Obama Administration Gives Some Contractors a Pay Raise Next Year, Too

Low-wage contractors working for federal agencies will receive a pay bump next year, as the minimum wage created by an Obama administration executive order will increase slightly in 2017.

The lowest wage for any employee working on or in connection with federal contracts will be $10.20 per hour, up from $10.15 in 2016. The increase is part of an automatic formula President Obama instituted through the order after it first went into effect in 2015. It was issued through a Labor Department notice in the Federal Register.

Tipped employees will see a larger bump to their base pay, jumping $0.95 to $6.80 per hour.  The executive order increased pay for tipped workers by 95 cents per year until it reaches 70 percent of the regular minimum wage. If a worker’s tips do not add up to at least $10.20, the employer must make up the difference.

Obama signed the order in 2014 as part of his larger push to increase the federal minimum wage. It initially set the lowest allowable pay for contractors at $10.10 per hour, but mandated annual, inflation-based adjustments, rounded to the nearest $0.05. In 2015, the minimum wage also increased $0.05 for regular employees and $0.95 for tipped workers.

The federal contractor community has pushed back against the executive order since its signing, calling it unnecessary and saying it targets employers already paying their workers a fair wage. Alan Chvotkin, the Professional Services Council's executive vice president and counsel, said most companies have adjusted to the new reality but must ensure they do not fall behind. 

"It is still a significant administrative burden companies have to go through," Chvotkin said. "They have to make sure they are staying up to date on this."