FAR 52.222-43 Price Adjustments for Service Contract Act Contractors

David Gul · Last updated November 3, 2026

ExcelGurus is not affiliated with, endorsed by, or acting for the U.S. Department of Labor, the U.S. General Services Administration or any other federal agency. This guide describes FAR 52.222-43 as published on acquisition.gov (FAC 2026-01) and the decisions it cites, as read on October 30, 2026; check the clause in your own contract, including any agency deviation. It is not legal advice.

FAR 52.222-43 adjusts the price of a Service Contract Act (SCA) contract when a new wage determination applies at an option or anniversary, but only by the increase in wages and fringe benefits you actually have to pay to meet it, plus the employer’s share of social security, unemployment taxes and workers’ compensation on that increase. It adds nothing for overhead, general and administrative expense (G&A) or profit. The increase is measured from the rates you actually paid, on the hours in your payroll records: in Stobil (CBCA 5698) and Melwood (CBCA 7989), boards turned down amounts built on projected or contract hours. The clause asks you to notify the contracting officer within 30 days after you receive the new wage determination, with the amount and any supporting data the contracting officer may reasonably require, payroll records included. EG SCA Wage Pack (52.222-43), an Excel workbook from ExcelGurus, prepares and checks these numbers from your own payroll export.

What 52.222-43 adjusts

FAR 52.222-43 goes in fixed-price, time-and-materials and labor-hour service contracts that carry the Service Contract Labor Standards clause (52.222-41) and either run for several years or have options. It is prescribed above the simplified acquisition threshold and may be used below it (FAR 22.1006(c)(1)). A contract with no options and no multiyear term uses 52.222-44 instead, which works the same way but counts its 30 days from the effective date of the wage change. Cost-reimbursement contracts use neither clause, because a higher labor cost there is reimbursed as cost.

The wage determination that counts is the one “current on the anniversary date of a multiple year contract or the beginning of each renewal option period” (paragraph (c)). Paragraph (d) then adjusts the contract price, the contract unit price labor rates or the fixed hourly labor rates “to reflect the Contractor’s actual increase or decrease in applicable wages and fringe benefits to the extent that the increase is made to comply with” that wage determination. The same applies to a wage determination applied to the contract by operation of law, and to a later rise in the Fair Labor Standards Act (FLSA) minimum wage.

The clause gives its own example. The old wage determination required $4.00 an hour, the contractor paid $4.10, the new one requires $4.50, and the contractor chooses to pay $4.75. “The allowable price adjustment is $.40 per hour”: $4.50 minus the $4.10 already paid. The Federal Circuit read the example in Stone v. Secretary of Veterans Affairs (2021) as two principles: the adjustment covers only the increase the contractor actually experiences, even when the wage determination rose by more, and it “does not include voluntary increases above the new wage determination.”

The FAR overhaul has not changed this. Its model deviation text keeps 52.222-43 and 52.222-44 under the same numbers and, apart from “must” for “shall”, the same words, dated by each agency’s deviation; the DoD, GSA, VA and NASA deviations for FAR Part 22 change neither clause.

What is in the adjustment, and what is not

Paragraph (e) limits the adjustment to those wage and fringe increases “and the accompanying increases or decreases in social security and unemployment taxes and workers’ compensation insurance”, and says it “shall not otherwise include any amount for general and administrative costs, overhead, or profit.” The U.S. Air Force’s Price Adjustment Guide (September 2022), the most detailed public account we found of how a contracting officer prices these requests, fills in the rest. It calls itself informational and optional; the lists below follow it, the clause and the board decisions.

