Executive Compensation Limit for Government Contractors
- Year ending December 31, 2022: $589,000
- Year ending December 31, 2023: $619,000
Section 702 of the Bipartisan Budget Act (BBA) of 2013 provides the calculation to be used in determining the compensation limit for government contractors. While contractors may provide compensation which is greater than this cap, these excess dollars will be unallowable. Of note, Section 702 provides a waiver of the cap amount, if approved by the head of an executive agency, for scientists, engineers, or other specialists “upon determination that such exceptions are needed to ensure that the executive agency has continued access to needed skills and capabilities.”
In order to be considered allowable, contractors must also consider 31.205-6, to include reasonableness of compensation (In other words, compensation which is less than the cap, is NOT automatically considered to be reasonable!). While engaging in compensation planning for 2023, we encourage you to review and adhere to your policies and document your processes and findings when benchmarking for compensation reasonableness. If, while doing your due diligence, you find that employees are significantly above the benchmark, consider and maintain documentation to support these compensation decisions.
Our experienced team of previous DCAA auditors and compensation professionals are here to support you in this process and throughout an audit.