On February 12, 2014, President Obama signed an Executive Order raising the minimum wage for employees of federal contractors and subcontractors.  Here’s what employers need to know about the Executive Order:

To Whom Does the Executive Order Apply?  In general, the Executive Order will apply to federal contractors and subcontractors who are parties to federal contracts or subcontracts that are issued or solicited after January 1, 2015.  The Executive Order directs the U.S. Secretary of Labor to issue more detailed regulations concerning the new minimum wage requirements by October 1, 2014.

What Is The New Minimum Wage Under the Executive Order?  Effective January 1, 2015, the minimum wage required for employees of covered federal contractors and subcontractors will be $10.10 per hour.  Beginning in January of 2016, this minimum wage will be raised on an annual basis to reflect inflation.

What Is the New Minimum Wage for Tipped Employees Under the Executive Order?  Beginning January 1, 2015, tipped employees of covered federal contractors and subcontractors must be paid at least $4.90 per hour.  If the employee’s hourly wage plus the employee’s tips do not meet or exceed $10.10 per hour, however, the employer must increase the hourly wage accordingly to ensure the employee receives at least $10.10 per hour.  Like the general minimum wage under the Executive Order, the minimum wage for tipped employees will also be increased annually beginning in 2016 to keep pace with inflation.

Takeaway:  Employers who are parties to federal contracts or subcontracts should begin preparing for increased minimum wage costs beginning in January of 2015.  In addition, those employers should pay attention when the U.S. Secretary of Labor releases more detailed regulations on this issue prior to October of 2014.