The federal government's continued investment in cloud computing, cybersecurity, zero-trust technology and IT modernization is creating federal contracting opportunities and government subcontracting opportunities for small and midsize government contractors. 

Recent developments involving Cloudflare's expansion into the federal market, including its work toward FedRAMP High authorization, highlight the growing demand for secure cloud and cybersecurity capabilities across federal agencies. At the same time, the Department of Defense continues to expand its enterprise cloud initiatives, creating opportunities for contractors with specialized technology, cybersecurity, engineering and support capabilities. 

FedRAMP High is the highest FedRAMP authorization level for cloud services and is designed for systems handling high-impact federal information where a security breach could have severe consequences.

It requires a rigorous assessment against a large set of NIST SP 800-53 security controls and provides federal agencies greater assurance that a cloud environment meets stringent security requirements. For government contractors, FedRAMP High authorization can be an important competitive differentiator, particularly for contracts involving sensitive government data, cloud migration, cybersecurity, or mission-critical systems.

It does not replace other requirements such as CMMC, NIST 800-171, FISMA, or agency-specific contractual requirements, but it can help position a technology provider for higher-security federal opportunities.  Federal website on FedRAMP include:  

• FedRAMP.gov – Official GSA FedRAMP Site — Main portal.  

  
  

• FedRAMP Marketplace — Searchable database of certified cloud services.  

  
  

• FedRAMP Rev 5 Agency Authorization — Government guidance explaining the authorization process.  

  
  

• GAO – Cloud Security and FedRAMP —Independent overview from the Government Accountability Office.  

For small and midsize government contractors, these opportunities can be significant—but they can also bring new workforce and HR compliance requirements for government contractors. 

Watching the Federal Cloud and Cybersecurity Market? 

For small and midsize government contractors, identifying an opportunity early can be just as important as being qualified to perform the work. 

Companies considering government teaming opportunities, federal subcontracting opportunities or new federal contracts should monitor federal procurement activity, upcoming requirements and industry developments on a regular basis. 

Federal Contracting Resources to Monitor 

• SAM.gov – Federal Contract Opportunities 

  SAM.gov Contract Opportunities 

• SAM.gov is the primary federal source for federal contract opportunities, including sources-sought notices, requests for information (RFIs), presolicitations, solicitations and award notices. 

  
  

• Contractors can search by agency, NAICS code, set-aside status and other criteria. Registered users can also save searches and follow opportunities. 

  
  

• Don't limit your searches to active solicitations. Sources-sought notices and RFIs can provide an early indication of an agency's requirements and potential acquisition strategy. 

• SAM.gov – Research Federal Contract Awards 

  SAM.gov Contracting and Award Data 

  
  

• Federal contract award information can help small businesses identify: 

• Which companies are winning similar work 

  
  

• Which agencies are purchasing the service 

  
  

• Contract values and periods of performance 

  
  

• Incumbent contractors 

  
  

• Potential prime contractors to approach for teaming or subcontracting opportunities 

  
  

• Researching previous federal contract awards can be particularly valuable when an agency is preparing to recompete an existing requirement. 

• SBA – Subcontracting Opportunities 

  U.S. Small Business Administration – Subcontracting 

  
  

• Small businesses do not always have to compete directly for a prime federal contract. Government subcontracting opportunities can provide another path into federal work, allowing a growing company to build past performance, establish agency relationships and develop experience supporting larger federal programs. 

  
  

• SBA resources can also help businesses understand subcontracting opportunities and connect with resources such as SUBNet, the Dynamic Small Business Search (DSBS) and APEX Accelerators. 

• Monitor Agency Forecasts and Acquisition Plans 

  Federal agencies publish information about anticipated contracting requirements. Monitoring agency forecasts can give contractors an opportunity to research requirements, identify potential teaming partners and prepare their capabilities before a solicitation is released. For technology-focused companies, areas worth monitoring include: 

  
  

• Federal cloud computing 

  
  

• Federal cybersecurity 

  
  

• Zero Trust 

  
  

• IT modernization 

  
  

• Artificial intelligence 

  
  

• Network infrastructure 

  
  

• Software development 

  
  

• Engineering and technical services 

  
  

• Data and analytics 

  
  

• Cloud security and compliance 

• Follow Federal Contracting and GovCon News 

Industry news can sometimes provide an early indication that a large prime contractor has won work and may soon need specialized subcontractors. Government contractors should also monitor government contracting news and GovCon industry news for information about: 

• New federal contract awards 

  
  

• Large IDIQ and GWAC vehicles 

  
  

• Task-order awards 

  
  

• Agency modernization initiatives 

  
  

• Contract recompetes 

  
  

• Major prime contractors entering new markets 

  
  

• Small-business teaming opportunities 

  
  

• Cybersecurity and cloud requirements 

  
  

What Should Small Businesses Be Looking For? 

When monitoring these resources, don't search only for your company's exact service description. Look for signals that a larger federal opportunity may create subcontracting work. 

A Government Contractor Business Development Watchlist 

Consider making the following resources part of your regular federal contracting and business development routine: 

1. SAM.gov Sources Sought – Identify potential requirements early. 

   
   

2. SAM.gov Presolicitations – Monitor opportunities moving toward solicitation. 

   
   

3. SAM.gov Contract Awards – Identify winning prime contractors and incumbents. 

   
   

4. Agency Forecasts – See what federal agencies expect to purchase. 

   
   

5. SBA SUBNet – Look for subcontracting opportunities. 

   
   

6. Dynamic Small Business Search (DSBS) – Help make your capabilities visible to potential prime contractors. 

   
   

7. GovCon industry news – Track awards, recompetes and market developments. 

   
   

8. Prime contractor announcements – Identify companies entering new federal markets that may need teaming partners. 

   
   

Don't Wait Until the Proposal Is Due 

The best federal contracting opportunities may become visible months before a solicitation is released. 

A sources-sought notice may indicate that an agency is researching a requirement. An agency forecast may identify an upcoming procurement. A large contract award may reveal the company that could soon need subcontractors. A major prime contractor entering a new technology market may create opportunities for specialized small businesses. The earlier a contractor identifies these signals, the more time it has to develop relationships, evaluate teaming opportunities and prepare its workforce. 

Why This Matters to Small and Midsize Government Contractors 

Companies pursuing a new federal contract, teaming arrangement or subcontract may need to quickly expand their workforce or demonstrate that their existing infrastructure can support the requirements of a federal contract. Depending on the contract, workforce and locations involved, this may include: 

• Hiring and onboarding employees in multiple states 

  
  

• Managing exempt and nonexempt employee classifications 

  
  

• Maintaining compliant employee handbooks and workplace policies 

  
  

• Supporting federal contractor employment and affirmative action requirements 

  
  

• Managing employee benefits and payroll as the workforce grows 

  
  

• Addressing leave, wage and hour, and state-specific employment requirements 

  
  

• Establishing consistent HR processes for employees working remotely or at government and customer locations 

  
  

• Maintaining appropriate employment records and documentation 

  
  

• Preparing for additional federal contractor compliance requirements that may flow down through a prime contractor or higher-tier subcontractor 

The HR and compliance infrastructure that supported a 10- or 20-person company may not be sufficient once the company begins pursuing larger federal contracting opportunities. 

