◊ Where fringe benefits are stated as a weekly or monthly amount, the hourly 

cash equivalent can be determined as shown in the following example. 

 Example: The fringe benefits for pension is $120 per week, the hourly 

cash equivalent is $120 divided by 40 hours or $3.00 per hour. 

 Note: If the fringe benefits do not specify the daily or weekly hours of 

work for which fringe benefits are to be measured, a standard 8-

hour day, 40-hour workweek will be applicable. 
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U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

 ◊◊ Where fringe benefits are specified in terms such as “ten (10) paid holidays 

per year” or “one week paid vacation after one year of service,” the 

employee’s hourly rate of pay is multiplied by the number of hours making 

up the paid vacation or holidays to determine annual cost. (A standard 8-

hour day and 40-hour week will be applicable unless the wage 

determination specifies otherwise.) The total annual cost is divided by 

2,080 hours (40 hours a week x 52 weeks) to arrive at an hourly cash 

equivalent. 

 Example: The fringe benefit is 10 paid holidays per year. 

 Employee’s hourly rate is $9.00. 

 $9.00 x 80 hours (10 days of 8 hours each) = $720. 

 $720/2,080 hours = $0.346 per hour. 

 Example: The fringe benefit is one week paid vacation after one year of 

service. Employee’s hourly rate is $10.00. 

 $10.00 x 40 hours = $400. 

 $400/2,080 hours = $0.19 per hour. 

 ◊◊ Where an employer decides to pay an hourly cash equivalent instead of the 

vacation fringe benefit, the cash payments need not commence until the 

employee has completed “one year of service.” However, if the employee 

should terminate employment before receiving the full cash amount of the 

vested fringe benefit due, the employee must be paid the full amount of any 

difference remaining as a final cash payment. 

 Example: An employee became eligible for one week paid vacation on 

May 1 and the employer elects to pay the hourly cash equivalent 

to the employee in lieu of the paid vacation beginning that date. 

The employee terminates his employment on July 1. If the 

employee has received only one-sixth (2 of 12 months) of the 

vacation to which he/she is entitled, the employee is still due the 

remaining five-sixths (10 of 12 months) of the vacation pay 

upon termination. 
17

U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

DISCHARGING WAGE AND FRINGE BENEFIT OBLIGATIONS 

◊◊ A contractor/subcontractor cannot offset an amount of monetary wages paid in 

excess of that required by the applicable wage determination in order to satisfy 

the fringe benefit obligations of the applicable wage determination. 29 C.F.R. 

§ 4.170. In other words, a contractor may not credit wage payments higher than 

the applicable minimum monetary wage to satisfy a fringe benefit deficiency, or 

vice versa. 

◊◊ Thus, in the following example, where a fixed cost per employee H&W fringe 

benefit applies, and the contractor provides vacation and holiday benefits the 

wage determination specifies, available records show that an individual service 

employee is being paid a monetary wage of $11.00 per hour, and the employer 

pays $2.41 per hour (up to 40 hours per week) for the employee’s health 

insurance, the fringe benefit requirement would not be met: 

 Wage Determination Contractor has 

 requires: paid: 

 Wage $10.25 Wage $11.00 

 H&W benefits 3.16 H&W benefits 2.41 

 Total $ 13.41 Total $13.41 

◊◊ In this example, the contractor/subcontractor would be in compliance with the 

wage requirement of the applicable minimum monetary wage requirement. 

However, the fringe benefit requirement would not be met. The cost of the fringe 

benefits furnished payment is $.75 below the minimum listed in the wage 

determination. 

◊◊ As discussed above, the obligation to furnish the specified benefits may be 

discharged by furnishing any equivalent combination of fringe benefits, or by 

making equivalent or differential payments in cash. Thus, in the example above, 

if the contractor/subcontractor met the vacation and holiday benefit requirements, 

as listed on the wage determination , and beyond that, only provided health 

insurance benefits by contributing an hourly amount of $2.41 for the worker’s 

health insurance, the remaining $.75 could be paid as a cash equivalent, or that 

amount could have been contributed to provide another benefit such as a 401k 

plan, to be in compliance with the applicable fringe benefit obligation of $3.16 

H&W benefit required by the wage determination. However, it should be noted 

that employer contributions to bona fide fringe benefit plans must be regularly, at 

least quarterly. 
18

U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

TEMPORARY AND PART-TIME EMPLOYMENT 

◊ SCA makes no distinction between temporary, part-time, and full-time employees. 

