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Title: Accommodating for the Service Contract Act (SCA) in Unanet

Brief description:

This entry describes options for handling SCA requirements in Unanet. This page is designed to be used in conjunction with the SCA Deeper Dive page here: KC - Quick Topic - Service Contract Act (SCA) in Unanet - A Deeper Dive

What’s covered in this document:

What is the Service Contract Act (SCA)?

The United States Department of Labor describes the Service Contract Act (SCA) as follows:

"The McNamara-O’Hara Service Contract Act requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor's collective bargaining agreement. The Department of Labor issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies. These determinations are incorporated into the contract.

For contracts equal to or less than $2,500, contractors are required to pay the federal minimum wage as provided in Section 6(a)(1) of the Fair Labor Standards Act.

For prime contracts in excess of $100,000, contractors and subcontractors must also, under the provisions of the Contract Work Hours and Safety Standards Act, as amended, pay laborers and mechanics, including guards and watchmen, at least one and one-half times their regular rate of pay for all hours worked over 40 in a workweek. The overtime provisions of the Fair Labor Standards Act may also apply to SCA-covered contracts."

When employees work out of position or "work up,", they're paid the HIGHER of their base rate (in their Person Profile on the Rates tab) or the "out of position" rate. (See Wage Rates section below.)

Note that employees are compensated for fringe benefits through an additional lift in their hourly rate. Because the lift in rate represents their benefits, it must be separated from their base hourly rate that typically has fringe applied through a Unanet cost structure. The best practice in Unanet is described in the section below titled, "Health and Welfare (Fringe) Benefits: Captured through a Unanet expense report."

Service Contract Act Mandates

Covered employees working on SCA-covered contracts are entitled to pay and benefits in three basic areas as listed below. For more information on these three areas, visit this section of the Deeper Dive.

  • Wages 

  • Health & Welfare (H&W) Benefits 
  • Paid Leave 

Wage Rates: Manage via tasks and labor categories

The term “Prevailing Wage” in the SCA has been interpreted by the Wage and Hour Division of the DOL (charged with administration and enforcement of the SCA) as the mean of the hourly wage paid in the locality covered by the WD for the occupational categories listed in the WD. The mean is calculated by the Wage and Hour Division based on annual surveys conducted in the localities. Localities outside major metropolitan areas may be surveyed less often than annually.

To accommodate Wage Rates in Unanet, separate tasks can be created on the projects for each SCA position or Labor Category and named (for example) Guard Level 1, Guard Level 2, Guard Level 3. The labor category can be controlled via the assignments on each task, making sure they match those in downstream systems. The labor category used in the assignment should be set up to reflect the appropriate Cost Rate per the applicable WD. (Screenshot below of the Labor Category Cost Rates.)

The employee is responsible for selecting the appropriate task on their timesheet for the appropriate position and rate.

Initial Setup for Wage Rates

  • Create Tasks to represent the SCA position (e.g., Guard Level 1, Guard Level 2, etc.).
  • Create Labor Categories with the Cost Rate populated with the appropriate Wage Determination (WD).
  • Assign people to the appropriate Tasks.

Ongoing Usage for Wage Rates

  • Regular review/comparison of the Labor Category cost rate (Prevailing Wage in Wage Determination/WD) to the Employee cost rate (pay rate) in order to ensure that the Assignment reflects the greater of the two. Note that this may be automated via a Validation Stored Procedure.
  • Employees are responsible for selecting the appropriate Task on their timesheet.

Health and Welfare (Fringe) Benefits: Captured through a Unanet expense report 

The contract covering the wage determination (WD) will dictate which hours will have Health and Welfare applied. One WD says it can be applied to all hours including time off, while the other WD's have limitations. This can vary by contract.

User-defined fields (UDF's) at the person level capture the H&W amount per hour as well as the Benefit/Premium amount; then an export template calculates the H&W expense as:

(Eligible hours * UDF H&W amount per hour) - UDF Insurance Premium Paid = H&W expense.

You will need to find a way to determine which hours are eligible based on the specific WD you are working with. Options include pay codes, tasks, custom logic, or other.

