Business Operations
HR and Payroll Compliance for Government Contractors
Operating as a federal contractor adds a massive compliance layer on top of standard labor law. Violations don't just trigger fines — they trigger contract payment withholding, termination for default, and debarment. The federal government uses purchasing power to enforce socio-economic policy.
The Service Contract Act (SCA)
Applies to most service contracts over $2,500. You must pay at least the DoL Wage Determination rate for each labor category in each work locality.
H&W fringe: mandatory hourly amount provided through bona fide benefits or cash-in-lieu. Most common mistake is failing to apply H&W to overtime hours — silent DoL liability that accumulates.
Vacation vesting carries across successor contractors. If you win a re-compete and hire the incumbent's people, you owe their accrued years.
DCAA Timekeeping
Daily entry. Total time accounting. Correct charge codes. Audit trail on every change. Supervisor approval by someone with direct knowledge of the work.
Floor checks are unannounced. Employees with three days of unfilled timesheets fail the firm and can trigger withholding.
OFCCP and Affirmative Action
Federal contractors over $10K are under OFCCP jurisdiction. Over 50 employees and $50K, you need a written Affirmative Action Program.
Track applicants meticulously — race, gender, veteran, disability — and document why each candidate was hired or rejected.
Consequences of Non-Compliance
DoL back-pay orders, payment withholding, False Claims Act treble damages on fraudulent timesheets, and debarment for willful violations. For a GovCon firm, debarment is a death sentence.
Standard commercial payroll (ADP, Paychex) can do SCA but requires significant configuration. Many firms migrate to GovCon-specialized PEOs or payroll providers.
Want help putting this into practice?
Desra Secure operates SCA-aware payroll, DCAA timekeeping, and OFCCP compliance for cleared contractors.
This guide is provided for general informational purposes only and does not constitute legal, accounting, or compliance advice. Specific obligations depend on your contracts and your environment.