 In the absence of an expressed limitation on a wage determination, wage and fringe 

benefit requirements apply equally to all such employees. 29 C.F.R. § 4.165(a)(2). 

◊ However, part-time employees need only be provided with a proportionate amount of 

the vacation and holiday fringe benefits due full-time employees. 29 C.F.R. § 4.176. 

 Examples: 

 ◊◊ Full-time employees due one week vacation (40 hours). A part-time 

employee works a regularly scheduled workweek of 20 hours. The parttime employee is due 20 hours (20/40 = 1/2) the hours due the full-time 

worker’s paid vacation, based on working half the time the full-time 

employee works. 

 ◊◊ Full-time employee works an 8 hour day and receives 8 hours pay as a 

holiday benefit. A part-time employee works 5 hours per day. The parttime employee is due 5 hours pay (5/8) as holiday benefit. 

 ◊◊ Holiday or vacation pay obligations to temporary and part-time employees 

working an irregular schedule of hours may be discharged by paying such 

employees a proportion of the holiday or vacation benefits due full-time 

employees based on the number of hours each such employee worked in the 

workweek prior to the workweek in which the holiday occurs, or with 

respect to vacations, the number of hours which the employee worked in the 

year preceding the employee’s anniversary date of employment. 29 C.F.R. 

§ 4.176(a)(3). 

 ◊◊ Health and welfare fringe benefits must be paid at the specified amount in 

the wage determination for temporary and part-time employees. In general, 

the temporary and part-time employees are entitled only to an amount 

proportional to the amount of time spent in contract work. 29 C.F.R. 

§ 4.176. 
19

U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

OVERTIME REQUIREMENTS OF FLSA AND CWHSSA 

◊ The SCA does not require overtime pay, but FLSA and/or CWHSSA overtime 

pay requirements may apply to SCA contracts. 29 C.F.R. §§ 4.180 and 4.181. 

◊ FLSA has the broadest application and contractors/subcontractors performing on 

contracts subject to SCA may be required to compensate their non-exempt 

employees working on or in connection with SCA-covered contracts for overtime 

work pursuant to its overtime pay standards. 

◊ CWHSSA applies to any service contract in excess of $100,000 that employs 

laborers, mechanics, guards, and watchmen. 

◊ CWHSSA applies to laborers, mechanics, guards, and watchmen for the time 

spent on covered contract work only (i.e., all time each employee spent working 

on covered contracts - excluding all commercial, non-government work). 

(Service employees on the contract who are not laborers, mechanics, guards or 

watchmen, are not subject to CWHSSA). 

◊ FLSA requires the payment of time and one-half the “regular rate of pay” for all 

hours worked in excess of 40 hours in a week. 

◊ CWHSSA requires the payment of time and one-half the “basic rate of pay” for all 

hours worked in excess of 40 hours in a week. The “basic rate of pay” under 

CWHSSA is the individual’s straight time hourly rate and can not be less than the 

“basic hourly rate” required in an applicable SCA wage determination. 

◊ Under the SCA and FLSA, amounts paid as fringe benefits – both contributions 

to “bona fide” fringe benefit plans and cash payments made to meet fringe benefit 

requirements in the wage determination – are excluded in computing overtime 

obligations. This exclusion applies to CWHSSA as well. 29 C.F.R. § 4.177(e) 

and 29 C.F.R. § 778.7. 