HR Compliance for Government Contractors: Prepare Before You Win 

Business development is often focused on winning the work—but winning the work can create immediate government contractor HR and compliance challenges. A new subcontract or teaming arrangement may require a company to: 

• Hire employees quickly 

  
  

• Enter additional states 

  
  

• Establish new positions and compensation structures 

  
  

• Determine appropriate exempt/nonexempt classifications 

  
  

• Expand benefits administration 

  
  

• Update employee policies and handbooks 

  
  

• Implement new onboarding and HR processes 

  
  

• Address federal contractor compliance requirements 

  
  

• Manage a larger or geographically dispersed workforce 

The time to identify these requirements is before the contract starts—not after the first employee is hired. 

C2 Helps Government Contractors Prepare for Growth 

As your government contracting business grows, C2 Essentials provides HR compliance for government contractors, helping small and midsize federal contractors build and maintain the HR infrastructure needed to support their workforce and federal contracting objectives. C2 can help government contractors evaluate areas such as: 

• HR compliance and employee policies 

  
  

• Multi-state employment requirements 

  
  

• Employee classification and wage/hour considerations 

  
  

• Benefits administration 

  
  

• Payroll and HR processes 

  
  

• Employee onboarding and documentation 

  
  

• Federal contractor compliance considerations 

  
  

• Workforce expansion and HR infrastructure 

  
  

Whether you are pursuing a new prime contract, considering a government contractor teaming arrangement or preparing to become a subcontractor, planning your HR and compliance strategy before the opportunity is awarded can help position your organization for growth. 

Is Your Company Ready for Its Next Federal Opportunity? 

If your company is pursuing federal contracting opportunities in cloud computing, cybersecurity, IT modernization or other federal technology markets, now may be a good time to evaluate whether your HR and compliance infrastructure is ready for the next contract. C2 Essentials is your HR compliance consultant for navigating the workforce challenges that come with government contracting and business growth. 

California employers subject to the State’s Pay Data Reporting requirements should be aware of upcoming changes enacted through Senate Bill 464 (SB 464). The legislation modifies California’s existing pay data reporting requirements and is intended to expand workforce data reporting and improve consistency in how employers classify and report employee information. The changes become effective January 1, 2027. 

California Pay Data Reporting requirements apply to private employers with 100 or more employees nationwide that have employees who are assigned to a California establishment or who regularly perform work while physically located in California. The requirement applies regardless of where the employer’s headquarters are located.    

Employers typically report: 

• Employer information, including company details, industry classification, and reporting establishment information. 

  
  

• Employee demographic information, including race/ethnicity and sex categories. 

  
  

• Job classification information, currently based on EEO-1 job categories. Beginning with future reporting cycles under the updated requirements, employers will transition to reporting based on Standard Occupational Classification (SOC) Major Occupational Groups. 

  
  

• Compensation data, including annual W-2 wages and employee pay bands. 

  
  

• Hours worked during the reporting year. 

Employers use a designated payroll period during the fourth quarter of the reporting year (October 1 through December 31, 2026) to determine the employees included in the report, compensation data and hours worked. 

• For 2027, the anticipated filing deadline will be May 12, 2027.  

  
  

• California Pay Data Reports are submitted annually by the second Wednesday in May. 

  
  

• California Pay Data Reports cover employee data from the prior calendar year (2026).  

  
  

• Under SB 464, covered employers will transition from reporting employees using the traditional 10 EEO-1 job categories to expanded occupational classifications based on Standard Occupational Classification (SOC) major occupational groups.  

  
  

• At this time, California has not issued a formal EEO-1-to-SOC Major Occupational Group crosswalk that employers can simply use for the 2027 Pay Data Reporting transition.  

  
  

• The California Civil Rights Department (CRD) is expected to provide additional instructions, FAQs, or technical guidance before the first filing under the new requirements.  

  
  

• The current EEO-1 categories are broad groupings (for example, "Professionals" or "First/Mid-Level Officials and Managers"), while SOC Major Groups classify work based on occupation type (for example, Computer and Mathematical Occupations or Architecture and Engineering Occupations).  

  
  

• SOC categories are based on the federal SOC system used by agencies such as the Bureau of Labor Statistics.   

The official source for SOC Major Occupational Groups is the U.S. Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) website

The updated requirements reflect California’s continued focus on pay transparency, workforce data collection, and identifying potential pay disparities. Employers should expect increased attention on how positions are classified, how compensation information is maintained, and how demographic information is collected and reported. 

How C2 Essentials Can Help 

C2 Essentials will confirm whether your organization is subject to California Pay Data Reporting requirements. 

C2 Essentials already maintain workforce demographic, job classification, and compensation data for federal compliance obligations, including EEO reporting, VETS-4212 reporting, and other contractor recordkeeping requirements. C2 Essentials will assist covered clients with preparing a Workforce Data Review evaluating employee classifications, job titles, and workforce data to support accurate reporting. 

Aligning HRIS, payroll, and workforce reporting processes now can help contractors reduce administrative burdens, improve data accuracy, and maintain consistency across federal and state compliance requirements.  

Every successful company relies on a dedicated group of people to keep the operational wheels turning. You might have the most innovative product in your industry or an incredibly persuasive sales team. However, if no one is actively managing, supporting, and guiding your workforce, the entire operation will eventually stumble.

Business leaders and curious employees alike often ask themselves what the human resources department does on a daily basis. The truth is, their daily to-do list is massive, highly dynamic, and constantly shifting based on the immediate needs of the staff and the long-term goals of the executive team.

To clarify things early on: a human resources department is the specific internal division responsible for finding, screening, recruiting, training, and supporting job applicants and current employees. They are the active managers of the entire employee lifecycle.

In this comprehensive article, we are going to dive deep into the specific actions, tasks, and strategic moves that HR professionals execute every single day. We will explore how they actively protect your business, why they are essential for your daily operations, and how partnering with experienced experts like C2 Essentials can take this heavy workload off your shoulders.

The Daily Grind: The Core Actions of an HR Team

When you peek behind the curtain of a busy corporate office, you will see HR professionals handling an incredible variety of tasks. They do not just sit back and file paperwork. They take proactive, highly specific actions to ensure the workforce remains productive and satisfied.

Let's break down the exact, day-to-day actions that define what a modern people management team actually does.

Actively Recruiting and Hiring Top Talent

Finding the absolute best people for an open role is the most visible action the human resources department takes. However, recruiting is far more than just posting a job ad on the internet and waiting for resumes to roll in. They actively hunt for talent.

First, they collaborate closely with department managers to figure out exactly what kind of skills the team is missing. They write compelling, highly engaging job postings designed to catch the eye of top-tier professionals. Then, they actively source candidates through networking events, digital platforms, and industry connections.

Once the resumes start flowing in, they act as the primary filter. They read through hundreds of applications, conduct initial phone screenings, and run thorough background checks. If you are struggling to build a solid hiring pipeline, exploring human resources solutions and insights can completely overhaul the way your company attracts and secures amazing new team members.

Orchestrating Employee Onboarding and Training

The moment a candidate accepts a job offer, the HR department kicks into high gear. They must orchestrate the entire onboarding process. This action is critical because a confused, unsupported new hire is highly likely to quit within their first month.

They set up the employee's internal profiles, organize their initial desk setup, and ensure they have access to all the necessary software tools. They schedule orientation meetings to explain the core company values, the dress code, and the daily expectations. They physically guide the new hire through their first few days.

