On a multi-year Service Contract Act contract, the Department of Labor usually issues a new wage determination before each option year. When the option is exercised, the new WD becomes part of your contract and you must pay its rates. FAR 52.222-43 is the clause that lets you recover that cost. It is short, and every paragraph matters.
The clause applies to fixed-price, time-and-materials and labor-hour service contracts that contain FAR 52.222-41 and are multiple-year contracts or have options to renew, above the simplified acquisition threshold (FAR 22.1006(c)(1)). The current version is dated August 2018.
What each paragraph does
| Paragraph | What it says, in short |
|---|---|
| (a) | Applies to contracts under area prevailing WDs and under collective bargaining agreements. |
| (b) | You warrant your prices include no contingency for cost increases the clause adjusts for. |
| (c) | The WD current on the anniversary date or at the start of each option period applies. |
| (d) | Price is adjusted for your actual increase in wages and fringe benefits made to comply with the new WD. |
| (e) | The adjustment covers wages, fringe and the related Social Security, unemployment taxes and workers' comp. No G&A, overhead or profit. |
| (f) | Notify the contracting officer within 30 days after receiving the new WD. |
| (g) | The government may examine your records until 3 years after final payment. |
Paragraph (b): no wage escalation in your bid
The warranty reads: "The Contractor warrants that the prices in this contract do not include any allowance for any contingency to cover increased costs for which adjustment is provided under this clause."
In practice, price labor in every option year at the rates on the WD in the solicitation. Do not add 3% a year to wages or H&W "to be safe." Those increases are what the clause pays for after award. Building them in breaks the warranty and makes your bid higher than compliant competitors.
Costs the clause does not adjust, such as supplies, equipment and pay you choose to give above the WD minimum, are yours to escalate as you see fit.
Paragraph (d): what is covered
The adjustment reflects your actual increase or decrease in wages and fringe benefits, to the extent the increase is made to comply with:
- the WD applicable on the anniversary date or at the start of the option period,
- a WD otherwise applied to the contract by operation of law, or
- an amendment to the Fair Labor Standards Act minimum wage enacted after award.
The FAR gives its own example: the prior WD required $4.00 an hour and the contractor paid $4.10. The new WD requires $4.50. Even if the contractor raises pay to $4.75, the allowable adjustment is $0.40 an hour.
Two rules follow:
- Measure from what you paid, not from the old minimum. The adjustment is the gap between your actual rate and the new minimum. If you already pay above the new minimum, there is nothing to recover for that employee.
- Raises above the new minimum are yours. Voluntary increases beyond what the WD requires are not covered.
Fringe benefits include health and welfare, and any change in vacation or holidays on the new WD. Because vacation and holidays are paid at the new wage, the wage increase applies to those paid hours too. That is why the example below uses all paid hours, not just hours worked.
Paragraph (e): what is excluded
The adjustment is limited to the wage and fringe increase "and the accompanying increases or decreases in social security and unemployment taxes and workers' compensation insurance." It "shall not otherwise include any amount for general and administrative costs, overhead, or profit."
So you recover the FICA, FUTA, SUTA and workers' comp on the increase, but not the markups you applied at bid. Two practical notes:
- FUTA and most SUTA taxes stop at an annual wage base per employee. If an employee's wages already exceed the base, a raise adds no FUTA or SUTA cost, and you cannot claim any.
- H&W paid into a bona fide health plan is generally not subject to FICA or FUTA (IRS Publication 15-B). H&W paid as cash in lieu is wages, so it carries FICA. Claim only the taxes you actually incur.
Paragraph (f): the 30-day notice
You must notify the contracting officer of any increase claimed "within 30 days after receiving a new wage determination," unless the contracting officer extends the period in writing. The clock runs from when you receive the WD, typically with the option modification, not from the WD's publication date on SAM.gov.
The notice must state the amount claimed, the change in fixed hourly rates on a time-and-materials or labor-hour contract, and any relevant supporting data the contracting officer may reasonably require, including payroll records. Keep working while the adjustment is negotiated. The clause requires you to continue performance pending agreement.
Decreases go the other way: you must notify the contracting officer of them promptly.
Step by step
- Get the new WD. Note the WD number, revision and the date you received it. Your notice is due 30 days later.
- List each employee or position with the rate you actually paid before the change and the new WD minimum.
- Compute the required wage increase per hour: new minimum minus what you paid, never below zero.
- Multiply by paid hours in the option period, including vacation and holiday hours.
- Add the fringe increase, for example the H&W rate change times H&W hours (up to 40 a week).
- Add only the taxes and insurance on the increase that you will actually pay: FICA, FUTA and SUTA below their wage bases, and workers' comp.
- Submit the amount, the rate changes and supporting data within the 30 days, and keep the payroll records.
Worked example
Ten full-time janitors were priced and paid at $15.00 an hour on Harris County WD 2015-5233 rev 35, where the minimum is $14.74. For option year 1, assume a new revision raises the Janitor minimum to $15.40 and H&W from $5.92 to $6.20. (These new-WD figures are illustrative.) H&W is paid into a health plan. Workers' comp is 3.00% of payroll, and each employee's wages already exceed the FUTA and state wage bases.
| Item | Math | Per employee |
|---|---|---|
| Required wage increase | $15.40 − $15.00 = $0.40 × 2,080 paid hours | $832.00 |
| H&W increase | $0.28 × 2,080 hours | $582.40 |
| FICA on the wage increase | 7.65% × $832.00 | $63.65 |
| FUTA and SUTA | Wage bases already met | $0.00 |
| Workers' comp on the wage increase | 3.00% × $832.00 | $24.96 |
| Allowable adjustment | $1,503.01 |
For ten janitors, the claim is $15,030.10 for the option year. No overhead, G&A or profit is added. If you decide to pay $15.75 instead of $15.40, the claim does not change: the extra $0.35 is your cost. If the WD was received on October 1, 2026, the notice is due by October 31, 2026.
Had the original bid escalated wages by 3% a year, the government could argue that the price already contained this increase. That is the point of paragraph (b).
See what the new WD says
Look up the current WD for your county and compare its rates to what you pay today.
Open the free WD lookupYour adjustment and deadline, calculated.
The Price Adjustment sheet in SCA Bid Pricing Pro takes your old and new rates and computes the allowable FAR 52.222-43 increase and the 30-day notice date.
Related guides
Sources
- Acquisition.gov: FAR 52.222-43, Fair Labor Standards Act and Service Contract Labor Standards-Price Adjustment (Multiple Year and Option Contracts)
- Acquisition.gov: FAR 22.1006, Solicitation provisions and contract clauses
- SAM.gov: Wage Determination 2015-5233, revision 35
- U.S. Department of Labor: SCA Wage Determinations
- IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits
- IRS Topic 759, Form 940 and FUTA tax
Last reviewed: November 2026. This guide is general information, not legal advice.