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New Minimum Wage Rates for Federal Contractors: What You Need to Know for 2026

Federal contractors are facing a shifting landscape regarding minimum wage requirements. Following a recent notice from the U.S. Department of Labor’s (DOL) Wage and Hour Division, new minimum wage rates have been established for specific federal contracts and subcontracts. These changes are set to take effect on May 11, 2026, and it is critical for employers to understand if their agreements fall under these updated mandates.

The New Rates

Starting in May 2026, the minimum wage for covered contracts will be:

• $13.65 per hour for regular employees.
• $9.55 per hour for tipped employees.

These rates are part of a regulatory framework that includes annual adjustments. The DOL will review and update these figures every year based on inflation to ensure worker pay keeps pace with the rising cost of living.

Which Contracts Are Covered?

The new rates specifically apply to contracts governed by Executive Order 13658, the 2014 Obama-era mandate. This includes contracts subject to the Davis-Bacon Act (DBA)—typically construction and public works—and the Service Contract Act (SCA).

To be subject to these new 2026 rates, a contract must meet specific timing criteria:

1. It must have been awarded between January 1, 2015, and January 29, 2022.
2. It must not have been renewed or extended on or after January 30, 2022.

The DOL’s recent clarification is significant because it addresses legal uncertainty created by subsequent executive orders. Even though more recent orders adjusted rates for newer contracts, the DOL maintains that Executive Order 13658 remains in effect for this specific window of agreements.

Key Interactions with the Davis-Bacon Act

For those managing construction or repair projects under the Davis-Bacon Act, these regulations establish a mandatory wage floor. Even if the prevailing wage determination for a specific locality or trade is lower than the federal minimum, employers must pay the higher rate of $13.65 per hour for work performed on or in connection with the contract.

Steps for Employer Compliance

With the 2026 deadline approaching, federal contractors should take proactive steps to mitigate liability and ensure a smooth transition:

• Audit Your Contracts: Review your current federal awards to see if they fall within the 2015–2022 window. Determine if they have been extended in a way that moves them into a different regulatory category.
• Update Payroll Systems: Coordinate with your payroll department or service provider to ensure your systems are ready to implement the $13.65 and $9.55 rates by the May 11, 2026, effective date.
• Establish Inflation Monitoring: Since these rates will be adjusted annually, create a process to check for DOL updates every year to maintain ongoing compliance.
• Seek Legal Guidance: Because the interplay between various executive orders can be complex, consulting with legal counsel can help clarify how these general rules apply to your specific business situation.

By preparing now, contractors can avoid the risks of government enforcement actions and ensure their operations remain compliant with the latest federal labor standards.

Tags: federal contracts, minimum wage, Department of Labor, Executive Order 13658, Davis-Bacon Act, Service Contract Act, payroll compliance, labor laws 2026, marketus