22.406-2
Wages, fringe benefits, and overtime
Contractors must ensure that all wage, fringe benefit, and overtime payments meet or exceed wage determination requirements, using only approved methods for calculating cash equivalents and overtime rates.
Overview
FAR 22.406-2 details how contractors must compute wages, fringe benefits, and overtime for laborers and mechanics under covered contracts. It specifies what can be included as wages, how fringe benefits are calculated, and the proper method for determining overtime pay. The regulation ensures that contractors meet the minimum wage and benefit requirements set by wage determinations and provides guidance on calculating the cash equivalent of non-cash benefits.
Key Rules
- Wage Computation
- Only cash payments, certain irrevocable contributions to bona fide benefit plans, and other approved fringe benefits may be counted as wages.
- Fringe Benefit Equivalency
- Contractors can meet wage obligations through a combination of cash and approved fringe benefits, as long as the total meets or exceeds the wage determination requirements.
- Calculating Cash Equivalents
- Non-cash benefits must be converted to an hourly cash equivalent based on actual hours worked; disputes are referred to the Department of Labor.
- Overtime Calculation
- Overtime must be paid at 1.5 times the basic hourly rate (excluding employer fringe benefit contributions), using the higher of the wage determination rate or the actual rate paid.
Responsibilities
- Contracting Officers: Ensure contractors comply with wage and fringe benefit requirements, resolve disputes, and refer unresolved issues to the Department of Labor.
- Contractors: Accurately compute and pay wages, fringe benefits, and overtime as prescribed; maintain documentation and follow approved calculation methods.
- Agencies: Oversee compliance and facilitate dispute resolution as needed.
Practical Implications
- This section protects workers by ensuring they receive the full value of wages and benefits required by law.
- Contractors must carefully track and document all wage and benefit payments, especially when using non-cash benefits.
- Miscalculations or improper benefit valuations can lead to compliance violations and potential penalties.