Tipped employees working on a narrow slice of federal contracts will see their required cash wage rise to $9.85 an hour on January 6, 2027, up from $9.55. The Labor Department’s Wage and Hour Division published the new rates on October 8 in a Federal Register notice signed by Administrator Andrew B. Rogers. The same notice lifts the minimum wage for covered contract workers from $13.65 to $14.05 an hour.

The two rates that change

The notice, titled “Minimum Wage for Federal Contracts Covered by Executive Order 13658, Notice of Rate Change in Effect for 2027,” sets the general contract minimum at $14.05 an hour and the tipped cash wage at $9.85. Both take effect January 6, 2027. The cash wage goes up 30 cents and the full minimum goes up 40 cents, so the notice’s own figures put the gap that tips must fill at $4.20 an hour, $14.05 minus $9.85.

That gap is the rule’s tip test. The notice says tips “must equal at least the difference between the cash wage paid and the” full minimum wage. If tips fall short, the contractor has to raise the cash wage until cash and tips together reach $14.05.

For a tipped worker, the practical question is whether the employer’s federal contract is one of the pre-2022 ones, because only those carry the $9.85 cash wage. A covered tipped worker would see the cash portion of pay go from $9.55 to $9.85 on January 6, with tips expected to cover the remaining $4.20. Someone on a contract awarded or renewed in 2022 or later is outside this notice.

The new $9.85 cash wage and $14.05 minimum start January 6, 2027, and the notice says a poster for the new rates will be available on the Wage and Hour Division’s website.

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Which contracts the rate covers

The scope is narrower than the headline number suggests. Executive Order 13658 applies to contracts covered by the Davis-Bacon Act or the Service Contract Act that were “awarded between January 1, 2015, and January 29, 2022,” and that were not renewed or extended on or after January 30, 2022. Davis-Bacon covers federal construction work and the Service Contract Act covers federal service work, so the rate follows federal construction and service work, not the whole federal payroll.

Contracts awarded, renewed or extended on or after January 30, 2022 fell under a different order, Executive Order 14026. The Labor Department’s notice says that order was revoked on March 14, 2025, in section 2(d) of Executive Order 14236, and it sets no 2027 rate under it. Executive Order 13658, the notice says, remains in effect for the older contracts.

What the notice does not cover

The Federal Register notice is a rate change, not a new rule. It does not say how many workers are affected or how many contracts remain under Executive Order 13658. It also describes a seasonal recreational exemption created in 2018 under Executive Order 13838 without saying whether that exemption currently applies, and it notes that Executive Order 14026 revoked Executive Order 13838 as of January 30, 2022.

Prevailing wages are a separate matter. The notice says wage determinations for Davis-Bacon and Service Contract Act work have moved to a federal website, sam.gov, which it calls “the authoritative and single website” for those determinations.

Dates to keep apart

Three dates appear in the notice and are easy to mix up. Rogers signed it October 2, the Federal Register published it October 8, and the rates take effect January 6, 2027. Until January 6, the current $13.65 minimum and $9.55 cash wage stay in place for covered contracts.

Finding out which order covers a contract

A worker can start with the employer or the contracting officer, who should know the date a federal contract was awarded and whether it was renewed or extended after January 29, 2022. That award and renewal history decides whether Executive Order 13658 or the since-revoked Executive Order 14026 applied.

The Labor Department’s notice names a contact for questions about the rule: Daniel Navarrete, director of the Division of Regulations, Legislation, and Interpretation, at (202) 693-0406, which is not toll-free. The alternative-format line is 1-866-487-9243, and the notice says a poster for the new rates will be available on the Wage and Hour Division’s website.

The figures in the notice are $14.05 an hour for the contract minimum and $9.85 for the tipped cash wage, both effective January 6, 2027, as published at 91 Federal Register 64403.

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This article was produced with AI assistance and edited for accuracy against the sources linked above.