A new federal contractor minimum wage takes effect May 11, 2026, but coverage depends on more than just the rate.
Background on the Federal Contractor Minimum Wage
Executive Order 13658
Issued in 2014, Executive Order 13658 established a minimum wage requirement for certain employees working on or in connection with covered federal contracts. The order took effect January 1, 2015, and requires the Secretary of Labor to adjust the wage rate annually based on inflation.
The upcoming increase to $13.65 per hour reflects that inflation-based adjustment.
Executive Order 14026
On January 30, 2022, Executive Order 14026 established a higher minimum wage requirement for certain federal contractors and applied to contracts entered into, renewed, or extended on or after that date.
In March 2025, Executive Order 14236 rescinded EO 14026. However, EO 13658 was not rescinded and continues to apply to contracts within its original coverage window.
As a result, contracts entered into between January 1, 2015, and January 29, 2022, that were not renewed or extended on or after January 30, 2022, remain subject to EO 13658 and its annual wage adjustments.
What the $13.65 Rate Means for Employers
The increase to $13.65 per hour applies only to covered contracts under EO 13658. It does not automatically apply to all federal contractors.
Employers should review:
- The original contract award date
- Whether the contract has been renewed or extended
- Whether the contract falls within the EO 13658 coverage period
The Department of Labor has acknowledged that fewer contracts remain covered under EO 13658, but some still qualify.
Uncertainty for Post-January 30, 2022 Contracts
The Department of Labor has not issued clear guidance on whether a federal contractor minimum wage above the federal minimum wage of $7.25 per hour applies to contracts entered into after January 30, 2022.
Although a DOL rule implementing EO 14026 remains published, the agency has indicated it is not currently enforcing it. Further regulatory action may provide additional clarity.
Until additional guidance is issued, employers should monitor official DOL communications and consult legal counsel as needed.
Impact on Federal Contractors and HR Teams
While the number of contracts covered by EO 13658 has declined, compliance remains critical for those with qualifying agreements.
HR and payroll teams should:
- Identify covered employees working on or in connection with qualifying contracts
- Confirm your payroll provider will automatically apply the updated $13.65 federal contractor minimum wage effective May 11, 2026.
- Adjust tipped employee cash wages to $9.55 where applicable
- Ensure compliance with state or local minimum wage laws that may require higher rates
- Review applicable prevailing wage requirements under the Service Contract Act or Davis-Bacon Act
Misclassification or incorrect wage application can result in back pay liability and potential enforcement action.
Payroll and Compliance Readiness
Wage rate changes tied to specific contract dates can create administrative complexity. Employers should ensure payroll systems are configured to:
- Track employees assigned to covered contracts
- Apply contract-specific wage rates
- Document compliance in the event of an audit
Advance preparation before the May 11, 2026 effective date can help reduce compliance risk.
Employer Compliance Considerations
The 2026 increase to $13.65 per hour reflects the ongoing inflation adjustment under Executive Order 13658. Employers with qualifying contracts should confirm coverage status and prepare payroll adjustments accordingly.
Because regulatory interpretations and enforcement positions may evolve, monitoring Department of Labor guidance remains important. Contractors should also ensure compliance with applicable state and local wage laws and any prevailing wage obligations.
Support for Federal Contractor Payroll Compliance
Applying different wage rates based on federal contract dates can create payroll complexity, especially when employees work across multiple projects or funding sources. Ensuring the correct minimum wage is applied to covered contracts requires accurate tracking, configuration, and documentation.
Inova supports employers with payroll systems designed to manage contract-specific wage rules, multi-rate pay scenarios, and compliance reporting requirements. If you would like to discuss how your organization is managing federal contractor wage requirements, our team is available to help.
