Federal contractor minimum wage rises to $14.05 in 2027, but few workers still qualify

The minimum wage for workers on federal contracts covered by Executive Order 13658 rises from $13.65 to $14.05 an hour on January 6, 2027. The cash wage for tipped workers on those contracts goes from $9.55 to $9.85. The Labor Department's Wage and Hour Division announced both rates in a Federal Register notice published October 8, 2026.

The catch is in who still qualifies. The new rate only reaches workers on certain contracts entered into between January 1, 2015, and January 29, 2022, that haven't been renewed or extended since January 30, 2022, whether through an exercised option or any other way. The department itself says the number of those contracts "has significantly decreased over the past several years and continues to dwindle." Most people working for federal contractors today won't see this raise.

Who actually gets $14.05

Executive Order 13658, signed in 2014, covers four kinds of agreements: construction contracts under the Davis-Bacon Act, service contracts under the Service Contract Act, concessions contracts (food, lodging or souvenir shops in a national park, for example) and leases of federal space to offer services, like a coffee shop in a federal building. The worker has to be someone owed a minimum wage under the FLSA, the Service Contract Act or Davis-Bacon. Salaried executive, administrative and professional employees who are exempt from the FLSA aren't covered, and neither are support workers who spend less than 20% of their hours in a given week working "in connection with" a covered contract.

Then comes the date test. A contract signed in 2019 with yearly option periods drops out of EO 13658 the first time an option was exercised on or after January 30, 2022. Multi-year service contracts are usually built that way, which is why the pool keeps shrinking. If your contract was awarded or extended in the last four and a half years, this notice doesn't apply to you.

Contracts for seasonal recreational services on federal lands, such as river running, hunting trips or ski services, are left out entirely. The department's page says so, citing Executive Order 13838 and the 2025 order discussed below.

What happened to the $17.75 contractor wage

Newer contracts used to have a much higher floor. Executive Order 14026, signed in April 2021, set $15.00 from January 30, 2022, for contracts entered into or renewed from that date, with yearly inflation updates. By January 1, 2025, it stood at $17.75 an hour, for tipped and non-tipped workers alike.

On March 14, 2025, Executive Order 14236 revoked it. The Wage and Hour Division now states that it is no longer enforcing Executive Order 14026 or its rule at 29 CFR part 23. The older order was never revoked, so the leftover 2015 to 2022 contracts still get their annual EO 13658 increase. Workers on post-2022 contracts now fall outside both orders. What protects them is the Service Contract Act or Davis-Bacon prevailing wage for their job and county, a state or local minimum if it's higher, and otherwise the federal $7.25.

At full time, the gap between the revoked rate and the surviving one is $7,696 a year: $36,920 at $17.75 against $29,224 at $14.05 over 2,080 hours.

Where $14.05 comes from

The order ties the raise to the CPI-W, the consumer price index for urban wage earners and clerical workers. The department averaged the index from July 2025 to June 2026 (320.866) and compared it with the July 2024 to June 2025 average (311.293). That's a 3.075% increase, and $13.65 plus 3.075% is $14.070. The order rounds to the nearest nickel, which gives $14.05. October 2025 is missing from the average: the Bureau of Labor Statistics collected no price data during the 2025 shutdown, so the newer year rests on 11 months.

Why January 6 and not January 1? The rules require at least 90 days of public notice before a new rate takes effect, and January 6 is exactly 90 days after October 8. The schedule had already slipped this year: the 2026 rate of $13.65 wasn't announced until February 9, 2026, and only took effect on May 11. Until then, covered workers stayed at the 2025 rate of $13.30.

EO 13658 rate	Effective	Tipped cash wage	Full-time year
$13.30	January 1, 2025	$9.30	$27,664
$13.65	May 11, 2026	$9.55	$28,392
$14.05	January 6, 2027	$9.85	$29,224

What $14.05 pays over a year

The raise is 40 cents an hour, or $16 a week at 40 hours, and $832 over a full-time year. Compared with the $7.25 federal minimum, a covered worker earns $14,144 more a year, almost double. Here is the federal take-home for a single filer with no other income, using 2026 tax rules because the 2027 tables aren't final:

The same worker at $13.65 takes home $24,990.82, so about $670.66 of the $832 raise reaches the bank account, roughly 81 cents of each new dollar. State income tax takes a little more in most states, and the take-home pay calculator adds it for yours. Overtime rises with the base: time and a half on $14.05 is $21.075 an hour.

Tipped workers: $9.85 plus a guarantee

A covered contractor may pay tipped employees a cash wage of $9.85 and count tips toward the other $4.20 an hour, a tip credit of up to $168 in a 40-hour week. That only works if the tips actually arrive. Under 29 CFR 10.28, if cash wage plus tips falls short of $14.05 an hour for the workweek, the employer must make up the difference on the regular payday. The tipped rate also applies only to workers who customarily and regularly get more than $30 a month in tips.

In a week with $168 or more in tips, no top-up is owed. The tip credit can't go the other way either: an employer can pay more than $9.85 and claim less credit, but never less than $9.85.

How to tell if your job is covered

Covered contractors must post or otherwise tell workers about the EO 13658 rate, so a poster or a notice in your onboarding papers is the first clue. The second is the contract's history: ask whether it was awarded before January 30, 2022, and whether any option has been exercised since. January 6, 2027 falls on a Wednesday, so in a Sunday-to-Saturday week, hours before January 6 are owed at $13.65 and hours from that day on at $14.05. Questions about the rate go to the Wage and Hour Division's Division of Government Contracts Enforcement at (202) 693-0064.

To compare $14.05 with an offer at a different rate or schedule, the hourly to salary calculator converts any wage for your own hours.

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