Biden increases minimum wage for federal contract workers

President Joe Biden recently issued Executive Order (EO) 14026 increasing the minimum wage for federal contractors and phasing out the tip credit wage.

What president’s order says

Minimum wage. Starting January 30, 2022, all executive branch agencies must incorporate a $15 minimum wage into new contract solicitations. Additionally, by March 30, 2022, the agencies will need to implement the minimum wage in new contracts.

Federal contractors entering into new contracts must agree to pay employees doing work performed under the contracts the applicable minimum wage established by the EO. The increase is anticipated to be implemented into existing contracts when the parties exercise their options to extend them.

Tip credit wage. As of January 30, 2022, tipped workers must earn a minimum cash wage of $10.50 per hour. By January 1, 2023, the cash wage must be 85 percent of the federal contractor minimum wage at the time, rounded to the nearest $0.05. And by January 1, 2024, the cash wage must equal the federal contractor minimum wage in effect at the time.

Who’s covered

The EO applies to (1) new contracts, (2) new contract-like instruments, (3) new solicitations, extensions, or renewals of existing contracts or contract-like instruments, and (4) the exercise of an option on an existing contract or contract-like instrument if: