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Understanding the Service Contract Act (SCA)

May 15, 2014


The McNamara O’Hara Service Contact Act (SCA) of 1965 applies to any contract over $2,500 entered into by the United States of America and the District of Columbia to provide services using “service employees”.  The Act requires contractors to pay employees locally prevailing wage and fringe benefit rates, or the rates negotiated in a collective bargaining agreement. The SCA does not apply to professional, administrative, or exempt employees.


Contracting agencies use wage determinations issued by the Department of Labor. While the base wage may vary, the fringe benefit rate is generally set on a national level and is adjusted each year in June.  Currently the fringe benefit rate is $3.81.


Contractors can choose how to fulfill their fringe benefit obligations. Some pay the fringe as additional cash wages, however this option incurs the payroll burden such as FICA, FUTA, SUTA, and Workers Compensation on those dollars.


Contractors can instead allocate fringe dollars to pay for employee benefits such as health insurance, ancillary benefits and properly configured retirement plans. Using fringe benefit dollars as intended, for bona fide benefits, reduces payroll burden for contractors. This option also extends insurance coverage to employees, helps them save for retirement and now, with the implementation of the Patient Protection and Affordable Care Act (PPACA) provides funding for benefits mandated by law. This saves the employers the costs of these benefits and helps affected contractors avoid penalties for noncompliance.


The Contractors Plan works with several SCA clients. If you work on SCA contracts, we can help. Here are just a few of the advantages of partnering with The Contractors Plan:


  • Compliance assistance at no additional cost
  • One-stop shopping. Contractors can obtain health insurance, supplemental benefits, and set up retirement plans through The Contractors Plan.
  • Ease of Administration. One of the biggest advantages of working with The Contractors Plan is simplicity. All you have to do is upload a file and send in the contributions – we handle everything else.
  • If you want to offer a loan program with their retirement plan, The Contractors Plan has a turnkey solution.
  • The Contractors Plan has a Health Reimbursement Account option for employers who use our health insurance products.

We’re here to help. If you have questions about prevailing wage benefits for SCA contracts, please contact us.