EP 1180-1-1
1 Aug 01
9-6. Wage Adjustment Computation. To determine the amount of the wage adjustment, the following
factors must be considered: the applicable revised WD wage rate for the new contract period, LESS the
actual wage rate paid in the previous period, PLUS allowable payroll taxes applicable to this differential,
EXCLUDING general and administrative expenses (G&A), overhead, profit.
a. Calculating the actual wage rate paid. The actual hourly rate paid in the previous period is the
total of the hourly rate paid plus other compensations (bonuses, commissions, shift differentials, etc.)
converted to an hourly rate. The other compensations must be prorated over the hours worked in the
period for which they are paid. To do this, divide the total other compensations by the number of hours
they cover. A yearly bonus would be divided by 2,080 hours to convert it to an average hourly rate for
the standard work hours in one year. Conversely, a commission that was calculated and paid quarterly
would be divided by 520 hours to convert it to an hourly rate. The regular hourly wage rates and "other"
compensation hourly rates are then added together for each employee to determine their total actual
hourly wage rate paid in the previous period.
Example: The contractor paid a regular hourly rate of .10 per hour, and year-end
performance bonus of 0 to each employee. The bonus payment would apply to
the entire year of 2,080 hours, and thus represent an additional $.17 per hour wages
(0 divided by 2,080 hours). The total actual wage rate paid to this employee is
.27 per hour for the year.
b. Calculating the applicable rate change. The amount of adjustment is limited to the difference
between the new wage rate applicable to the contract and the wage rate applicable to the contract and
the wage rate actually paid by the contractor to the employees in the previous contract period.
Example: The prior WD required a minimum wage rate of .00 per hour. The
contractor actually paid employees .27 per hour in the contract period. The
revised WD now requires a minimum wage rate of .50 per hour. The allowable
hourly wage adjustment is limited to $.23 per hour (.50 less the actual wages
paid of .27). No adjustment would be due if the contractor had paid wage rates
in the previous period equal to or greater than the new minimum rate applicable to
the next contract period.
9-4
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