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I have an overseas T&M contract that has a danger/hardship pay allowance applied. If for instance the allowance is 5%, is the 5% only applied for the 1st 40 hours of compensation on base salary or is it on total base salary? The government is directing the employees to work 60 hours. Can I apply the 5% to all 60 hours of compensation or only on 40 hours?

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Read the task order/underlying contract. If this is not addressed you will have a hard time not paying on all 60 hours as that is what the company and workers probably expect. I realize that Government Workers only get it for the first 40 (unless that got changed recently) but those rules don't apply to the contract unless it is so stated.

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Does the contract/task order reference the Dept. of State Regs (DSSR)?

Edited to add: Regardless of whether or not the DSSR is cited, DCAA will assume that the DSSR establishes the "reasonable" levels of employee compensation. Based on the DSSR procedures, DCAA will use the 40 hour workweek as the basis for calculating pay differentials. (See the 2004 DCAA Audit Guidance on this topic, available under "Open Audit Guidance" at the DCAA website.)

Now, don't get me wrong. I don't believe that DCAA's audit guidance can supersede things like contract language, the parties' intent, or the contractor's established practices (consistently applied). But that's how DCAA will answer your question.

Hope this helps.

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I believe DCAA uses a Price Reasonableness criteria based on market survey regarding Foreign Duty Allowance. It is also my understanding that the Dept of State Allowance only apply to Government Employees. What the contractor pays his employees is a matter of Employee/Employer Agreement unless the contract cites that the employees gets specific allowances. Many of our contractor employees are 12 hrs 7 days or 84 hrs a week. A lot get Danger and Post on the first 40 hours. Overtime is not really an issue since FLSA doesn't extend beyound USA.

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