President Joe Biden signed an executive order on April 27, 2021, to require some federal contractors to pay workers at least $15 per hour. This EO applies to those on government contracts, and the higher minimum wage goes into effect beginning January 30, 2022.
Biden also tied the minimum wage to be adjusted each year for inflation as part of the executive order. It will be at a rate set by the Labor Secretary.
The Biden administration hopes to enhance worker productivity, reduce absenteeism, and lower training and supervisory costs by taking these steps.
Agencies are “strongly encouraged” to make the pay raise active immediately as of the order date. New government contracts now include a clause mandating that covered contractors and subcontractors take the requirement into the lower-tier documents.
What Is the Impact on Tipped Minimum Wage?
Biden’s executive order makes changes to the tipped minimum wage for some federal contractors. Starting on the January 30, 2022, date, workers who get tips must receive a base pay of $10.50 per hour.
There are also provisions for the following years (2023 and 2024) that contractors must pay tipped workers 85% and the higher minimum wage, respectively.
If a tipped workers’ hourly wages don’t reach the higher amount, the contractor must increase salaries to make up the difference.
This EO replaces the one signed by Barack Obama in 2014. That order required federal contract workers to earn $10.10 per hour, indexed to inflation. Under that structure, the current hourly wage was $10.95 in 2021.
Although the wage difference is notable, the orders from Obama and Biden appear pretty similar in how they operate. Both focus on concessions and services without applying to tribal agreements.
Biden’s EO also revoked one of Trump’s orders that provided an exemption for recreational services on federal lands.