But the educational aspect does not stop after week one. HR professionals actively organize continuous training programs. They book industry experts for internal workshops, manage the budget for external certifications, and ensure everyone stays updated on the latest technical skills required for their specific roles.

Managing Compensation and Administering Benefits

People work to earn a living, and the HR department is the team taking action to ensure compensation is fair, competitive, and clearly understood. They regularly analyze market data to ensure the salaries you offer are keeping up with your industry competitors.

Beyond base salaries, they take on the massive task of negotiating and managing employee benefits through a PEO. They spend weeks meeting with insurance brokers to find the best health, dental, and vision plans available within your budget.

When open enrollment season arrives, they hold informational sessions. They actively help employees understand complicated medical terms, assist them with the digital enrollment forms, and answer deeply personal questions regarding retirement plans and paid time off policies.

Handling Employee Relations and Resolving Conflicts

Whenever human beings work closely together, disagreements will inevitably happen. The human resources department acts as the official workplace mediator. They actively step into uncomfortable situations to resolve interpersonal conflicts before they destroy team morale.

If an employee feels they are being treated unfairly by a manager, they go to HR. The HR professional listens actively, takes detailed notes, and launches a formal, completely unbiased investigation. They interview witnesses and review internal communications to find the truth.

Furthermore, they enforce disciplinary actions when necessary. If someone violates the company code of conduct, HR delivers the warnings, crafts the improvement plans, and, if absolutely necessary, handles the difficult process of terminating the employee in a legal, respectful manner.

Processing Payroll and Managing Time Tracking

Ensuring everyone gets paid accurately and exactly on time is a heavily regulated, mathematically intense action. The HR department often takes the lead on making sure the money flows correctly every single pay period.

They carefully track employee working hours, ensuring that no one is working unauthorized overtime. They calculate the correct local, state, and federal taxes that must be deducted from each individual paycheck. They also process complex wage garnishments and manage bonus payouts.

Because making a mistake on a paycheck is disastrous for employee trust, this action requires extreme attention to detail. This is exactly why many growing businesses rely on expert Administrative Services Organization (ASO) solutions to handle the complex mathematical lifting and guarantee perfect accuracy every single time.

Strategic Actions: Moving Beyond the Daily Tasks

While the daily administrative duties keep the lights on, highly effective HR teams also take massive strategic actions. They actively help the founders and the executive team steer the company toward long-term financial success.

Here is exactly what they do on a macroscopic, strategic level to keep your business highly competitive.

Fostering and Protecting Company Culture

The HR department actively builds the environment where your staff spends most of their waking hours. They do not just let company culture happen by accident; they design it with clear intention.

They launch anonymous surveys to figure out exactly how the staff is feeling. They analyze that data and take action. If morale is low, they might organize an impromptu team-building event, restructure the breakroom, or implement a brand-new peer recognition program.

They actively fight against workplace burnout. According to insightful data and trends published by the Harvard Business Review, teams with strong, supportive cultures show incredibly high engagement and massively increased profitability. HR professionals take the necessary daily actions to build and protect that profitable environment.

Driving Performance Management and Career Growth

Great employees want to advance in their careers. The human resources department builds the actual roadmaps that make internal advancement possible. They create the frameworks that managers use to evaluate their team members objectively.

They design the specific templates used for annual or quarterly performance reviews. They teach managers how to deliver constructive criticism without demoralizing the employee. They track key performance indicators across the entire organization.

If a team member wants a promotion, HR outlines exactly what specific milestones they must hit to earn that new title. By actively mapping out these internal career paths, they give employees a compelling reason to stay loyal to your company for many years.

Navigating Strict Legal Compliance and Labor Laws

The human resources department reads the fine print so you do not have to. They constantly monitor changes in local, state, and federal employment laws to ensure your business is never caught breaking the rules.

They update the official employee handbook every time a new labor law passes. They guarantee your hiring practices strictly adhere to the anti-discrimination guidelines enforced by the Equal Employment Opportunity Commission (EEOC). They also manage complex employee relations and documentation to ensure compliance with the National Labor Relations Board (NLRB).

By taking these proactive compliance actions, they shield your business from devastating financial penalties and ruinous lawsuits. They act as your dedicated legal defense mechanism on the front lines of your daily operations.

How Modern Teams Adapt to the Changing Workplace

The business landscape is changing faster than ever before. The way we work today looks entirely different than it did just a few years ago. The HR department takes aggressive action to keep your company fully adapted to these modern realities.

Let's look at what they do to keep your workforce agile and thoroughly modernized.

Managing Remote and Hybrid Workforces

With a massive shift toward working from home, HR teams now manage people they rarely see in person. They actively rewrite the company rulebook to accommodate flexible schedules and asynchronous communication.

They purchase and implement digital collaboration tools. They train managers on how to lead a team effectively over video calls. They actively find creative ways to make a remote employee living three states away feel intimately connected to the core company culture.

Implementing Advanced Software and HRIS Systems

They aggressively digitize the workplace. Modern HR professionals implement robust Human Resources Information Systems (HRIS) to automate the boring, repetitive tasks that used to eat up their entire day.

They set up digital portals where employees can request time off with a simple click. They use advanced software to track applicant pipelines and safely store highly sensitive medical information. By taking action to modernize the office technology, they drastically increase the overall efficiency of the entire executive team.

Evaluating When to Outsource Your HR Functions

Building an internal team capable of executing all these complex actions requires a massive budget. For many small and mid-sized businesses, hiring full-time recruiters, benefits specialists, and compliance officers is simply out of the question.

If you are wondering why you should outsource with an expert, the answer lies in efficiency. By partnering directly with a Professional Employer Organization (PEO) like C2 Essentials turns your HR department into an external powerhouse.

Outsourcing means the instant activation of an entire team of seasoned, dedicated experts. They will expertly handle your payroll, navigate your benefits administration, manage your legal risk, and ensure your strict compliance.

To learn more about how this powerful partnership actually works in practice, you can easily explore the comprehensive services we offer at C2 Essentials.

According to insights from the Society for Human Resource Management (SHRM), the transition away from basic administrative personnel management toward strategic human capital management is the defining trend of the modern corporate era. If you want to scale your business without the administrative headaches, we highly encourage you to review the comprehensive services we offer at C2 Essentials.

Every career begins with a first step. The first day of an internship often comes with a mix of excitement and uncertainty. There are new people to meet, new skills to learn, and the challenge of taking knowledge from the classroom and applying it in the real world. 

For many students, the transition from the classroom to the professional world can feel uncertain. Internships provide a bridge between those two worlds, offering students the opportunity to gain experience, find their strengths, build confidence, and discover how their interests can translate into meaningful careers. 

At C2 Essentials, we have had the privilege of watching students begin that journey firsthand. This National Intern Day, we’re looking back at the journeys of two former interns, Paige Theoret and Maegann Thompson, whose experiences with C2 Essentials helped shape their professional paths. 

While their paths looked different, both gained valuable experiences that helped shape the professionals they are today. 

Although they joined C2 in different roles and at different points in their education, both walked away with new skills, valuable experiences, and a clearer vision for their futures. 

Paige Theoret: Turning a Passion for Marketing into a Career Path 

When Paige Theoret joined C2 Essentials as a Marketing Specialist Intern, she was pursuing a degree in International Business and Marketing at the College of Charleston. Like many students preparing for graduation, she was looking for an opportunity to gain hands-on experience, develop professionally, and see how the concepts she learned in the classroom translated into the workplace. 

