The Realities of Contract Work

About three months after the longest government shutdown in history came to an end, leaders of companies and unions representing federal contract workers are speaking out, asking for legislative changes to ensure that their employees are guaranteed back pay if another shutdown occurs. WTOP

The latest Federal Government shutdown lasted thirty-five days and affected eight hundred thousand contractors, everyone from the men and women that empty the trash, to the men and women that write the software that fly the unmanned aircraft used by the military.

I ask that we work together to find a way to enact legislation that will treat the contractor workforce just as their federal workforce counterparts are treated —Leidos CEO Roger Krone.

Mr. Krone’s supposed concern for his employees notwithstanding, this is about the money Leidos and other federal contractors lost during the shutdown. Let me explain how it works. A contractor is a body with a value attached to it. That value is a combination of their salary, their benefits, and a number of other factors at play within the company that is loaning their services to the Federal Government. What is called the loaded rate. That loaded rate would astound you (or perhaps not – that $10,000 toilet seat. That was as much the cost of labour as the cost of materials). If I am employed at an annual salary of $130,000, I would be making about $60/hour. Now, we add to that the overhead costs, etc from the company and I am being sold to them at a rate of $120/hr.

This is about the money, and not the money lost by the contractors.

The argument or at least the parallel is that the Federal Employees got their money, the contractors should too. I am of two minds about this. I can see the argument that the Federal workforce was involuntarily furloughed. In labour law, it is slightly different from being laid-off, but the effects are the same. If Ford had furloughed a line, those employees would not be paid for their time off. Similarly, the contractors would not be paid.

Companies are often left with two choices during a shutdown, he said: pay their employees and go out of business, or withhold pay and see their workforce leave them.

He is correct. Contractors actually live on a very small margin with Federal contracts. And they do have a significant risk that their employees will walk out on them if they are not paid. And that is the risk of contracting in general. You take a job with a contractor knowing that at some point your contract will expire. Some companies recognize this, make allowances for it, and protect their employees, to a certain extent, while others are less concerned. In fairness to Leidos, they tend to protect their employees, but they have lost their margin over the thirty-five days, through no fault of their own because the government (the paymaster) was not doing their job.

How this compensation should be addressed is not a simple issue. Being paid to not work is not going to be successful. And 800,000 federal contractors did not work for thirty-five days. Unlike Federal Employees, contractors had the option of looking for work or taking unemployment, or annual training or leave. I am not sure contractors should expect back pay. But as a former Federal contractor, I can feel their pain. There is no easy solution.