Paying Irregular Labor Rates

[Corduroy Frog]

Suppose an employee wants to make $100,000 per year.  The contractor has three contracts, but because of the availability of money, he is paid $75 on one contract, $50 on another contract, and $48 on another contract.  Because the company wants their indirect rates to be low, he is only paid $25 on Overhead and $25 on G&A.

How is this elaborate scheme perceived by DCAA, DOL, a contracting officer who finds out about it, or anyone else?

[C Culham]

12 hours ago, Corduroy Frog said:

Suppose an employee wants to make $100,000 per year.  The contractor has three contracts, but because of the availability of money, he is paid $75 on one contract, $50 on another contract, and $48 on another contract.  Because the company wants their indirect rates to be low, he is only paid $25 on Overhead and $25 on G&A.

How is this elaborate scheme perceived by DCAA, DOL, a contracting officer who finds out about it, or anyone else?

Your question does not contain enough info (like type of position, application of SCA or not, etc.) but being who I am I have a first reaction. 

 It is specific to DOL since you raised it.   If the positions are SCA covered then I do wonder about how the rates line up against a SCA Wage Determination through each of the contracts.  Especially if, as provided by the SCA Directory of Occupations, work under each contract is the same.  Further if it is not and something is being invented then there is the conformance requirements of a SCA Wage Determination (see below).

Then there is lots of other stuff that I will leave to others such are the contracts FFP, Cost Reimbursement, or an other like labor Hour?   Are the contracts all the same or mix between each one?  Is certified cost or pricing required?   All which in my view matter as well as to whether there is a issue or not.

 

Conformance Process:



The contracting officer shall require that any class of service employee which is 
not listed herein and which is to be employed under the contract (i.e. the work to 
be performed is not performed by any classification listed in the wage 
determination) be classified by the contractor so as to provide a reasonable 
relationship (i.e. appropriate level of skill comparison) between such unlisted 
classifications and the classifications listed in the wage determination (See 29 CFR 
4.6(b)(2)(i)).  Such conforming procedures shall be initiated by the contractor 
prior to the performance of contract work by such unlisted class(es) of employees 
(See 29 CFR 4.6(b)(2)(ii)).  The Wage and Hour Division shall make a final 
determination of conformed classification wage rate and/or fringe benefits which 
shall be paid to all employees performing in the classification from the first day 
of work on which contract work is performed by them in the classification.  Failure 
to pay such unlisted employees the compensation agreed upon by the interested 
parties and/or fully determined by the Wage and Hour Division retroactive to the 
date such class of employees commenced contract work shall be a violation of the Act 
and this contract.  (See 29 CFR 4.6(b)(2)(v)). When multiple wage determinations are 
included in a contract a separate SF-1444 should be prepared for each wage 
determination to which a class(es) is to be conformed.

[here_2_help]

14 hours ago, Corduroy Frog said:

The contractor has three contracts, but because of the availability of money, [an employee] is paid $75 on one contract, $50 on another contract, and $48 on another contract.  Because the company wants their indirect rates to be low, he is only paid $25 on Overhead and $25 on G&A.

How is this elaborate scheme perceived by DCAA, DOL, a contracting officer who finds out about it, or anyone else?

The only way this works is if the "employee" is an independent contractor (1099-type) and is hired to perform disparate functions/activities on the different cost objectives you list. Otherwise, I would suspect there is going to be an auditor concern with the integrity of the contractor's compensation system. If the employee is salaried and any of the contracts are cost-type, then it would be an auditor concern on steroids.

A better way--and a more common way--is to pay the employee $XX/hour on all hours recorded to all cost objects and then establish a bonus plan that pays $XXX based on an objective and measurable set of criteria, so as to get the employee to the desired $100,000/year in compensation.

I must say, you seem to run into the shadiest of contractors. Must be stressful trying to keep them on the straight & narrow. I hope it pays well.