Looking back, Paige describes her internship as "one of the most valuable learning experiences in my career." 

Throughout her time at C2 Essentials, she strengthened both her technical and professional skills. "It strengthened my communication skills, taught me the importance of taking initiative, and showed me how meaningful collaboration keeps projects moving forward," she reflected. 

One of the defining moments of Paige's internship was attending the Global SOF Conference, an experience that broadened her perspective beyond the office. 

"One of the biggest highlights was attending the Global SOF Conference, where I gained invaluable industry exposure and learned from incredible professionals," Paige shared. The opportunity allowed her to see the broader impact of the work being done and connect with professionals across the government contracting community. 

Beyond the projects and experiences, it was the people who left the greatest impression. 

"I'm especially grateful for the opportunity to work closely with Jackie, whose leadership and mentorship had a lasting impact on my professional growth," Paige said. Having the opportunity to learn alongside experienced professionals gave her the confidence to continue growing as she prepared to begin her career. 

Today, after graduating from the College of Charleston, Paige lives in Charlotte, North Carolina, where she works in recruiting. Although her career has taken her from marketing to talent acquisition, the lessons she gained during her internship continue to shape the way she approaches new opportunities. 

Reflecting on her journey, Paige says she is "thankful to have been part of such an amazing team" and "will always appreciate everything I learned during my time there." Those experiences continue to serve as a foundation as she builds the next chapter of her career. 

Maegann Thompson: Discovering the Power of Communication and Collaboration 

For Maegann Thompson, her internship at C2 Essentials was an opportunity to step into the business world while continuing her studies at Southern Methodist University (SMU), where she is majoring in Communications. 

For Maegann, her internship at C2 Essentials was an opportunity to move beyond the classroom and gain firsthand experience in how businesses operate. As an Operations Intern, she was able to work across several areas of the organization, gaining exposure to payroll, accounting, and general operations. 

“During my internship with C2 Essentials, I served as an Operations Intern and gained hands-on experience across several business functions, including payroll, accounting, and general operations,” Maegann shared. 

Through this experience, Meagann gained a better understanding of how different departments work together behind the scenes to support clients and maintain efficient business processes. Her role allowed her to see the importance of collaboration and how each team contributes to the overall success of an organization. 

Beyond the work itself, Maegann found value in the people she worked alongside. She described the culture at C2 Essentials as one of the most rewarding parts of her experience, noting that “everyone was eager to share their knowledge and help me learn,” which allowed her to grow both professionally and personally. 

As a Communications major, Maegann’s internship also helped her see how the skills she was developing in school translated into a professional environment. Whether collaborating with different departments, understanding business processes, or communicating effectively across teams, her experience reinforced the importance of strong communication in every area of an organization. 

“The skills and experiences I gained during this internship strengthened my understanding of business operations and provided a foundation that has continued to benefit me in subsequent roles and opportunities,” Maegann reflected. 

Her time at C2 Essentials gave her more than just workplace experience, it provided her with a stronger foundation for her future career and a clearer understanding of how communication, teamwork, and operations come together to drive success. 

As she continues her studies, Maegann carries forward the lessons and experiences gained at C2 Essentials, building a stronger foundation for her future career and a deeper understanding of the role communication plays in every successful organization. 

The Lasting Impact of an Internship 

While internships may only last for a semester or summer, the experiences gained can have a lasting impact. The skills learned, relationships built, and lessons discovered often become the foundation for future opportunities. 

At C2 Essentials, we believe in creating opportunities where interns can contribute, learn, and grow alongside experienced professionals. We’re proud to have been part of Paige and Meagann’s career journeys and grateful for the energy and perspective they brought to our team. 

National Intern Day is a celebration of the students and emerging professionals who are taking the first steps toward their careers. Every project completed, question asked, and challenge overcome helps build the skills needed for future success. 

Thank you, Paige and Maegann, for being part of the C2 Essentials story. We look forward to seeing all that you accomplish in the years ahead. 

The first half of 2026 has been one of the most active periods of federal policy change in recent years for government contractors. Through executive orders, acquisition policy initiatives, and agency implementation guidance, the federal government has continued reshaping the regulatory landscape for organizations that perform work under federal contracts.

While many of these initiatives will continue to evolve through Federal Acquisition Regulation (FAR) updates and agency guidance, contractors should begin evaluating how these changes may affect their compliance programs, employment practices, cybersecurity readiness, and contract performance. 

Below are several developments that deserve management’s attention. 

FAR Modernization Initiative 

Federal agencies continued implementation of the Revolutionary FAR Overhaul (RFO), a government-wide effort to modernize the Federal Acquisition Regulation. The initiative is intended to streamline procurement, reduce unnecessary regulatory burden, and make federal acquisitions more efficient.

Although many proposed revisions are still under development, contractors should expect procurement procedures, solicitation language and contract administration requirements to continue evolving throughout 2026. 

Recommended Actions 

• Monitor FAR Council announcements. 

  
  

• Review internal procurement and contract administration procedures. 

  
  

• Train contract management personnel on new acquisition requirements. 

Resources 

• Acquisition.gov – Revolutionary FAR Overhaul (RFO)

  
  

• GSA News Release – Revolutionary FAR Overhaul Initiative

  
  

• GSA Acquisition Policy Library & Resources

  
  

Defense Procurement Reform 

The Department of Defense continues emphasizing faster acquisition timelines, improved contractor performance, and increased accountability across the defense industrial base.

Procurement reforms are designed to reduce acquisition delays while strengthening supply chain resiliency and contractor performance. Contractors supporting defense programs may experience updated performance metrics, accelerated procurement schedules, and increased expectations regarding delivery and production capacity. 

Recommended Actions 

• Review project management and contract performance metrics. 

  
  

• Strengthen subcontractor oversight. 

  
  

• Prepare for evolving reporting requirements. 

Resources 

• White House – Executive Order 14402: Promoting Efficiency, Accountability, and Performance in Federal Contracting

  
  

Cybersecurity and CMMC Readiness 

Cybersecurity remains one of the highest compliance priorities for federal contractors. During the first half of 2026, the Department of Defense continued preparations for implementation of the Cybersecurity Maturity Model Certification (CMMC) program.

Although implementation timelines continue to evolve, contractors handling Federal Contract Information (FCI) or Controlled Unclassified Information (CUI) should not delay cybersecurity planning. Organizations seeking future DoD contracts should continue preparing for CMMC assessments and ensure implementation of required NIST security controls. 

Recommended Actions 

• Conduct cybersecurity gap assessments. 

  
  

• Review NIST SP 800-171 compliance. 

  
  

• Prepare documentation for future CMMC certification requirements. 

Resources 

• Department of Defense – Cybersecurity Maturity Model Certification (CMMC)

  
  

• National Institute of Standards and Technology (NIST) Special Publication 800-171

  
  

Increased Supply Chain Oversight 

Federal agencies continue placing greater emphasis on supply chain security, domestic sourcing, and vendor transparency. Contractors supporting national security and critical infrastructure projects should expect increased scrutiny of suppliers, subcontractors, and foreign sourcing risks. Supply chain resiliency has become an increasingly important factor in federal procurement decisions. 

Recommended Actions 

• Identify critical suppliers and subcontractors. 

  
  

• Evaluate foreign sourcing risks. 

  
  

• Maintain documentation supporting supply chain due diligence. 

Resources 

• SAM.gov – Federal Contract Opportunities and Entity Registration

  
  

• Acquisition.gov – Federal Acquisition Regulation Resources

   

Artificial Intelligence and Technology Procurement 

Federal agencies continue expanding investments in artificial intelligence, software modernization, and advanced technology solutions. As AI becomes more integrated into government operations, contractors should expect evolving acquisition requirements governing responsible AI use, cybersecurity, data rights, and software assurance. 

Technology contractors should closely monitor emerging procurement guidance as agencies establish consistent standards for AI-enabled products and services. 

Recommended Actions 

• Review software development and cybersecurity documentation. 

  
  

• Evaluate intellectual property and data rights provisions. 

  
  

• Monitor agency guidance regarding AI procurement requirements. 

Resources 

• Acquisition.gov – Federal Acquisition Regulation Updates

  
  

• NIST Artificial Intelligence Resource Center (AIRC)

  
  

Changes to Federal Contractor DEI and Equal Employment Requirements 

The Administration continued implementing changes to diversity, equity, and inclusion (DEI) requirements for federal contractors. Executive Order 14398 directs agencies to remove certain DEI-related contract requirements and implement new contract language addressing unlawful discrimination.

As agencies update solicitations and contract clauses, contractors should expect continued changes in compliance expectations. It is important to note that while federal contractor obligations are changing, employers remain subject to federal and applicable state anti-discrimination laws. Requirements under Section 503 of the Rehabilitation Act and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) continue unless modified by future regulatory action. 

Recommended Actions 

• Review affirmative action, EEO, and DEI-related policies. 

  
  

• Monitor new solicitations and contract modifications for updated contract clauses. 

  
  

• Continue complying with all applicable federal and state employment laws. 

Resources 

• White House – Executive Order 14398: Addressing DEI Discrimination by Federal Contractors  

  
  

• GSA Acquisition Letter MV-2026-02 – Implementation Guidance

  
  

• Acquisition.gov – FAR Implementation & FAR Overhaul Updates  

  
  

  
  

Looking Ahead 

The pace of federal contracting reform is expected to continue throughout the remainder of 2026. Many executive orders and acquisition initiatives will continue moving through agency implementation, FAR revisions, and contract modifications before becoming fully operational.

For small and medium-sized government contractors, the most effective strategy is to remain proactive. Regular reviews of employment policies, cybersecurity practices, supply chain management, and contract administration procedures can help reduce compliance risk while positioning organizations for future federal contracting opportunities. 

How C2 Essentials Can Help 

Federal contracting requirements continue to evolve, making proactive compliance more important than ever. As your HR and compliance partner, C2 Essentials monitors federal employment, payroll, and government contractor regulatory developments that impact your business.

Our HR, payroll, and compliance professionals help clients evaluate regulatory changes, update workplace policies, support multi-state compliance, assist with government contractor workforce obligations, and navigate evolving federal contractor requirements—allowing you to stay focused on delivering for your customers. 

Links to Federal Resources 

• White House – Executive Orders & Presidential Actions

  
  

• Acquisition.gov – Federal Acquisition Regulation (FAR) & FAR Overhaul Updates

  
  

• General Services Administration (GSA) – Acquisition Policy Library & Resources

  
  

• Department of Defense – Cybersecurity Maturity Model Certification (CMMC)  

  
  

• SAM.gov – Federal Contract Opportunities

  
  

• National Institute of Standards and Technology (NIST)

  
  

• U.S. Department of Labor – Office of Federal Contract Compliance Programs (OFCCP)

  
  

States continue to explore new approaches to address rising healthcare costs, and employers should be aware of emerging legislation that may create additional compliance obligations. New Jersey recently enacted an employer healthcare fee program that became effective July 1, 2026, requiring certain employers to contribute toward the state’s Medicaid program when employees and their dependents rely on Medicaid coverage.

While the requirements currently apply only to employers meeting specific criteria in New Jersey, the law represents a broader trend of states evaluating employer-funded healthcare programs as part of their efforts to address healthcare affordability.   

The law also prohibits employers from using an applicant's or employee's Medicaid status as a reason to deny employment, continued employment or advancement.   

The law applies based on the number of employees associated with an employer who are enrolled in New Jersey Medicaid, not simply the employer's total headcount. The fee schedule is: 

• 50–249 Medicaid-covered employees: $325 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

• 250–499 Medicaid-covered employees: $525 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

• 500 or more Medicaid-covered employees: $725 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

The threshold is not based on having 50 total employees like the ACA's Applicable Large Employer (ALE) rules. 

Instead, the New Jersey law looks at how many of an employer's employees are enrolled in New Jersey Medicaid.  

For example: 

• An employer with 1,000 total employees but only 20 employees enrolled in New Jersey Medicaid would not meet the threshold.  

  
  

• An employer with 300 total employees and 75 employees enrolled in New Jersey Medicaid would fall into the first fee tier.  

The New Jersey requirement is designed to address concerns that some employers may not provide affordable healthcare coverage to employees, resulting in increased reliance on public healthcare programs. The program is structured as an employer fee, assessment, or contribution rather than a traditional tax. While New Jersey is among the first states in the current wave of states considering these types of programs, other states continue to evaluate similar approaches. 

New Jersey included several safeguards in the law. Beginning July 1, 2027, employees who have worked for an employer for fewer than 90 days will be excluded from the fee, along with part-time, per diem, temporary and seasonal workers. Fees assessed for those workers before that date may qualify for a credit or refund in the following year. In addition, employees and dependents with certain developmental, intellectual, or permanent physical disabilities are exempt from the assessment.  

Emerging Compliance Trend 

Employers should view this development as an emerging state compliance trend rather than an immediate nationwide requirement. For government contractors operating across multiple states, maintaining accurate workforce data and monitoring state-specific employment requirements will be increasingly important as additional states evaluate similar employer healthcare assessments. 

What Employers Should Do Now 

At this time, employers should not expect to independently enroll in a program or submit payments unless notified by the State of New Jersey. The legislation provides that the employer fee will be assessed by the state, based on employees and dependents receiving Medicaid coverage, and employers will be notified of any liability.  Employers with New Jersey employees should consider taking the following steps: 

• Review employee work locations: Confirm which employees are assigned to or working in New Jersey, particularly for employers with multi-state operations.  

  
  

• Maintain accurate employee records: Ensure payroll, benefits eligibility, and employee census information is accurate and up to date.  

  
  

• Monitor state communications: Watch for guidance from New Jersey agencies regarding employer notices, assessment procedures, payment deadlines, and any required appeals process.  

  
  

• Coordinate payroll and benefits administration: Employers should be prepared to address any State assessments that may require coordination between HR, payroll, finance, and benefits teams.  

  
  

• Avoid employment decisions based on Medicaid status: Employers should not ask applicants or employees whether they receive Medicaid benefits or make employment decisions based on an individual’s healthcare coverage status.  

The bill provides that: 

• The fee is assessed by the New Jersey Division of Revenue and Enterprise Services, not self-reported by employers.  

  
  

• The assessment is based on the number of employees and dependents receiving New Jersey Medicaid coverage as of December 31 preceding the assessment year.  

  
  

• Employers are then notified of their liability by the State.  

  
  

• Employers, if they receive an assessment, will be provided an opportunity to review or challenge the assessment if the employer believes the assessment is inaccurate. 

