The McNamara-O’Hara Service Contract Act (SCA) applies to every contract entered into by the United States or the District of Columbia, the principal purpose of which is to furnish services in the United States through the use of service employees. Contractors performing on such Federal service contracts in excess of $2,500 must observe minimum wage and safety and health standards, and maintain certain records. Service employees on covered contracts in excess of $2,500 must be paid not less than the monetary wages and fringe benefits contained in wage determinations issued by the U.S. Department of Labor (DOL) for the contract work.

1. SCA Compliance Principles

2. Overview
How does Service Contract Act (SCA) work?
Fringe benefit plans
•Benefits
•Sick
•Holiday
•Jury Duty
•Bereavement
How vacation works

3. How Does SCA Work?
Health & Welfare (H & W)
•Life, accident, and health insurance plans, sick leave, pension
plans, civic and personal leave, severance pay and savings and
thrift plans.
•Minimum employer contributions must cost an average of $3.59*
per hour computed on the basis of all hours worked (or paid, as
specified in your WD) by service employees employed on the
contract.
*or the prevailing rate in your Wage Determination (WD)

4. How does SCA work?
Odd Numbered Wage Determinations
•Compliance with the H&W rate on all "odd numbered" Standard
Wage Determinations (e.g., WD No. 2005-2103) requires payment of
the minimum H&W rate for each hour paid for each employee, up
to a maximum of 40 hours per week. [See 29 CFR 4.175(a)]
•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.

5. How does SCA work?
How Does SCA Work?
Even Numbered Wage Determinations
•Compliance with the H&W rate on all "even numbered" Standard
WDs (e.g., WD No. 2005-2104) requires the contractor to
contribute an average of the stated H&W rate per hour, computed
on the basis of all hours worked by each employee. [See 29 CFR
4.175(b)]
•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 sick leave. Also, it does
not include unpaid leave time, such as that provided under the

6. How does SCA work?
Option One
Employer pays H&W in cash ($3.59* per hour)
•Cash payments in lieu of fringe benefits must be paid on regular
pay date (29 C.F. R. 4.165(a))
•If employer pays in cash, you must itemize the H&W on a
separate line item on the pay stub
* Or the prevailing rate in your WD

7. How does SCA work?
Option Two
Providing fringe benefits, such as:
•Medical insurance
•Dental insurance
•Vision insurance
•Life insurance
•LTD/STD insurance

8. How does SCA work?
Important fact!
Under SCA, the contractor may not credit excess wage payment
against the fringe benefit (FB) obligation.

9. How does SCA work?
Reconciliation
•Weekly, Monthly, or Quarterly
•Provide employee statements
•Quarterly reconciliation is the best method

10. How does SCA work?
Important fact!
The employer does not have to offer sick leave.
However, if the employer does offers sick leave, it can be applied
to the Health &Welfare dollars.

11. How does SCA work?
Holiday Fringe Benefits (29 C.F.R. 4.174)
•Holiday pay is required under SCA
•Employee entitled to holiday pay if works in the holiday workweek
•Employee not entitled to holiday pay if holiday not named in WD
(i.e. government closed by proclamation)
•Paid holidays can be traded for another day off if communicated to
employees
•Part-time employees receive holiday on a pro-rata basis

12. How does SCA work?
Jury Duty and Bereavement – not required
•If employer does provide jury duty or bereavement pay, the
actual dollars paid can be applied to Health & Welfare.

13. How does SCA work?
Vacation requirements
•Vacation is required under SCA.
•Employee receives vacation hours after they have worked 1 full
year.
•If employee leaves before their 1 year anniversary date they do
not receive vacation pay.
•If employer chooses to show accrued vacation on paystubs, the
employee will be entitled vacation pay if they terminate prior to
their 1 year of service.

14. How does SCA work?
Anniversary Date (12-months Service)
•Upon 1 year anniversary the employer puts vacation hours in
employee vacation balance.
•If 6 months later employee terminates, the employer must pay
out vacation balance. Employee does not get vacation pay for the
6 months worked over the 1 year.
•Incumbents – original start date on contract must be
grandfathered for vacation balances. Keep this in mind when
bidding on SCA contracts.

15. Contact Information
Jackie Asencio, President / CEO
medias@c2essentials.com
703-444-0096
www.c2essentials.com