Federal contractors, including janitors, security guards, child-care workers who provide services to the government, will soon be paid a $15-an-hour minimum wage, the Labor Department said Monday.

Starting Jan. 30, all new contracts or contract extensions will require the higher minimum wage, which will be indexed to inflation, the department said in announcing it had finalized a rule President Biden called for earlier this year. The rule would raise the minimum wage for contractors from $10.95 an hour. Most federal contracts...

Federal contractors, including janitors, security guards, child-care workers who provide services to the government, will soon be paid a $15-an-hour minimum wage, the Labor Department said Monday.

Starting Jan. 30, all new contracts or contract extensions will require the higher minimum wage, which will be indexed to inflation, the department said in announcing it had finalized a rule President Biden called for earlier this year. The rule would raise the minimum wage for contractors from $10.95 an hour. Most federal contracts last three to five years, according to the department.

Labor Department officials say about 327,000 contractors could see higher wages under the rule. The government employs a total of around five million contractors, according to Paul Light, a professor at New York University.

“Federal contract workers are essential workers and are critical to the federal government,” said Labor Secretary Marty Walsh. “It’s a step in the right direction and it also ensures the federal government leads by example.”

The $15 hourly wage will also apply to outfitters and guides on federal land and to workers with disabilities, some of whom can currently be paid less than the minimum wage, the department said.

The rule also eliminates the tipped minimum wage for federal contractors by 2024. The tipped minimum wage allows employers, such as those working in food service, to be paid less than the federal minimum wage if workers make up the difference through tips.

The rule implements an executive order signed by President Biden in April.

Business groups and Republican lawmakers have criticized the administration’s efforts to raise the minimum wage for federal contractors.

In July, when the Labor Department first proposed the rule, Rep. Virginia Foxx

of North Carolina, the top Republican on the House Education and Labor Committee, said the rule would make it difficult for small businesses to compete for contracts.

“President Biden is paving the way for increased automation, a reduction in workers’ hours and additional small business closures,” she said at the time.

The rule announced Monday is one of several regulatory changes the Biden administration has proposed to raise worker pay. Another proposal would limit the tipped minimum wage for all workers, not just those under federal contracts. Tipped workers can earn as little as $2.13 an hour if they make enough in tips to get to the federal minimum wage of $7.25 an hour.

Earlier Video

President Biden has identified raising the minimum wage as a key goal of his administration, but economists and lawmakers disagree on the potential impact. WSJ asked two economists and a minimum-wage worker what the costs and benefits of a $15 minimum wage might be. Photo: Bill Clark/Congressional Quarterly/Zuma Press (Video from 3/2/21) The Wall Street Journal Interactive Edition

Write to David Harrison at david.harrison@wsj.com