FAR 22.1904—Annual Executive Order Minimum Wage Rate.
Plain-English Summary
FAR 22.1904 explains how the annual Executive Order (E.O.) minimum wage rate is announced and how contract price adjustments are handled when that rate changes. It covers three main topics: the Administrator’s publication and notice duties, the contractor’s right to request a price adjustment after a new annual rate becomes effective, and the contracting officer’s limits on what may be adjusted. In practice, this section matters because it ties the E.O. minimum wage update to federal contract administration, especially for service and construction contracts that also involve Service Contract Labor Standards (SCLS) or Wage Rate Requirements (Construction) wage determinations. The rule is designed to ensure contractors can recover certain increased labor costs caused by the annual minimum wage increase, while preventing overpayment, duplicate recovery, or inclusion of unrelated costs such as overhead and profit. It also clarifies how the adjustment is calculated for each affected worker by comparing the new E.O. rate to the current E.O. rate, the applicable wage determination rate, and the worker’s actual wage, with no increase if the result is zero or negative. Overall, the section provides the timing, notice, and pricing mechanics needed to implement annual minimum wage changes consistently across covered federal contracts.
Key Rules
Annual notice before effective date
For the annual E.O. minimum wage rate effective January 30, 2022, and each year after, the Administrator must notify the public at least 90 days in advance by publishing a Federal Register notice. The rate must also be posted and maintained on Wage Determinations at SAM.gov or any successor site.
General notice on wage determinations
The Administrator must include a general notice on wage determinations issued under the Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute. That notice must explain the E.O. minimum wage and tell users how to obtain annual updates.
Price adjustment only after effective date
A contractor may request a price adjustment only after the new annual E.O. minimum wage determination becomes effective. The rule does not allow an advance adjustment before the effective date.
Adjustment limited to labor-related increases
Price adjustments are allowed only for increased labor costs caused by the annual E.O. minimum wage, including subcontractor labor costs, and for associated labor costs. Associated labor costs may include changes in Social Security and unemployment taxes and workers’ compensation insurance, but not general and administrative costs, overhead, or profit.
Worker-by-worker adjustment cap
The wage rate adjustment for each worker is limited to the lowest amount produced by comparing the new E.O. wage rate against the current E.O. minimum wage rate, the applicable service or construction wage determination rate, and the worker’s actual wage. If the result is zero or less, no increase is paid for that worker.
No duplicate or unrelated adjustments
The contracting officer may not adjust the contract price for costs outside those identified in paragraph (b)(1), and may not provide a duplicate adjustment where the same costs are already covered under SCLS or construction wage clauses.
Responsibilities
Administrator
Publish the annual E.O. minimum wage rate in the Federal Register at least 90 days before it takes effect, maintain the rate on SAM.gov or a successor site, and include a general notice on applicable wage determinations explaining the E.O. minimum wage and how to obtain updates.
Contractor
After the new annual E.O. minimum wage rate becomes effective, request a price adjustment if eligible, and support the request with labor-cost data showing only the increased costs directly caused by the new rate, including allowable associated labor costs.
Contracting Officer
Evaluate and apply price adjustments only after the effective date, limit any adjustment to the costs allowed by the rule, and avoid duplicate recovery for the same labor costs under other wage clauses.
Subcontractor
Provide labor-cost information as needed to support the prime contractor’s adjustment request, because subcontractor labor costs are expressly included in the allowable adjustment base.
Agency
Ensure contract administration procedures reflect the annual notice and pricing requirements, and coordinate wage-determination updates and contract modifications consistent with the rule.
Practical Implications
Contractors should track the effective date closely; a request filed too early is not authorized, and a request filed late may complicate administration even if the underlying entitlement exists.
The adjustment is narrowly limited, so contractors should separate direct labor impacts from overhead, profit, and other indirect costs that cannot be recovered under this section.
The worker-by-worker calculation can eliminate increases for some employees if the applicable wage determination rate or actual wage already exceeds the new E.O. minimum wage.
Contracting officers must watch for duplicate recovery when the same labor category is already covered by SCLS or construction wage adjustments.
Documentation matters: contractors should retain payroll records, subcontractor data, and benefit/tax impact calculations to justify the requested adjustment and show that only allowable costs are included.
Official Regulatory Text
(a) For the E.O. minimum wage rate that becomes effective on January 30, 2022, and annually thereafter, the Administrator will- (1) Notify the public of the new E.O. minimum wage rate at least 90 days before it becomes effective by publishing a notice in the Federal Register; (2) Publish and maintain on Wage Determinations at SAM.gov, https://www.sam.gov , or any successor site, the E.O. minimum wage rate; and (3) Include a general notice on wage determinations which are issued under the Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute. The notice will provide information on the E.O. minimum wage and how to obtain annual updates. (b) (1) The contractor may request a price adjustment only after the effective date of a new annual E.O. minimum wage determination published pursuant to paragraph (a). Prices will be adjusted only for increased labor costs (including subcontractor labor costs) as a result of the annual E.O. minimum wage, and for associated labor costs (including those for subcontractors). Associated labor costs shall include increases or decreases that result from changes in social security and unemployment taxes and workers’ compensation insurance, but will not otherwise include any amount for general and administrative costs, overhead, or profit. (2) The wage rate price adjustment under this clause is the lowest amount calculated by subtracting from the new E.O. wage rate the following: the current E.O. minimum wage rate; the current service or construction wage determination rate under the contract (if the wage rate is applicable to that worker); or the actual wage currently paid the worker. If the amount is zero or below, there will be no increase paid for this worker. (i) Example 1 - New E.O. wage rate is $16.10. Previous E.O. wage rate is $15.70. The current service or construction wage determination rate applicable to this worker under the contract is $15.75. Analysis: The calculation is $16.10 - $15.80 = $.30. The price adjustment for this worker is $.30. The actual wage currently paid to the worker is $15.80. (ii) Example 2 - New E.O. wage rate is $15.50. Previous E.O. wage rate is $15.10. The current service or construction wage determination rate applicable to this worker under the contract is $15.75. Analysis: The calculation is $15.50 - $15.80 = -$.30. There is no price adjustment for this worker. The actual wage currently paid to the worker is $15.80. (3) The contracting officer shall not adjust the contract price for any costs other than those identified in paragraph (b)(1) of this section, and shall not provide duplicate price adjustments with any price adjustment under clauses implementing the Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute.