Health and welfare (H&W) is the fringe benefit on every Service Contract Act wage determination that covers insurance, pension and similar benefits. It is a fixed dollar amount per hour, set nationally by the Department of Labor and updated once a year. On a janitorial or guard contract it is often the second-largest cost after wages.
The 2026 rates
DOL's All Agency Memorandum No. 252, dated August 10, 2026, raised the H&W rate. WDs revised since then show these amounts:
| Rate | Per hour | Per week | Per month |
|---|---|---|---|
| Standard | $5.92 | $236.80 | $1,026.13 |
| EO 13706 contracts | $5.42 | $216.80 | $939.46 |
| Hawaii, HPHCA coverage | $2.51 | $100.40 | $435.07 |
| Hawaii, HPHCA coverage, EO 13706 | $2.01 | $80.40 | $348.40 |
Weekly and monthly figures are as printed on the WDs. The weekly amount is 40 hours at the hourly rate.
When the new rate reaches your contract
A new rate does not change an existing contract on the day DOL announces it. DOL states that only the WDs inserted into the contract at award or by modification apply. On a contract with options, the WD current at the start of each option period applies (FAR 52.222-43(c)), and you recover the cost increase through a price adjustment. See FAR 52.222-43 price adjustment, step by step.
For a new bid, use the rate printed on the WD revision attached to the solicitation.
Standard rate or EO 13706 rate?
Executive Order 13706 requires paid sick leave on covered federal contracts. The WD note says it applies to SCA contracts awarded (and solicited) on or after January 1, 2017. In the solicitation, look for FAR 52.222-62, Paid Sick Leave Under Executive Order 13706.
- Covered contracts use the lower $5.42 rate, because employees also earn 1 hour of paid sick leave for every 30 hours worked, up to 56 hours a year.
- The WD adds that a contractor may not receive credit toward its SCA obligations for sick leave provided under EO 13706. You cannot count the sick leave as part of the $5.42.
- Contracts not covered use $5.92.
The lower rate is not a discount. You pay for the sick leave separately, so the total cost per productive hour stays close to the standard case (see the example below).
Hawaii
Hawaii WDs carry two lower rates, $2.51 and $2.01 with EO 13706, because Hawaii's Prepaid Health Care Act (HPHCA) already makes employers provide health coverage. The WD is specific: the lower rate is for employees "on whose behalf the contractor provides health care benefits pursuant to the Hawaii prepaid Health Care Act." For employees who do not receive HPHCA-mandated coverage, the rate is $5.92 (or $5.42 with EO 13706). If part of your Hawaii workforce is not covered by HPHCA, price those people at the full rate.
Which hours H&W is owed on
29 CFR 4.175(a)(1) sets the rule: unless the WD says otherwise, H&W is due for all hours paid for, including paid vacation, sick leave and holiday hours, up to 40 hours per week and 2,080 hours per year on each contract. The regulation gives examples:
| Week | H&W hours |
|---|---|
| 4 days × 10 hours worked | 40 |
| 3 days × 12 hours worked | 36 |
| 32 hours worked + 8 hours holiday pay | 40 |
| More than 32 hours worked + 8 hours holiday pay | 40 |
| Two weeks of paid vacation (80 hours) | 80 |
Overtime hours never add H&W beyond 40 a week. An employee who works all 52 weeks and is paid 80 hours of vacation in lieu of time off already has 2,080 H&W hours, so the vacation payout carries no extra H&W (29 CFR 4.175(a)(1)(iv)).
For pricing, the key point is that a full-time employee earns H&W on 2,080 hours, but only works the hours left after holidays, vacation and sick leave. That gap is why H&W per productive hour is higher than $5.92.
Cash in lieu or a bona fide plan
You can meet the H&W obligation three ways (29 CFR 4.177):
- Contributions to a bona fide plan, such as health insurance, a retirement plan or life insurance, as defined in 29 CFR 4.171.
- Cash in lieu, paid on the regular payday in addition to the required wage.
- A combination of the two that costs you at least the WD amount.
Compliance is measured per employee, by your cost (29 CFR 4.175(a)(2)). If single coverage costs less than the WD amount, you pay that employee the difference in cash or equivalent benefits, even if your company-wide average is higher. The exception is a WD that states H&W as an average cost, which is less common.
Three things cannot count toward H&W:
- Benefits required by other laws, such as Social Security, unemployment insurance and workers' compensation (29 CFR 4.171(c)).
- Any part of the wage itself. Fringe payments cannot offset the hourly wage on the WD, and the wage cannot cover the fringe (29 CFR 4.177(a)(1)).
- Sick leave required by EO 13706.
Why the choice changes your price
IRS Publication 15-B lists employer-provided accident and health benefits as exempt from Social Security, Medicare and FUTA taxes. Cash in lieu is paid as wages, so it carries FICA (7.65% employer share) and any other payroll-based cost that applies to wages. On $5.92 an hour, FICA alone is about $0.45 per paid hour. Your estimate should say which method you use.
Worked example: H&W in an hourly bill rate
A full-time janitor on Harris County WD 2015-5233 rev 35 is paid 2,080 hours a year. Eleven holidays (88 hours) and two weeks of vacation (80 hours) leave 1,912 productive hours.
| Case | Math | H&W per productive hour |
|---|---|---|
| Standard, paid into a health plan | $5.92 × 2,080 ÷ 1,912 | $6.44 |
| Standard, paid as cash in lieu | $6.44 + ($5.92 × 7.65% × 2,080 ÷ 1,912) | $6.93 |
| EO 13706, plan, all 56 sick hours used | $5.42 × 2,080 ÷ (1,912 − 56) | $6.07 |
In the EO 13706 case the sick hours are paid hours, so H&W is still owed on 2,080 hours, spread over 1,856 productive hours. Separately, the 56 sick hours add to your paid time off, which raises the wage cost per productive hour. That part belongs in your PTO uplift, explained in how to build a burdened labor rate.
The common mistake is pricing H&W at $5.92 per billable hour. On this example that underprices every productive hour by $0.52, which is about $995 a year per full-time employee.
Check the H&W on your WD
The free lookup shows the standard and EO 13706 H&W printed on the WD for your county.
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SCA Bid Pricing Pro has the 2026 rates built in, including EO 13706 and Hawaii, and spreads H&W over productive hours with the right tax treatment for cash or plan.
Related guides
Sources
- SAM.gov: All Agency Memoranda (AAM 252, 2026 SCA Health and Welfare Fringe Benefit)
- SAM.gov: Wage Determination 2015-5233, revision 35 (standard and EO 13706 rates)
- SAM.gov: Wage Determination 2015-5689, revision 30 (Hawaii rates)
- eCFR: 29 CFR part 4, sections 4.171, 4.175 and 4.177
- Acquisition.gov: FAR 52.222-62, Paid Sick Leave Under Executive Order 13706
- Acquisition.gov: FAR 52.222-43
- U.S. Department of Labor: SCA Wage Determinations
- 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.