A new executive order just cut the minimum wage for federal contractors, rescinding an existing executive order that has set it at $15 per hour. With adjustments, the federal wage policy had set the minimum wage at $17.75 for the year, but the requirement has now been eliminated.
The wage rollbacks in 2025 will set the minimum wage for federal contractors at $13.30 per hour from here on out. Corporations working on government contracts are free to stick to the preexisting regulations, but it appears more than likely that they will make changes to their wage offerings. As a result of the wage drop, some federal contractors may see a pay cut of up to 25 percent.
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Minimum Wage Drops for Federal Contractors: We’re Back to $13.30 per Hour
The wage policy for 2025 was announced recently by the administration, and it will undo minimum wage protections for thousands of employees who work at private sector companies with government contracts. The president issued EO 14236, “Additional Rescissions of Harmful Executive Orders and Actions,” and revoked EO 14026, which had set a $15-per-hour minimum wage rate for federal contractors. As a result of yearly adjustments, the minimum wage for 2025 has been raised to 17.75 per hour.
With the new regulations, the Labor Department will cease enforcing the $17.75 per hour minimum wage for federal contractors. We have already seen job cuts at the federal level and a reversal of other regulations and protections for federal workers, and this latest wage rollback in 2025 comes as a part of the overhaul of the federal sector.
Who Will Be Affected by the Minimum Wage Rollback?
An estimated 390,000 to 600,000 private-sector workers employed by federal contractors could face potential pay cuts of up to 25% across industries. The previous administration’s rule applied to contracts for services, construction, concessions, and those on federal lands, covering employees directly working on or in connection with the contracts.
Private organizations with government contractors have likely already established contracts with workers, and the majority will have to respect the deals until completion, however, all future contracts can be affected by the new minimum wage news. Workers will have to negotiate harder to ensure their wages remain unchanged in the coming months, but they cannot stop employers from offering them a lower deal.
Impact of the Federal Contractors’ Minimum Wage Change
Regulations from the previous administration had raised the wages for these federal contract workers to ensure they were provided a living wage that would allow them to be more proactive members of society and the economy, but many workers have now lost that protection.
The federal minimum wage for the US has been set at $7.25, so the prior contract wage laws gave workers who worked with government projects a leg up in society and also incentivized them to seek positions that support the government. The current ruling will still allow the minimum wage for federal contractors to be higher than the federal standards of employment for other roles, but the gap is narrowing unfavorably.
Some believe that the change in policy will allow employers to create more jobs and help a wider net of workers, but the impact on workers under contract will need to be studied further. Private sector companies with government contracts will need to keep an eye on EO 14236 and see how the Labor Department chooses to enforce regulations from here on out.
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