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Minimum Wage Raised for Federal Contractors

February 14, 2014

After his most recent State of the Union address, President Obama signed an executive order to raise the minimum wage for federal contractors from $7.25 to $10.10 starting in 2015. The executive order also included provisions addressing increased wages for tipped employees and disabled workers.

The increase will take effect for new and renewed contracts beginning on January 1, 2015. Current contracts will not be retroactively changed, however. The $10.10 rate will also be changed annually in accordance with inflation changes in the Consumer Price Index.

Federal contractors who are tipped employees will also see wage increases. Base wages for tipped employees will start at $4.90, and if tips received don’t add up to an hourly rate of $10.10, employers must make up the difference. Before this executive order, federal contractors could also pay disabled workers a subminimum wage; however, this will no longer be allowed as of January 1, 2015.

The executive order only affects federal contract workers, not the federal minimum wage for all employees. President Obama is still pushing for Congress to raise the minimum wage, which has not been increased since 2009.

Supporters of the wage increase say that the 2009 rate of $7.25 is outdated by today’s cost of living standards, pushing more Americans below the poverty line. Critics argue that raising the minimum wage will force employers to cut jobs and hours, especially when coupled with the additional costs the Affordable Care Act will bring in 2015.