The Energy Department announced it is putting a halt to wage increases by freezing salaries and bonus payments for its site facility and management contractor employees. The move comes soon after President Obama proposed a two-year pay freeze for civilian federal employees.

“As our nation continues to recover from these challenging economic times, households and small businesses across the country are making sacrifices,” said Chu. “In this spirit, we are asking our contractor employees, who are doing important research, operations and environmental cleanup work, to join the federal workforce in playing a part.”

The freeze will be implemented on January 1, 2011 and will affect about 75,000 contract workers at 28 sites. The Department of Energy is one of the government’s largest employers of contractors, with an outsourced workforce bigger than its own staff.

For departments that previously approved contractor salary increases for next year, the new rule will take effect at the beginning of the next pay increase cycle and last for the following two years. Obama’s proposal only cancels cost-of-living adjustments for two years, yet regularly scheduled increases for General Schedule employees—who make up two-thirds of the civilian work force—will continue.

Unlike other federal agencies, the Department of Energy has a unique arrangement with contractors that allows them to manage wages.

“In these contracts, essentially DOE is the employer, so they closely manage and approve the costs that are incurred by these [management and operating] contractors to manage the personnel, facilities and the operations of these facilities,” said Alan Chvotkin, executive vice president and counsel at the Professional Services Council, in a Washington Technology article.

Yet other agencies like the Defense or Homeland Security departments, don’t have the ability to freeze contractor employees’ pay he said. Overall, the “government has a very limited ability to direct the contractor formally on how to manage its workforce,” he said.

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Chandler Harris is a freelance business and technology writer located in Silicon Valley. He has written for numerous publications including Entrepreneur, InformationWeek, San Jose Magazine, Government Technology, Public CIO,, U.S. Banker, Digital Communities Magazine, Converge Magazine, Surfer's Journal, Adventure Sports Magazine,, and the San Jose Business Journal. Chandler is also engaged in helping companies further their content marketing needs through content strategy, optimization and creation, as well as blogging and social media platforms. When he's not writing, Chandler enjoys his beach haunt of Santa Cruz where he rides roller coasters with his son, surfs and bikes across mountain ranges.