Synopsis of Law, from the Department of Labor
The Service Contract Act requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor’s collective bargaining agreement. The Department of Labor issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies. These determinations are incorporated into the contract.

For contracts equal to or less than $2,500, contractors are required to pay the federal minimum wage of $5.15 an hour (as of September 1, 1997) as provided in Section 6(a)(1) of the fair labor Standards Act. Contractors must also, under the provisions of the Contract Work Hours and Safety Standards Act and the Fair Labor Standards Act, pay employees at least one and one-half times their regular rate of pay for all hours worked over 40 hours in a workweek.

Important Parts of The Regulations

Code of Federal Regulations Section 29, Part 4.

Section Number:     4.165
Section Name: Wage payments and fringe benefits–in general.
(c) The prevailing rate established by a wage determination under the Act is a minimum rate.

Section Number:     4.170
Section Name: Furnishing fringe benefits or equivalents.
(a) … Fringe benefits required under the Act shall be furnished, separate from and in addition to the specified monetary wages, by the contractor or subcontractor to the employees engaged in performance of the contract…
(b) … A contractor may dispose of certain of the fringe benefit obligations which may be required by an applicable fringe benefit determination, such as pension, retirement, or health insurance, by irrevocably paying the specified contributions for fringe benefits to an independent trustee or other third person pursuant to an existing “bona fide” fund, plan, or program on behalf of employees engaged in work subject to the Act’s provisions …

Section Number: 4.172
Section Name:
Meeting requirements for particular fringe benefits–in general.
… No deduction from the specified amount may be made to cover any administrative costs, which may be incurred by the contractor in providing the benefits; as such costs are properly a business expense of the employer …

Section Number: 4.175
Section Name: Meeting requirements for health, welfare, and/or pension benefits.
… As set forth in Sec. 4.172, unless specified otherwise in the applicable determination such payments are due for all hours paid for, including paid vacation, sick leave, and holiday hours, up to a maximum of 40 hours per week and 2,080 hours per year on each contract …
(b) Some fringe benefit determinations specifically provide for health and welfare and/or pension benefits in terms of average cost. Under this concept, a contractor’s contributions per employee to a “bona fide” fringe benefit plan are permitted to vary depending upon the individual employee’s marital or employment status. However, the firm’s total contributions for all service employees enrolled in the plan must average at least the fringe benefit determination requirement per hour per service employer …

Section Number: 4.176
Section Name: Payment of fringe benefits to temporary and part-time employees.
(a) … the Act makes no distinction, with respect to its compensation provisions, between temporary, part time, and full time employees …

Section Number: 4.180
Section Name: Overtime pay–in general.
… In determining any overtime pay to which such service employees are entitled under any Federal law, the regular or basic hourly rate of such an employee shall not include any fringe benefit payments computed here under which are excluded from the regular rate under the Fair Labor Standards Act by provisions of section 7(d) …