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What Federal Contractors Need to Know About HR Compliance

Being a federal contractor opens up many opportunities for your large business, but it also brings strict government oversight. Government agencies want to ensure that the companies they award work to are well-run and spend government funds responsibly.

Labor laws and regulations can be a significant challenge for federal contractors because of changing rules and detailed data reporting requirements.

Whether your company is new to federal contracting or has been working in the field for years, the right tools can help you be — and stay — compliant, even as laws and regulations change.

Why is HR compliance important for federal contractors?

Federal contractors that don’t comply with employment laws and regulations risk losing their government contracts. In addition to losing jobs, federal contractors may face other severe consequences, like:

  • ineligibility for future contracts
  • civil and criminal sanctions
  • suspension
  • debarment

The right HR compliance software and self-service technology helps federal contractors adhere to federal and local laws by:

In the evolving compliance landscape, an organization’s HR tech must adapt to new guidance and challenges. Anything less won’t help sustain your ongoing success.


What laws and regulations must federal contractors follow?

Different regulations may apply to federal contractors based on the value of their government contract, how many employees they have and whether they are categorized as prime contractors or first-tier contractors.

  1.  EEO-1 Component 1 Report

 This report annually requires most federal contractors with 50 or more employees, prime contractors and first-tier contractors to provide specific data about their workforce, including:

  • staff size
  • job categories
  • race/ethnicity
  • sex

Information about when EEO-1 reports are collected each year is available on the U.S. Equal Employment Opportunity Commission’s website.

  1. Davis-Bacon and Related Acts (DBRA)

Depending on the size of government contract a company works on, it may be subject to regulations from the Davis-Bacon and Related Acts (DBRA) that address:

  • local prevailing wage rates
  • fringe benefits
  • overtime pay

It’s important to stay on top of changes to regulations. The U.S. Department of Labor proposed an update to DBRA regulations in 2022 that may affect federal construction projects, including those that are federally assisted.


  1. Fair Labor Standards Act (FLSA)

 FLSA sets requirements for:

  • minimum wage
  • overtime
  • hours worked
  • record-keeping
  • child labor

Similar to FMLA, local authorities may enact their own rules regarding FLSA, especially around minimum wages. Additionally, the Department of Labor regularly raises the cost of penalties for noncompliance, even if the requirements stay the same.

  1. Occupational Safety & Health Act (OSH Act) 

In addition to creating the Occupational Safety and Health Administration (OSHA), the OSH Act established requirements for safe and healthy workplaces. There are several methods for enforcing OSHA standards, like:

  • on-site inspections
  • routine audits
  • regular reviews
  • conferences about complaints

OSHA penalties range from fines to outright shutting down noncompliant workplaces, both consequences that businesses want to avoid.

What are federal contractors’ common compliance mistakes?

Some common compliance mistakes federal contractors may make come from:

  • inaccurate and outdated records
  • missed posting and notice requirements
  • unexpected changes in labor laws and regulations

The Department of Labor requires companies to file a set of reports through the year. Businesses need to track which laws and regulations apply to their projects and keep track of, store and analyze data related to the work.

The Office of Federal Contract Compliance Programs (OFCCP) evaluates how contractors comply with nondiscrimination requirements. Because the office may use more than one investigative procedure to determine violations, companies need to stay proactive and agile.

How do I keep my federal contracting business compliant?

Staying in compliance requires companies to track legislation and have data management and reporting systems in place. Technology that automates HR practices and tracks applicable legislation helps reduce your company’s risk.

And Paycom’s single, easy-to-use app for HR and payroll does both! Our HR management software helps you comply with new and updated state and federal regulations by:

  • measuring workforce data in real time
  • automatically building reports without losing accuracy
  • storing important information in one system of record

Not sure your company needs these tools? Even if your large business has a compliance department to stay on top of requirements, automation makes it easier to collect and report required data to government agencies. If your business does not have a compliance department, review the Federal Contract Compliance Manual published by the OFCCP to stay on top of what’s required to stay in compliance.

Learn more about Paycom’s single, easy-to-use app for HR and payroll and how it supports the specialized needs of federal contractors.

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.