And a new job class that is or will be be used in the

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and a new job class that is (or will be) be used in the new period of performance, must be carefully scrutinized. Such requests would indicate possible misclassification of the workers within the contractor’s proposal and initial periods of performance. These requests could also indicate that the contractor is “promoting” workers into higher paid job classifications at government expense without proper justification for doing so. Therefore, such adjustments are not permitted. A review of the job classifications used in the initial period of contract performance and the classifications used during the option periods will show whether the contractor is improperly requesting an adjustment from one class to another without an accompanying change in contract performance requirements. 8. Contractors often will request SCA Price Adjustments for fringe benefit increases reflected on the new WD requirement irrespective of the amounts they actually pay for fringe benefits in the prior period of performance. This is particularly true of contractors that provide health insurance or health care plans. Just as with wage rates, the amount of an SCA price adjustment is limited not only by the difference between the old WD requirement and the new WD requirement, but also by the difference between the new WD requirement and the “actual costs” that the contractor was already incurring in the prior period of performance. For example, recently one of the standard WD requirements for health & welfare fringe benefits changed from $3.01 per hour to $3.16 per hour. If the contractor’s health insurance costs in the prior period of performance were $4.00 per hour, an SCA price adjustment would not be permitted despite the change from the old WD requirement to the new WD requirement. Therefore, documentation of the contractor’s actual fringe benefit costs in the prior period of performance is necessary to determine whether an adjustment is allowable under the clause. 9. Request for the adjustment of “accompanying costs” for Federal unemployment tax (FUTA) and state unemployment tax (SUTA) are generally not supportable. Although the SCA Price Adjustment clause clearly allows for costs that accompany SCA wage rate adjustments, it is limited to those “actual increases” that a contractor incurs (or will incur). Generally, a contractor does not incur any additional FUTA or SUTA costs which result from SCA WD wage increases. For example, if an old WD requirement is $14 per hour and the new WD requirement is $15 per hour; the FUTA costs will rarely be impacted because FUTA tax is calculated and required for only a taxable base of $7,000 of earnings. Any earnings greater than $7,000 per individual employee are not taxed. Therefore, an individual full-time employee who had a wage rate of $15 would not cause a FUTA tax liability that is more than a full-time employee who had a wage rate of $14. The liability would be the same -- $7,000 (taxable base) X .008 (the standard FUTA rate) = $56, annually. This concept also holds true for SUTA, but each state has its own unique “taxable base”.
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