New rule puts $15 minimum wage for federal contractors in place next year

Labor Secretary Marty Walsh (Image credit: Vasilis Asvestas/Shutterstock.com

Employees working on federal contracts will have a $15 minimum wage starting on Jan. 30, 2022, per a new rule issued by the Labor Department on Monday.

The rule lays down the raise mandated by President Joe Biden in an executive order in April. The executive order will apply to new contracts, renewals and extensions of existing contracts starting on Jan. 30, 2022. The new hourly wage will be indexed by the Secretary of Labor in future years for inflation.

This is the first mandated wage increase since 2014, when former President Barack Obama signed an executive order increasing the minimum wage for contractors. Currently, the minimum wage is $10.95 an hour and $7.65 per hour for tipped employees. Those rates are scheduled to increase to $11.25 and $7.90 starting Jan. 1, 2022.

The change to $15 per hour will improve “economic security” for contractors, “many of whom are women and people of color,” said U.S. Secretary of Labor Marty Walsh in a statement.

The $15 minimum wage includes contractor employees with disabilities, a group that businesses are sometimes able to pay what’s known as a “sub-minimum wage” below the minimum wage under some current DOL regulations.

The rule also makes moves to eliminate the tipped minimum wage for federal contract employees by 2024. Currently, employers of tipped workers can also pay subminimum wages to tipped workers if their tips bring them up to a minimum wage.

DOL says that the wage floor will apply in the 50 states, the District of Columbia and some territories.