  
  

• The law also protects employee privacy by providing that individually identifiable information about an employee or dependent is exempt from public disclosure.  

Although the statute doesn't describe the mechanics, the State almost certainly will need to match Medicaid enrollment records with employer wage information, quarterly unemployment insurance (UI) wage reports and other payroll reporting.  

Growing Interest Among Other States 

New Jersey is not alone in exploring employer healthcare funding approaches. Similar proposals have been considered in several other states, including: 

• Colorado and Oregon – Both states considered legislation that would have required certain employers to contribute toward healthcare costs, although those proposals did not become law. 

  
  

• Washington – Lawmakers introduced a similar proposal focused on employer contributions toward healthcare affordability. 

  
  

• Connecticut – The Governor has proposed a future employer healthcare fee program that could take effect in upcoming years if approved. 

As States continue evaluating healthcare funding options, additional employer requirements may develop.  

Separate From ACA Employer Requirements 

New Jersey's employer healthcare fee is separate from the federal Affordable Care Act (ACA) and does not replace or modify existing employer responsibilities.

Employers that qualify as Applicable Large Employers (ALEs)—generally those with 50 or more full-time and full-time equivalent employees across all business locations—must continue to comply with the ACA's employer shared responsibility provisions, which generally require offering affordable, minimum-value health coverage to substantially all full-time employees and their dependent children or potentially facing an IRS employer shared responsibility payment. 

A State employer healthcare fee does not replace or modify an employer’s federal ACA responsibilities. Employers should continue to evaluate both Federal and State requirements when administering healthcare benefits. 

Your Compliance Partner 

C2 Essentials is committed to helping clients navigate an increasingly complex regulatory environment. As your PEO and HR consulting partner, we monitor legislative developments, evaluate their impact on employers, and align our HR, payroll, and compliance processes with new federal and state requirements as they become effective. Our goal is to help your organization remain compliant so you can stay focused on running your business. 

For employers performing work under covered federal service contracts, wage and hour compliance extends beyond the Fair Labor Standards Act (FLSA). The Service Contract Labor Standards (SCLS)—formerly known as the Service Contract Act (SCA)—requires contractors and subcontractors performing covered federal service contracts generally exceeding $2,500 to pay covered service employees at least the applicable prevailing wage rates and fringe benefits established by the U.S. Department of Labor. 

Common SCLS compliance mistakes include: 

• Misclassifying employees into the wrong labor category.  

  
  

• Paying less than the applicable wage determination.  

  
  

• Failing to provide the required health and welfare fringe benefit.  

  
  

• Using outdated wage determinations after a contract renewal or option year.  

  
  

• Failing to post the applicable wage determination at the worksite.  

  
  

• Maintaining inadequate payroll and labor records to demonstrate compliance.  

Unlike many private-sector wage and hour issues, SCLS violations can affect both your workforce and your federal contract. Noncompliance may result in back wage liability, withheld contract payments, contract disputes, or even debarment from future federal contracting opportunities in serious cases. 

Your First SCLS Contract 

For new government contractors subject to SCLS, the biggest compliance mistakes usually happen because they treat SCLS like a normal benefits or payroll issue. It is really a contract compliance obligation that affects HR, payroll, accounting, contracts, and operations. Highlights include: 

Confirm Whether the Contract Is Covered by SCLS - Not every federal contract requires SCLS compliance.  

Before applying SCLS requirements, contractors should confirm: 

• The contract is a covered service contract.  

  
  

• The contract value exceeds the applicable threshold (generally $2,500).  

  
  

• The contract incorporates the required SCLS clauses and Wage Determination.  

Obtain and Review the Correct Wage Determination - The Wage Determination is the foundation of SCLS compliance. Do not use an old Wage Determination from a previous contract or assume the same rates apply to all employees.  Always review the Wage Determination at contract award/renewal/modification for:  

• Geographic location covered by the contract.  

  
  

• Labor classifications.  

  
  

• Minimum hourly wages.  

  
  

• Health and welfare fringe benefit requirements.  

  
  

• Vacation and holiday requirements.  

  
  

• Effective dates.  

Properly Classify Employees - Choosing the lowest-cost labor category without confirming duties align with the classification can lead to compliance issues. Employees must be matched to the correct labor category based on their actual duties—not simply their job title. For example an employee titled "Administrative Assistant" may actually perform duties that align with a different Wage Determination classification. 

Track SCLS Hours Separately - SCLS obligations are generally tied to hours worked on covered contracts and contractors should not apply one company-wide payroll approach without distinguishing SCLS-covered employees.. Contractors should be able to identify: 

• Which employees worked on covered contracts.  

  
  

• Hours worked under each contract.  

  
  

• Applicable Wage Determination.  

  
  

• Benefits provided for those hours.  

Understand Health & Welfare Fringe Benefit Administration - The H&W fringe benefit is one of the most misunderstood areas. Contractors should assume employee enrollment in a company benefit plan automatically satisfies the H&W obligation. Contractors should: 

• Reconcile required H&W amounts against qualifying benefits provided.  

  
  

• Maintain documentation supporting benefit costs.  

  
  

• Address any shortfalls through additional benefits or cash equivalent payments.  

Do Not Overlook Vacation Benefits - Unlike typical private-sector PTO policies, SCLS vacation benefits may be a contractual obligation. Issues arise if contractors apply the standard company PTO policy to SCLS-covered employees without reviewing the Wage Determination:  

• Review the Wage Determination vacation requirements.  

  
  

• Track employee eligibility.  

  
  

• Recognize predecessor contractor service when applicable.  

  
  

• Maintain separate records for SCLS vacation accrual.  

Maintain Required Payroll Records - SCLS-covered contractors must maintain accurate records, including: 

• Employee name and address.  

  
  

• Job classification and wage rates paid.  

  
  

• Fringe benefits provided.  

  
  

• Hours worked and payroll deductions 

Train Supervisors and Program Managers - Supervisors should understand: 

• Employees cannot work outside recorded hours.  

  
  

• Employees cannot perform higher-level duties without review.  

  
  

• Time must be accurately reported.  

  
  

• Changes in assignments may impact classifications.  

Review Contract Changes - Continuing old payroll practices after a contract modification changes requirements as contract modification can change SCLS obligations. Contractors should review: 

• Option year renewals.  

  
  

• New Wage Determinations.  

  
  

• Additional labor categories.  

  
  

• Changes in work location.  

  
  

• Increased contract scope.  

Compliance Spotlight 

A U.S. Government Accountability Office (GAO) review of DOL enforcement found that between FY 2014-2019: 

• The DOL completed more than 5,000 Service Contract Act (now SCLS) investigations.  

  
  

• Approximately 68% of investigations resulted in violations.  

  
  

• Employers agreed to pay approximately $224 million in back wages.  

  
  

• 60 employers were debarred from receiving new federal contracts for three years.  

Service Contract Labor Standards (SCLS) violations can have consequences beyond back wages. In one case, a federal food service contractor was ordered to pay more than $1.4 million in back wages to employees and was debarred from bidding on federal contracts for three years after the Department of Labor found it failed to pay the required prevailing wages and fringe benefits.

More recently, the Department's Administrative Review Board affirmed another three-year debarment where a contractor failed to timely implement a revised wage determination after a contract modification—even though the contractor ultimately paid the affected employees. These cases underscore the importance of reviewing wage determinations whenever a contract is awarded, renewed, or modified.  

