New Contractor Minimum Wage to Take Effect on May 11, 2026

The Wage and Hour Division of the Department of Labor recently published a ‘Notice of Rate Change’ for federal contract workers under Executive Order (E.O.) 13658. This will increase the federal minimum wage paid to workers completing work on a federal contract or subcontract to $13.65/hour or $9.55/hour for tipped employees. These rates will only apply to those companies that entered into a federal contract “between January 1, 2015 and January 29, 2022 that were not renewed or extended (pursuant to an exercised option or otherwise) on or after January 30, 2022.”

E.O. 13658 was issued on February 12, 2014 under the Obama Administration and created a federal minimum wage for those working on a contract for the Federal Government, either as a prime- or sub-contractor. It allows the Secretary of Labor to increase the dollar amount on an annual basis and requires publication of the increase at least 90 days before it is to take effect. A final rule was published on October 7, 2014 that outlined specific standards and procedures for enforcement.

Administrations have taken different views on the issue of a contractor minimum wage ever since E.O. 13658 was issued. The most recent action - E.O. 14236 - revoked the Biden era E.O. 14026 re-establishing the minimum wage mandate after President Trump amended it during his first term to exempt ‘recreational services on federal lands.’ Although President Trump revoked E.O. 14026, he has not yet revoked the Obama-era E.O. 13658.

This back and forth has left some contractors confused about the minimum wage standards for those working on federal contracts and subcontracts. The new notice outlines the government’s position. While E.O. 13658 is still in effect, it primarily applies to those subject to the Davis-Bacon Act and the Service Contract Act, awarded between January 1, 2015 and January 29, 2022. Because of this, contractors that have entered into an agreement with the federal government during this period are potentially subject to the minimum wage increase, unless the contract was renewed, extended, or modified after January 30, 2022 according to the government’s new notice.

If wage adjustments need to be made to your company by the May 11, 2026 deadline, it is possible that several other items may also need to be updated, including: your payroll configuration, offer letters, wage notices, compensation policies, and tip credit documentation. Failure to comply could result in having to pay back wages, withholding of your federal contract, and possible disbarment from doing future business with the Federal government.

Organizations performing work on federal contracts should treat upcoming wage changes as a trigger for a broader review of compliance practices rather than a routine payroll update. Establishing a repeatable process for monitoring regulatory developments, validating contract coverage, and coordinating HR, payroll, finance, and legal stakeholders can significantly reduce operational and legal risk. Embedding these reviews into existing compliance calendars and internal controls helps ensure that compensation practices remain accurate, defensible, and aligned with evolving Department of Labor requirements.