◊ For example, for an employee who worked 44 hours on a covered contract as a 

janitor, where the wage determination rate for a janitor is $15.00 (basic hourly 

rate) plus $3.16 in health and welfare fringe benefits per hour per employee, the 

correct computations under SCA and CWHSSA would be: 

40 hours x $ 3.16 = $126.40 in fringe benefits 

44 hours x $15.00 = $600.00 for prevailing wages 

 4 hours x $15.00 x 1⁄2 = $ 30.00 for CWHSSA O/T earnings 

 $756.40 

 Note that a wage determination including the “average cost” benefits would 

compute such benefits for all hours worked ($3.16 x 44 = $139.04). 
20

U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

◊ If an employee worked in two or more classifications at different rates during a 

workweek, the overtime pay may be computed based on the hourly rate in effect 

for the hours worked beyond 40 hours in the workweek so long as the employee 

agrees. (The contractor’s records must clearly identify the hours worked in the 

separate job classifications.) Overtime also may be computed based on the 

weekly average rate (or “regular rate”) paid for all hours worked. 29 

C.F.R.§§ 778.6, 778.115 and 778.415 – 778.419. 

◊ The following examples demonstrate two methods for computing the overtime

premium pay under FLSA and/or CWHSSA for an employee who worked in 

different job classifications and at different rates of pay in the same workweek. 

 ◊◊ An employee is hired to perform work on a covered service contract in two 

job classifications: painter and electrician. The wage determination rate for 

an electrician is $22.00 (basic hourly rate). The wage determination rate for 

a painter is $20.00 (basic hourly rate). 

 Method 1: Computation of the overtime premium based on the “rate in 

effect” when the overtime hours were worked. (See section 7(g) of the 

FLSA.) 

 S M T W T F S 

 Painter hours 8 8 8 

 Electrician hours 8 8 4 

 In this example the overtime hours occurred on Saturday. The overtime 

premium could be computed based as follows: 

 1⁄2($22.00) x 4 = $44 

 Method 2: Computation of the overtime premium based on the “regular 

rate” for the workweek. 

 Step 1: Determine the straight time wages due, excluding fringe benefits: 

 24 hours at the painter’s rate of $20.00 = $480.00 

 20 hours at the electrician’s rate of $22.00 = 440.00

 Total straight time wages = $920.00 

 Step 2: Calculate the “regular rate”: 

 $920.00/44 hours worked = $ 20.91 regular rate 

 Step 3: Compute the overtime premium due: 

 1⁄2($20.91) x 4 overtime hours worked = $41.82 
21

U.S. DEPARTMENT OF LABOR SCA COMPLIANCE 

PREVAILING WAGE RESOURCE BOOK 2010 PRINCIPLES 

RECORDKEEPING 

Basic Payroll Records

The recordkeeping requirements of the SCA are stated in the SCA contract clauses. 

29 C.F.R. § 4.6(g). The employer is required to maintain the following records for each 

employee subject to the SCA and to make these records available for inspection and/or 

transcription on the request of an authorized representative of the Wage and Hour Division 

(WHD). These records must be maintained for three years from the completion of the work. 

Also, the contractor may be required to provide the basic time and payroll records required 

under the FLSA. 29 C.F.R. § 516.2. 

◊ Name, address, social security number of each employee. 

◊ The correct work classification(s), rate(s) of monetary wages paid and fringe 

benefits provided, rate(s) of cash payments in lieu of fringe benefits, and total 

daily and weekly compensation paid to each employee. 

Note: If the employer chooses to pay a cash equivalent to meet the fringe 

benefit requirements of the wage determination, the cash payment 

must be clearly identified as fringe benefits in the employer’s records. 

29 C.F.R. § 4.170. 

◊ The number of daily and weekly hours worked by each employee subject to SCA 

requirements. 

◊ Any deductions, rebates or refunds from the total daily or weekly compensation 

of each employee. 

◊ A list of monetary wages and fringe benefits for which wages rates and fringe 

benefits have been determined in accordance with the contract clause setting forth 

the conformance procedures. 29 C.F.R. § 4.6(b). 

◊ The list of a predecessor contractor’s employees furnished to the contractor 

pursuant to 29 C.F.R. § 4.6(1)(2). 

◊ Relevant records for any service employee(s) covered by a WHD certificate that 

allows for the payment of special minimum wages to workers with disabilities 

under Section 14 of the FLSA, and for any apprentices registered in an approved 

“bona fide” apprenticeship program. SCA: 29 C.F.R. §§4.6(o) – (p); FLSA: 29 

C.F.R. Part 525; National Apprenticeship Act: 29 C.F.R. § 29.6.