In the adjustment

• The wage increase. For each employee, the new wage determination rate minus the higher of the old wage determination rate and the rate actually paid in the prior period, in the same classification. It is never more than the old-to-new difference on the wage determination.
• Paid leave hours. Paid vacation and holiday hours are paid at the new rate, so they belong in the hours. Paid sick leave hours count only where FAR 52.222-62 (Executive Order 13706) or a collective bargaining agreement (CBA) requires them.
• The health and welfare (H&W) increase. The new H&W rate minus the higher of the old rate and the hourly cost of the H&W you actually provided in the prior period. Which hours earn H&W, and why it is never averaged, are in the health and welfare guide.
• Added holidays or vacation. A holiday or a longer vacation tier that the new wage determination adds, valued at the new rate and prorated for part-time employees.
• The accompanying costs. The employer’s share of social security and Medicare, federal and state unemployment tax, and workers’ compensation, on the increase only (see below).
• Increases under a CBA, when a wage determination that carries them applies to the period, measured from the previous period’s CBA rates (see successor contractors and CBA wage rates).

Left out

• Overhead, G&A, profit and fee, and the cost of preparing the request, which the board refused in Stobil. The Air Force guide also leaves out liability insurance, gross receipts tax, bonding and the GSA Industrial Funding Fee.
• Raises above the new minimum, including ripple or compression raises for employees already above it.
• Wages of employees paid at or above the new rate. No wage increase is due for them, although their H&W increase can still be.
• An underpayment under the old wage determination. The increase is measured from at least the old minimum, so the clause does not pay for bringing pay up to it.
• The overtime premium. Overtime hours count at straight time; the extra half is left out unless the contract prices overtime separately.
• Exempt employees and staff the SCA does not cover, such as payroll or billing clerks.
• Expense reimbursements and discretionary bonuses, such as mileage, uniforms and tools.
• Promotions and reclassifications. Each employee is compared in the same classification.
• Bid rates. The increase runs from the wage determination or CBA in force in the prior period and the rates actually paid, never from the rates in your proposal (HD Inc., ASBCA 63794, 2025).
• An allowance already in your prices. Under paragraph (b) you warrant that the contract prices include no allowance for the increases the clause adjusts; if your option prices carried an SCA escalation, the agency may contest the request (Corrections Corporation of America v. DHS, CBCA 2647, 2015).

Health and welfare, holidays and vacation

On a standard wage determination, H&W is owed for every hour paid, paid vacation, holiday and sick hours included, up to 40 hours a week and 2,080 hours a year on each contract (29 CFR 4.175(a)(1)). Hours over 40 in a week earn none, so the H&W increase is priced on those capped hours, week by week. It is owed employee by employee: the cost cannot be averaged across the workforce (4.175(a)(2)), and wages paid above the wage determination rate cannot be counted toward it (4.170(a)).

Every standard wage determination prints two H&W rates. On those revised since August 2026 they are $5.92 an hour, and $5.42 for a contract that includes FAR 52.222-62 (paid sick leave under Executive Order 13706); the 2025 rates were $5.55 and $5.09. The rate that applies is the one on the wage determination in your contract for the period.

Standard wage determinations already name eleven paid holidays, and their vacation runs from 2 weeks after 1 year of service to 4 weeks after 15 years. A new wage determination that adds a holiday adds up to 8 paid hours per full-time employee at the new rate, unless you already give that day off with pay, and the hours of an added vacation tier count the same way.

Payroll taxes and workers’ comp: on the increase only

The accompanying costs are figured on the increase, never on the whole payroll, and at current rates. Employer social security (6.2%, below the yearly wage base) and Medicare (1.45%) apply to the wage increase and to any part of the H&W increase paid as cash in lieu, which the IRS treats as wages; H&W paid to an insurer or a plan is not wages for FICA or FUTA (IRS information letter 2011-0074). Federal and state unemployment tax apply only to the part of the increase that falls under each employee’s yearly wage base, and most full-time employees pass the $7,000 FUTA base early in the year, so the FUTA increase is usually $0. Workers’ compensation is the policy’s rate per $100 of payroll applied to the increase, and nothing where the carrier charges by the hour. Whether state unemployment tax and workers’ comp count cash in lieu as payroll depends on the state.

Why your payroll hours decide the amount

The clause pays the contractor’s “actual increase”, and it lets the contracting officer ask for payroll records. Two sets of board decisions show what that means for the hours behind a request.

