How to build a burdened labor rate for an SCA bid

The wage on a Service Contract Act wage determination is a floor, not a price. Between that number and the hourly rate you bid sit health and welfare, paid time off, payroll taxes, insurance and your indirect costs. Most underpriced SCA bids get one of these wrong, usually by applying a cost to the wrong base or the wrong hours.

This guide builds a burdened rate in the order the costs stack, then works one through with real numbers.

Start with hours: paid vs productive

A full-time employee is paid for 2,080 hours a year (40 × 52). The government only gets the hours they actually work. Subtract paid time off:

• Holidays from the WD. Harris County WD 2015-5233 lists eleven, or 88 hours at 8 hours each.
• Vacation from the WD, based on each employee's service. Service includes time with predecessor contractors at the same federal facility (29 CFR 4.173), so an incumbent workforce often brings vacation entitlement on day one.
• Sick leave if the contract is covered by EO 13706 (FAR 52.222-62): 1 hour per 30 hours worked, up to 56 hours a year.

What remains are productive hours. Every cost per year must be recovered over those hours, not over 2,080.

Step 1: wage plus PTO uplift

Use the higher of the WD minimum and what you will actually pay. Then gross it up for PTO:

PTO uplift = PTO hours ÷ productive hours
Wage per productive hour = wage × (1 + PTO uplift)

Divide by productive hours, not by 2,080. With 168 PTO hours, 168 ÷ 2,080 = 8.08% is wrong; 168 ÷ 1,912 = 8.79% is right. The difference is real money: the PTO is paid whether or not the hours are billable.

Step 2: health and welfare on paid hours

H&W is owed on all hours paid, including vacation, holidays and sick leave, up to 40 a week and 2,080 a year (29 CFR 4.175(a)(1)). Spread it over productive hours:

H&W per productive hour = H&W rate × 2,080 ÷ productive hours

Use $5.92 or $5.42 depending on EO 13706 coverage. Details, including Hawaii, are in SCA health and welfare rates for 2026.

Step 3: payroll taxes and workers' comp

These apply to wages paid, including PTO. Several stop at an annual wage base, so compute them per employee per year, then divide by productive hours.

H&W paid into a bona fide health plan is generally exempt from Social Security, Medicare and FUTA (IRS Publication 15-B). H&W paid as cash in lieu is wages, so add FICA on it. Workers' comp and unemployment insurance are required by law, so they never count toward the SCA fringe (29 CFR 4.171(c)).

Step 4: overhead, G&A and fee, in that order

Steps 1 to 3 give the direct labor cost per productive hour. Indirect rates go on top, each on the subtotal before it:

1. Overhead on direct labor cost: supervision not billed directly, training, recruiting, uniforms if not priced as ODCs.
2. G&A on direct cost plus overhead: company management, accounting, insurance, proposal costs.
3. Fee (profit) on total cost.

Apply your rates to the same bases your accounting system uses, and stay consistent from bid to bid. If you price other direct costs such as supplies and equipment, they usually carry G&A and fee but not labor overhead.

Option years: hold labor at today's WD

FAR 52.222-43(b) makes you warrant that your prices contain no contingency for the wage and fringe increases the clause adjusts. Price labor in every option year at the current WD rates and recover increases after award. See FAR 52.222-43 price adjustment, step by step. ODCs can escalate.

Worked example: janitor, Harris County, Texas

Assumptions: Janitor (11150) on WD 2015-5233 rev 35 at the $14.74 minimum. Standard H&W of $5.92, paid into a health plan. Not covered by EO 13706. Eleven holidays and two weeks of vacation. For the tax lines, assume a SUTA rate of 2.7% on a $9,000 wage base, workers' comp at 3.00% of payroll, overhead 10%, G&A 8% and fee 6%. Use your own rates.

Values are rounded to the cent at each step. One full-time janitor billed for 1,912 hours comes to about $58,584 a year. On a post that must be staffed 2,080 hours, you need more than one FTE per post, because each employee is only productive 1,912 hours.

Compare that with the shortcut of $14.74 + $5.92 = $20.66 marked up 30%: $26.86. It looks generous and is $3.78 an hour short.

Common mistakes

• Dividing PTO by 2,080 instead of productive hours.
• Charging H&W only on hours worked, or on overtime hours.
• Applying FUTA and SUTA as flat percentages of all wages, ignoring the wage base.
• Adding FICA to H&W paid into a health plan, or forgetting it on cash in lieu.
• Escalating labor in option years.
• Assuming new hires have no vacation when the incumbent workforce carries over service.

Related guides

• How to read an SCA wage determination
• SCA health and welfare rates for 2026
• FAR 52.222-43 price adjustment, step by step

Sources

• SAM.gov: Wage Determination 2015-5233, revision 35
• eCFR: 29 CFR part 4, sections 4.171, 4.173 and 4.175
• Acquisition.gov: FAR 52.222-43
• Acquisition.gov: FAR 52.222-62, Paid Sick Leave Under Executive Order 13706
• IRS Topic 751, Social Security and Medicare withholding rates
• IRS Topic 759, Form 940 and FUTA tax
• IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits

Last reviewed: November 2026. This guide is general information, not legal or tax advice.