Health and Welfare Fringe Benefits 

The health and welfare fringe benefit is one of the most commonly misunderstood SCLS requirements. For example, if an employee works 2,000 hours on an SCLS-covered contract during the year, a $5.36/hour fringe benefit requirement equates to $10,720 annually in required fringe benefits. Failing to account for this cost when pricing a government contract can significantly reduce—or eliminate—the contract's profitability. 

Before submitting a proposal—or whenever a contract is renewed or modified—verify the applicable wage determination, confirm employee labor classifications, review fringe benefit calculations, and ensure payroll is aligned with current contract requirements. For additional guidance on SCLS compliance, the U.S. Department of Labor offers several employer resources: 

• Service Contract Labor Standards Guidance 

  
  

• Service Contract Labor Standards Overview 

  
  

• Employment Law Guide – Prevailing Wages in Service Contracts 

  
  

• FAR Subpart 22.10 – Service Contract Labor Standards 

Example: Service Contract Labor Standards (SCLS) Wage Determination 

A federal contractor is awarded a janitorial services contract  

for a federal office building in Fairfax County, Virginia.  

The solicitation includes a U.S. Department of Labor Wage Determination  

applicable to that geographic area. 

*Illustrative example only. Wage rates and fringe benefit requirements vary by Wage Determination, location, and contract. Employers should always refer to the Wage Determination incorporated into their federal contract. 

If a contractor hires a Janitor to perform work under this contract, the employee generally must receive at least: 

• $22.15 per hour in wages, and  

  
  

• An additional $5.36 per hour in fringe benefits, which may be provided through bona fide benefits (such as health insurance or retirement contributions) or, if permitted, paid as cash in lieu of benefits.  

  
  

If the employer pays only $20.00 per hour and does not provide the required fringe benefit, the contractor may owe back wages and fringe benefits for every hour worked under the contract. 

The Department of Labor's Wage Determinations are available through the official SAM.gov Wage Determinations database. Employers can search by contract type, state, county, or locality to identify the prevailing wages and fringe benefits applicable to a federal contract. 

• SAM.gov Wage Determinations  

  
  

• DOL Service Contract Labor Standards Resources  

  
  

Vacation Benefits 

Vacation benefits are one of the biggest differences between SCLS-covered employees and non-SCLS employees, and they are also one of the most common compliance issues for government contractors. Under the Service Contract Labor Standards (SCLS), vacation is not simply an employer policy. If the applicable Wage Determination includes a vacation benefit (most do), the contractor is legally required to provide that vacation benefit to covered service employees who meet the eligibility requirements. This is separate from—and in addition to—the health and welfare fringe benefit. }

Key Differences 

Suppose a Wage Determination provides: 

• 2 weeks of paid vacation after one year of service  

  
  

• 3 weeks after five years  

  
  

• 4 weeks after fifteen years  

If a contractor's standard PTO policy provides only one week of vacation after one year, that policy would not satisfy the SCLS requirement for covered employees. The contractor would need to provide at least the vacation benefit required by the Wage Determination to employees performing work on the covered contract. 

Successor Contractor Rule 

Another unique SCLS requirement is that an employee's length of service may carry over when a federal contract changes contractors. For example: 

• Contractor A loses the contract.  

  
  

• Contractor B wins the recompete and hires many of the incumbent employees.  

  
  

• An employee has 8 years of continuous service on that contract.  

  
  

For vacation purposes, Contractor B generally must recognize that prior service rather than treating the employee as a new hire. This is a significant departure from most private-sector PTO policies, where vacation is typically based only on service with the current employer. Because vacation under SCLS is tied to the applicable Wage Determination and, in many cases, an employee's continuous service on the contract, many government contractors: 

• Maintain separate PTO/vacation policies for SCLS-covered employees.  

  
  

• Track SCLS service dates separately from company hire dates.  

  
  

• Configure payroll and HRIS systems to apply different accrual rules for covered employees.  

  
  

• Review vacation entitlements whenever a contract is awarded, renewed, or transitions to a successor.  

  
  

When onboarding a new SCLS contract, identify which employees are covered by the Wage Determination and review both the required health and welfare fringe benefit and the required vacation schedule. If your organization hires incumbent employees from the previous contractor, obtain documentation of their qualifying service so vacation benefits are administered correctly from day one. 

Health and Welfare Fringe Benefit Reconciliation 

One of the most common SCLS compliance challenges involves properly administering and tracking the required health and welfare (H&W) fringe benefit. Contractors must ensure that covered employees receive at least the fringe benefit amount required by the applicable Wage Determination for every eligible hour worked on the contract.  

Because H&W benefits are often provided through a combination of employer-paid benefits and cash payments, contractors should periodically reconcile their fringe benefit obligations to confirm compliance. A proper reconciliation helps identify whether the value of qualifying benefits provided to employees meets or exceeds the required SCLS fringe benefit rate. A periodic H&W reconciliation should include: 

• Reviewing the applicable Wage Determination to confirm the required H&W rate. 

  
  

• Calculating the total H&W obligation based on covered employee hours worked. 

  
  

• Comparing required fringe obligations against qualifying employer-paid benefits, such as health insurance premiums, retirement contributions, or other allowable benefits. 

  
  

• Identifying any shortfalls that may require additional payments to employees. 

  
  

• Maintaining documentation supporting the benefit calculations and payments. 

For example, if an employee works 1,800 SCLS-covered hours during a contract year and the applicable Wage Determination requires a $5.36 per hour H&W fringe benefit, the contractor has a fringe benefit obligation of $9,648 for that employee. If the contractor only provided $8,500 in qualifying benefits, the remaining balance may need to be paid to the employee such as an employer retirement contribution, or a properly documented cash equivalent payment.  

Contractors should establish a regular review process—such as monthly, quarterly, or at contract milestones—to reconcile SCLS H&W obligations. Regular monitoring helps prevent small discrepancies from accumulating into significant back wage liabilities during a Department of Labor investigation. 

How C2 Essentials Can Help 

Maintaining compliance with the Service Contract Labor Standards (SCLS) requires more than processing payroll correctly. Contractors must ensure employees are properly classified under the applicable Wage Determination, receive the required prevailing wages and fringe benefits, administer vacation benefits correctly, and maintain accurate payroll and contract records. Regular reviews of contract modifications, wage determinations, and payroll practices can help identify compliance issues before they become costly liabilities. 

C2 Essentials partners with government contractors to navigate the complexities of SCLS compliance by assisting with wage determination reviews, employee labor classifications, fringe benefit administration, payroll compliance, and HR policy guidance. If your organization has questions regarding SCLS requirements or needs assistance evaluating its compliance practices, contact your HR Business Partner or Payroll Team before a minor oversight results in back wages, contract disputes, or a Department of Labor investigation. 

The U.S. Department of Defense (DoD) has announced that it is suspending implementation of Cybersecurity Maturity Model Certification (CMMC) Phase 2 while conducting a 60-day review of the program. Although this announcement has created uncertainty for many federal contractors, it should not be interpreted as a signal that cybersecurity requirements are going away. Instead, the DoD is evaluating how to streamline and improve the CMMC program while continuing to protect sensitive government information. 

For small and medium-sized government contractors, now is the time to remain focused on cybersecurity readiness rather than delaying compliance efforts. 

What Is Changing? 

