The 2026 H&W Rate Is Out. Your Contract Doesn't Know Yet.

On August 7, the Department of Labor issued All Agency Memorandum 252, setting the new Service Contract Act Health & Welfare rate. If your contracts are covered by the EO 13706 paid sick leave requirement, and at this point nearly all active service contracts are, your new number is $5.42 per hour, up from $5.09. For the shrinking set of contracts outside the executive order, the rate is $5.92, up from $5.55.

The paper trail has caught up quickly. AAM 252 is posted publicly on SAM.gov's All Agency Memorandum index, listed under August 10 as the 2026 Service Contract Act Health and Welfare Fringe Benefit memo, and I keep a copy here too if you would rather not dig through the index: All Agency Memorandum 252 (PDF). The revised Wage Determinations arrived on the memo's own timeline, in four waves on August 13, 17, 20 and 22. All 1,028 active standard Wage Determinations on SAM.gov now carry the new rates. So the memo is public, your Wage Determination on SAM.gov has been revised, and your contract still says exactly what it said last month.

That gap is confusing people, and the confusion is worth clearing up, because the most expensive mistakes with H&W rate changes come from acting at the wrong time.

What the memo actually says

The numbers, straight from AAM 252:

On contracts covered by EO 13706 paid sick leave, the H&W rate is $5.42 per hour, which works out to $216.80 per week or $939.46 per month for a full-time employee. Sick leave contributions under the EO are on top of this; they can't be credited against your H&W obligation, which is why the EO rate is lower.

On contracts not covered by the EO, the rate is $5.92 per hour, or $236.80 per week, $1,026.13 per month. Hawaii keeps its own reduced rates because the state's Prepaid Health Care Act already mandates health coverage: $2.51 per hour, or $2.01 on EO 13706 contracts, for employees the contractor must cover under the HPHCA. Hawaii employees who don't receive mandated coverage fall back to the standard $5.92 and $5.42.

The new rates apply to invitations for bids opened, and service contracts awarded, on or after August 10, 2026. Agencies are even authorized to make pen-and-ink changes to Wage Determinations already in hand for contracts starting after that date.

Nothing changes on your existing contracts yet

This is the part that trips up even experienced contractors: the new rate does not apply to your current contract on the day DOL announces it, and it does not apply automatically on your contract anniversary either.

The trigger is a contract modification. Your Contracting Officer has to incorporate a revised Wage Determination into your contract, typically at the anniversary date or an option year exercise. Until that mod is issued, your contractual obligation is the rate in the Wage Determination currently incorporated in your contract.

And Contracting Officers are not always prompt. The mod often lands weeks or months after the anniversary it's effective from. When that happens, you apply the new rate retroactively back to the effective date, true up your employees, and submit a price adjustment to recover the difference.

The money part

Two things follow from those mechanics, and they pull in opposite directions.

First, the increase is real money. On an EO-covered contract, $0.33 more per hour is about $686 per year for each full-time SCA employee. A contractor with 40 covered employees is looking at roughly $27,000 a year in new obligation once the rate reaches their contracts.

Second, you will likely get it back, but only if you handle the sequence correctly. The SCA price adjustment clause (FAR 52.222-43) entitles you to recover the actual cost difference the new Wage Determination imposes. The key word is actual. If you voluntarily raise your fringe spending before the revised Wage Determination is incorporated into your contract, you can complicate your own adjustment, because recovery is tied to the difference the incorporated rate requires, documented against what you were paying. Generosity ahead of the mod can become margin you never get back.

So the discipline is: wait for incorporation, apply the rate retroactively from its effective date, document every dollar of the catch-up, and file the adjustment. The cash flow burden of the retro period sits with you in the meantime, which is unpleasant, but it's recoverable if your records are clean.

What to do this week

Not much, and that's the point. Don't change what you're paying yet. Note where each of your contracts sits against its anniversary or next option year, because that's when the mod should come, and it's fair to nudge your Contracting Officer if it doesn't. Pull each of your Wage Determinations from SAM.gov today and confirm the revision number and the rate it states. Then model the delta per contract, per employee, so you know what the retro true-up will look like before it arrives. If a solicitation you're bidding was issued in the last month, check which rate it carries; anything opened on or after August 10 must reflect the new numbers.

That's it. The rate change rewards contractors who are organized and punishes contractors who guess.

The retro true-up is the ugly part

If you've lived through one of these, you know the real pain isn't the new rate. It's the catch-up: going back through months of payroll, recalculating every employee's obligation at the new rate, netting their benefits against it, and producing a defensible record of who was owed what. In a spreadsheet, that's a long week.

That exact problem is one of the first things I built into SimpleFringe: you enter the new rate and the effective date, and it recalculates the retro obligation employee by employee, shows the new variances, and exports the true-up for payroll. If a rate change lands on your contracts this fall and you'd rather not rebuild your workbook to absorb it, book a demo. Happy to show you what that looks like on your own numbers.