Note that employees may be compensated for fringe benefits (or a shortfall in the amount of benefits received) through an additional cash amount which is also calculated based on hours worked. Because this additional amount represents benefits and not wages, it must be separated from their base hourly rate that typically has fringe applied through a Unanet cost structure. In most cases, the shortfall amount is charged to the fringe pool along with other benefit costs. In a few cases, the government may permit the benefit shortfall to be charged directly to the contract.

Initial Setup for Health and Welfare (Fringe) Benefits

  • Set up a Person Profile User-Defined Field for the employee to identify their WD H&W amount, say $4.02.

    • On an ongoing basis, populate this field appropriately for each necessary employee.
  • Set up a Person Profile User-Defined Field(s) to record benefit premiums paid.

    • On an ongoing basis, populate this field appropriately for each necessary employee.
  • Set up a Payment Method and designate it as Non-reimbursable. Since it is usually reimbursed via Payroll rather than AP; if it were marked as Reimbursable then the system would want to pay it through AP which is not typical.
    • Set the expense report cost offset account as Accrued Salary.
  • Create an Expense Type called FRINGE-BENEFIT.
  • Create a H&W project associated with a "Fringe" Project Type. 
    • For clients using Unanet Financials, ensure the labor cost gets mapped into the Cost Pool.
  • Create and load an Export template which exports out Time into the format of an Expense import. A sample is attached here: SCA- FRINGE BENEFITS (1).csv.
    • Download that attachment.
    • Go to Admin > Export > Import and import the template.
    • Review and edit the logic of the export template. Test to ensure it is appropriately calculating and pulling the data. The export must be tweaked to match your system and processes. (You may need to create a way to identify which hours are eligible based on the particular WD you are dealing with; this may be a pay code or some other method which will need to be accommodated in the export logic.)

  • At the end of each time period, or at the end of each month, create an export of time that generates an expense import for the correct amount of Health & Welfare (less benefit premiums paid where applicable). The expenses are marked as employee paid so they are reimbursable to the employee.

Ongoing Usage for Health and Welfare (Fringe) Benefits

At the end of each period:

  • Create the Fringe amount as an Expense in Unanet. This may be accomplished via an export of Time and import of Expense, or via manual calculation/entry of the expense. If using an export of Time as an import of Expense:
    • Export the Time to calculate the Fringe amount as an Expense.
    • Import the file. This creates the Fringe Expense in Unanet.
  • Export the amount to pay the employee via a file import into the Payroll system. (This is a second export. The first export above enabled you to create the Expense in Unanet, while this second export allows you to import the Expense into your payroll system.)
    • This may be either a Time export with logic to calculate the Expense (the same logic used in the Time export that creates the Expense), or an Expense export of the Expense that was created to record the Fringe.

Paid Leave

Information on various ways to handle Paid leave in Unanet may be found here:

SCA Example

Let's take a look at an example of SCA calculations. 

An employee works on SCA Covered Project 1 and Non-SCA Covered Project 2.

The employee has selected Medical and Dental coverage. The company paid portion of those benefits is $200/month (or $47/week).

H&W is $2.40 on all Regular Time hours.

Let’s say the employee is hired as a Machine Operator 1 at $10/hour. That is his standard base wage. His indirect hours, time spent on non-SCA projects and Fringe time is paid at that rate.

In the current weekly period, this employee works 20 hours on SCA Covered Project 1 as a Machine Operator 2 (b/c he has super skills) and 20 hours on Non-SCA Covered Project 2. Our wage determination states a Machine Operator 2 is $15/hr.

His gross wages in the current period would be (20 x $15) + (20 x $10) = $500.

His H&W would be (40 x $2.40) - $47 = $49.

Generally speaking, however, SCA Covered employees are dedicated to a specific project because the Fringe requirements are higher on those then their non-SCA. Their rates may/may not be able to cover them on their other jobs.

Additional Information

Help Docs - Tasks

Help Docs - Labor Categories

KC - FAQ - Can I export billable hours only for import into ADP?

KC - Quick Topic - Service Contract Act (SCA) in Unanet - A Deeper Dive

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