Contractor Minimum Wage (E.O. 14026)

Summary

Sets a $15.00 per hour minimum wage for people working on federal contracts to improve their well-being and the quality of their work.

What problem does this solve?

Some workers on federal government contracts are not paid enough, which can lead to them doing lower-quality work. This order raises their pay to make them more productive and improve the value the government gets from its contracts.

What does this order do?

Sets a $15.00 minimum wage for federal contractors

Requires that workers on federal contracts be paid at least $15.00 per hour, starting January 30, 2022.

Adjusts minimum wage for inflation each year

Starting in 2023, the minimum wage for contractors will be increased annually based on the Consumer Price Index to keep up with the cost of living.

Phases out the tipped minimum wage

Increases the minimum cash wage for tipped workers in stages, requiring them to be paid the full contractor minimum wage by January 1, 2024.

Applies to new and renewed contracts

The new wage requirements apply to new contracts, contract renewals, and extensions of existing contracts that are signed on or after January 30, 2022.

Replaces a previous executive order

Supersedes Executive Order 13658, which had set a lower minimum wage for federal contractors, and revokes an order that exempted certain recreational service workers.

Assigns enforcement to the Secretary of Labor

Gives the Secretary of Labor the authority to investigate violations and make sure contractors are following the new wage rules.

Who does this affect?

Federal contract workers
Companies with federal contracts
Federal government agencies

What is the real world impact?

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Improves government efficiency

Boosts the quality and efficiency of government services by ensuring contract workers are paid a fair wage. This is expected to increase worker morale and productivity while reducing employee turnover and training costs.

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Sets a national wage standard

Uses the federal government's large purchasing power to encourage higher wages in the private sector. By requiring its contractors to pay more, the government can influence the job market beyond just its own contracts.

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May increase contract costs

Could raise the cost of federal contracts, as companies may pass the higher labor expenses on to the government. This means taxpayers could end up paying more for the same services.

When does this start?

This order has several key dates for its rules to take effect, starting with new wage requirements for contracts on or after January 30, 2022.

Rules implementation deadline

By November 24, 2021, the Secretary of Labor must issue rules to put this order into practice.

$15.00 minimum wage begins

Starting January 30, 2022, the $15.00 per hour minimum wage applies to new, renewed, or extended federal contracts.

Tipped worker wage increase (Phase 1)

Beginning January 30, 2022, the minimum cash wage for tipped workers on federal contracts is raised to $10.50 per hour.

Annual inflation adjustments begin

Starting January 1, 2023, the minimum wage will be adjusted for inflation each year.

Tipped worker wage increase (Phase 2)

Beginning January 1, 2023, the minimum cash wage for tipped workers increases to 85% of the full contractor minimum wage.

Tipped worker wage increase (Final Phase)

Beginning January 1, 2024, tipped workers must be paid the same full minimum wage as other contract workers.