Stobil. In Stobil Enterprise v. Department of Veterans Affairs (CBCA 5698, September 10, 2019), the board held that the contractor’s late notice did not defeat its request. The contractor lost the wage money anyway. It had priced the request from a chart of 2,080 projected hours per employee, a manager’s statement and an owner’s affidavit, and the board held that the adjustment “is based on the contractor’s actual increases”. The VA had worked out the H&W part from time cards and actual hours ($21,865.37), and nothing for wages, because Stobil already paid above the new rates. The Federal Circuit affirmed in 2021 (Stone v. Secretary of Veterans Affairs, nonprecedential): the contractor had not shown that its employees actually worked 2,080 hours a year, “a necessary element”.

Melwood. In Melwood Horticultural Training Center v. GSA (CBCA 7989 and 8075, December 3, 2024), the contractor priced its requests on contract hours, as it had through three option years. The board held that a price adjustment rests on the costs the contractor actually incurred, supported by payroll, and upheld GSA’s method, which an internal 2023 GSA policy (as the board quotes it) describes as “the hourly totals based on the prior year of the contract, verified through payroll records”. The earlier years’ practice did not change the clause’s plain words.

The Air Force guide. It calls the normal method forward pricing: the projection “uses the employee hours in the prior contract period, factoring in any known or expected changes to contract scope or work force.” When a request comes after the period, it uses the actual hours worked in that period. Proposal hours “are only used if historical hours are insufficient or considered unreliable” by the contracting officer, and a basis shorter than 12 months is prorated (the monthly average times 12).

So build the request from payroll: who worked on the contract, in which classification, at what rate, for how many straight-time, overtime and paid leave hours, over the 12 months before the new period. A flat 2,080 hours per employee is the figure that lost the wage money in Stobil.

The 30-day notice

Paragraph (f) asks you to “notify the Contracting Officer of any increase claimed under this clause within 30 days after receiving a new wage determination unless this notification period is extended in writing by the Contracting Officer.” The notice states the amount, and for a time-and-materials or labor-hour contract the change in the fixed hourly rates, with any relevant supporting data, including payroll records, that the contracting officer may reasonably require. You keep performing while the adjustment is worked out, and the agreement is made by a written modification.

• A copy of the wage determination is not the notice. In Air Masters Corp. v. GSA (GSBCA 16327, 2004), giving the contracting officer the revised wage determinations and CBAs did not count, because the notice has to state an amount.
• When the 30 days start. The clause counts from receiving the new wage determination, which can come with the agency’s notice that it intends to exercise the option (as in Melwood, CBCA 8075). The Air Force guide counts from the effective date of the unilateral modification that incorporates it. To be safe, work to the earlier date. Under 52.222-44 the 30 days run from the effective date of the wage change.
• If the 30 days have passed, send the request anyway, with the dates as they are. Boards do not apply notice provisions mechanically: in Stobil the board held, quoting Air Masters, that a late notice “does not defeat a contractor’s claim unless a contract clearly states an untimely submission will cause a contractor to lose rights, or unless an agency can demonstrate it was prejudiced.” The amount still has to be proven from payroll.
• Read a bilateral modification before you sign it while a request is open. In Stobil, releases in bilateral modifications were enforced except where the contractor had reserved its request; in Air Masters, a bilateral price modification signed without a reservation counted against the contractor.

What to send the contracting officer

Built from the clause, the Air Force guide and the board decisions, a complete request carries:

1. The notice itself, within 30 days after you receive the wage determination (or by the date the contracting officer set in writing), naming the contract, the period and the wage determination with its number and revision (what the letter says, part by part).
2. The amount requested, in total and by contract line item; for time-and-materials and labor-hour line items, the change in each fixed hourly rate, with no burden added.
3. Payroll data for the prior period, normally 12 months, for each employee: SCA classification, the hourly rate actually paid, hours worked on the contract, vacation and holiday hours paid (and sick hours, where they count), and other payments such as shift differentials and non-discretionary bonuses. The Air Force guide’s test: “All data and calculations submitted by a contractor should be independently verifiable.”
4. The hours basis, its dates, and any adjustment for a change in scope or workforce, with the reason.
5. H&W support: the plan premiums or costs actually paid for each employee, and the cash in lieu, split between what went to a plan and what was paid in cash.
6. Support for the accompanying costs: the state unemployment rate notice and wage base, the workers’ compensation rate from the policy, and the FICA and FUTA rates used.
7. A statement of what is left out: no G&A, overhead or profit, and no exempt or non-covered employees.
8. The old and new wage determinations, or the CBA-based wage determination and the CBA.
9. An offer of the records. Paragraph (g) lets the contracting officer examine directly pertinent books and records until 3 years after final payment.