Phase 2 of the CMMC program was expected to expand the number of contractors required to obtain third-party cybersecurity certifications before being awarded certain DoD contracts. Under the announced pause, the DoD will review the certification framework, implementation process, and associated costs to determine whether reforms are necessary. 

The review is expected to focus on reducing unnecessary administrative burdens while maintaining appropriate safeguards for Federal Contract Information (FCI) and Controlled Unclassified Information (CUI). 

What This Means for Contractors 

While the certification timeline may shift, the underlying cybersecurity obligations have not been suspended. Contractors should remember that: 

• Existing cybersecurity requirements under DFARS clauses remain in effect.  

  
  

• Contractors handling Controlled Unclassified Information (CUI) are still expected to implement the security controls outlined in NIST SP 800-171.  

  
  

• Future DoD solicitations may continue to include cybersecurity requirements even if formal CMMC certification dates change.  

Waiting until the review concludes could leave contractors scrambling if implementation resumes with little notice. 

Recommended Actions 

Government contractors should use this period to strengthen their cybersecurity posture by: 

• Reviewing compliance with NIST SP 800-171 security controls.  

  
  

• Identifying and remediating gaps in cybersecurity policies and technical safeguards.  

  
  

• Updating the organization's System Security Plan (SSP) and Plan of Action & Milestones (POA&M).  

  
  

• Maintaining documentation that demonstrates ongoing cybersecurity efforts.  

  
  

• Monitoring DoD announcements regarding the outcome of the reform review.  

Organizations that continue preparing now will likely be in a much stronger position regardless of how the final CMMC framework evolves. 

HR's Role in Cybersecurity Compliance 

Although CMMC is often viewed as an IT initiative, Human Resources plays an important supporting role. HR departments should ensure that: 

• Cybersecurity awareness training is provided to employees.  

  
  

• New hire onboarding includes required security policies and acceptable use acknowledgments.  

  
  

• Employee terminations include timely removal of system access.  

  
  

• Personnel responsible for handling sensitive information understand their cybersecurity responsibilities.  

  
  

• Security-related policies remain current and are consistently enforced.  

Strong administrative controls complement technical safeguards and help demonstrate an organization's commitment to protecting sensitive information. 

Looking Ahead 

The DoD's 60-day reform review introduces some short-term uncertainty, but the long-term direction is clear: cybersecurity will remain a critical requirement for companies doing business with the federal government. Contractors that continue investing in compliance, documentation, and employee awareness will be better positioned to compete for future contracts while reducing operational and security risks. 

How C2 Essentials Can Help 

Navigating federal contractor compliance requires more than understanding HR regulations. C2 Essentials partners with government contractors to support policy development, employee training, onboarding and offboarding procedures, documentation practices, and other administrative controls that complement your organization's cybersecurity compliance efforts. While technical cybersecurity implementation should be managed by qualified IT and security professionals, C2 Essentials helps ensure your workforce practices support your overall compliance strategy and readiness for future federal requirements. 

For many employers, wage and hour compliance seems straightforward—pay employees accurately and on time. However, the U.S. Department of Labor's (DOL) Wage and Hour Division routinely investigates employers for violations of the Fair Labor Standards Act (FLSA), and many findings result from common administrative mistakes rather than intentional misconduct. 

Enforcement Spotlight 

The U.S. Department of Labor continues to aggressively enforce the Fair Labor Standards Act. In Fiscal Year 2025 alone, the Wage and Hour Division recovered more than $259 million in back wages for nearly 177,000 employees nationwide—the highest annual recovery since 2019. Common violations included unpaid overtime, employee misclassification, and failure to compensate employees for all hours worked.  

While many investigations involve large employers, small and mid-sized businesses are frequently investigated after an employee complaint. The DOL does not limit investigations to Fortune 500 companies—any employer covered by the Fair Labor Standards Act may be subject to an audit. 

Government contractors may face additional wage compliance risks. In addition to the Fair Labor Standards Act, many federal contractors must comply with prevailing wage requirements under laws such as the Davis-Bacon Act or the McNamara-O'Hara Service Contract Act (SCLS). Timekeeping errors, employee misclassification, or improper overtime calculations can create contractual issues in addition to DOL wage and hour liability.  

For government contractors, where contract compliance and accurate labor reporting are already under increased scrutiny, maintaining sound wage and hour practices is essential. 

1. Misclassifying Employees as Exempt from Overtime 

One of the most common compliance issues involves incorrectly classifying employees as exempt from overtime. Paying an employee a salary alone does not make them exempt from the FLSA's overtime requirements. Most exemptions require employees to satisfy both a salary basis test and a duties test. Positions that have evolved over time—or employees whose responsibilities have changed—should be reviewed periodically to ensure they continue to qualify for an exemption. 

Tip: Conduct periodic exemption reviews, especially following promotions, reorganizations, or significant job duty changes. 

2. Failing to Pay for All Hours Worked 

The FLSA generally requires employers to pay nonexempt employees for all hours they are "suffered or permitted" to work. This may include work performed before or after scheduled shifts, responding to emails after hours, completing mandatory training, or performing work during meal periods. Remote and hybrid work environments have increased the likelihood of employees performing work outside their scheduled hours. 

Tip: Establish clear policies for recording all hours worked and train supervisors not to allow off-the-clock work. 

3. Incorrectly Calculating Overtime 

Overtime calculations can become more complicated when employees receive nondiscretionary bonuses, shift differentials, commissions, or multiple hourly rates. These forms of compensation often must be included when determining an employee's regular rate of pay for overtime purposes. Errors frequently occur when payroll systems or manual calculations fail to account for these additional earnings. 

Tip: Periodically review payroll calculations and ensure overtime is computed using the employee's correct regular rate of pay. 

4. Poor Timekeeping Practices 

Accurate time records remain one of an employer's strongest defenses during a wage and hour investigation. Missing, incomplete, or altered time records can make it difficult to demonstrate compliance. Employers should ensure employees accurately record all hours worked and that supervisors understand they may not modify time records without a legitimate business reason and appropriate documentation. 

Tip: Conduct periodic audits of timekeeping records and promptly investigate missing punches, recurring edits, or unusual patterns. 

5. Assuming Federal Law Is the Only Requirement 

Many states have wage and hour laws that provide greater protections than federal law. Depending on where employees work, employers may need to comply with state-specific requirements related to overtime, meal and rest breaks, final pay, minimum wage, or employee recordkeeping. For employers with remote employees or operations in multiple states, compliance should be evaluated under both federal and applicable state law. 

Tip: Review wage and hour policies whenever expanding into a new state or hiring remote employees. 

Helpful DOL Resources 

The U.S. Department of Labor provides several excellent compliance resources for employers: 

• Fair Labor Standards Act (FLSA) Handy Reference Guide 

  
  

• Overtime Pay Requirements Fact Sheet #23 

  
  

• Wage and Hour Division Overtime Resources 

  
  

• Overtime Fact Sheets Library 

How C2 Essentials Can Help 

Maintaining wage and hour compliance requires more than accurate payroll processing. Proper employee classification, timekeeping practices, supervisor training, and periodic HR audits all play an important role in reducing compliance risk.

C2 Essentials works with employers to review exempt classifications, evaluate wage and hour practices, assist with policy development, and help clients navigate federal and state employment law requirements. If your organization has questions regarding overtime eligibility, employee classification, or wage and hour compliance, contact your HR Team before a small issue becomes a costly investigation.