A short worked example

A firm-fixed-price contract’s option year starts with a new wage determination. One classification on it goes from $16.00 to $16.50 an hour, and the standard H&W rate from $5.55 to $5.92 (the 2025 and 2026 rates; the contract has no FAR 52.222-62). The contractor pays the H&W into a benefit plan at exactly the old rate, and its payroll for the 12 months before the option year shows three employees in the classification. The wage rates and hours are made up to show the method; hours paid include paid vacation and holidays.

• A was paid the old minimum, so the full $0.50 counts. A’s 60 overtime hours count at straight time ($0.50, not $0.75), and they earn no H&W, because H&W stops at 40 hours a week. A raise for A to $17.00 would not change A’s line: pay above the new minimum is the contractor’s choice.
• B already earned $16.25, so only $0.25 an hour is new cost, on the hours B was actually paid.
• C is paid above the new minimum, so no wage increase is due, but C’s H&W still has to rise by $0.37 an hour: pay above the minimum cannot be counted toward H&W.

Priced the way the request in Stobil was, at 2,080 projected hours for each of the three employees and the full $0.50, the wage line would have been $3,120.00 instead of $1,330.00: more than twice the increase this contractor actually has, and the kind of figure the boards have turned down.

Sources

Primary sources, as read on October 30, 2026. They change; the current versions are the ones that count.

• FAR 52.222-43 (AUG 2018) (www.acquisition.gov), FAC 2026-01: paragraphs (a) to (g)
• FAR 52.222-44 (MAY 2014) (www.acquisition.gov)
• FAR 22.1006, Contract clauses (www.acquisition.gov): which contracts carry each clause
• Revolutionary FAR Overhaul, Part 52 model deviation text (www.acquisition.gov)
• U.S. Air Force, FLSA, SCLS and EO 14026 Price Adjustment Guide, September 2022 (PDF) (www.af.mil): sections 4 to 10, 14 and 15
• Stobil Enterprise v. Department of Veterans Affairs, CBCA 5698 (2019) (PDF) (cbca.gov)
• Stone v. Secretary of Veterans Affairs, No. 2020-1732 (Fed. Cir. 2021) (PDF) (www.cafc.uscourts.gov)
• Melwood Horticultural Training Center v. GSA, CBCA 7989 (2024) (PDF) and CBCA 8075 (2024) (PDF) (cbca.gov)
• Air Masters Corp. v. GSA, GSBCA 16327 (2004) (gsbca.gsa.gov)
• HD Inc., ASBCA No. 63794 (2025) (PDF) (www.asbca.mil)
• Corrections Corporation of America v. DHS, CBCA 2647 (2015) (PDF) (www.cbca.gov)
• 29 CFR Part 4 (www.ecfr.gov): sections 4.170(a), 4.173, 4.174 and 4.175
• IRS information letter 2011-0074 (PDF) (www.irs.gov): cash in lieu of H&W and FICA and FUTA
• IRS Topic 759, Form 940 (FUTA) (www.irs.gov)
• Wage determination 2015-5619, Revision 30 (August 27, 2026) (sam.gov): the 2026 H&W rates
• Wage determination 2015-4281, Revision 34 (July 8, 2025) (sam.gov): the 2025 H&W rates

More Service Contract Act guides: SCA Health and Welfare · The SCA Price Adjustment Letter · How to Read an SCA Wage Determination · Common SCA Payroll Mistakes · SCA Holiday Pay · SCA Vacation · Successor Contractors and CBA Wage Rates · SCA Conformance (SF-1444) · SCA vs. Davis-Bacon · Executive Order Minimum Wage on SCA Contracts · All SCA guides