Tax credits, retirement, and wage and hour developments are among the top regulatory issues small and medium-sized business (SMB) owners should be monitoring next year, according to the latest annual list from human capital management software provider Paychex.
“With a new administration entering the White House and many new faces in other federal leadership positions starting in January, as well as a breakneck pace of technological innovation across the globe, 2025 is bound to be an impactful year for most businesses,” Kelee Delaney, director of compliance risk at Paychex, said in a statement. “Keeping up and complying with changing laws is perennially a top challenge for small businesses. Our annual list is designed to help them focus on what is likely to have the most significant impact on their business, their employees, and their bottom line.”
A team of in-house compliance and government relations experts at Paychex continually monitors laws and regulations at federal, state, and local levels. The team has identified the following topics that employers should watch closely in 2025, according to Paychex:
Taxes and tax credits
Many tax provisions contained in the 2017 Tax Cuts and Jobs Act (TCJA) are scheduled to sunset at the end of 2025, setting off a larger debate on the tax code. Provisions that will sunset at the end of 2025 without congressional action will include income tax withholding changes and the pass-through qualified income tax deduction. Also likely to be part of the larger discussion on tax policy are research and development expensing, bonus depreciation, the corporate tax rate, and more.
Retirement
Effective Jan. 1, 2025, with limited exceptions, a provision under SECURE Act 2.0 will require employers to auto-enroll employees in any new 401(k) or 403(b) workplace retirement plan established after Dec. 29, 2022. On the state level, state-sponsored retirement programs continue to be on the rise, with three expected to activate in 2025—Minnesota, Missouri, Nevada.
Paid Leave
At the state and local levels across the U.S., there are more than 40 jurisdictions with paid sick and safe leave (PSSL) laws, and several more jurisdictions making PSSL available in the next year, including Alaska, Missouri, and Nebraska, as a result of recently approved ballot measures. Delaware, Maine, Maryland, and Minnesota will begin offering paid family leave benefits in 2026, joining nine other states plus the District of Columbia who already offer these growing benefits. Businesses should start preparing for these new requirements in 2025.
Wage and hour
A U.S. District Court in Texas vacated the U.S. Department of Labor’s 2024 final overtime rule, reverting the minimum salary threshold of the standard executive, administrative, and professional (EAP) and highly compensated employee (HCE) exemptions back to the threshold amounts from the 2019 overtime rule. In addition, a total of nearly 70 minimum wage increases at the state, local, and even industry-specific level are scheduled to take effect Jan. 1, 2025. Businesses should also keep a close eye on state pay transparency laws going into effect in the new year.
Artificial intelligence and privacy
With AI adoption and innovation constantly evolving, businesses should pay close attention to changes in regulation and legislation to help manage the opportunities and risks that can come with using AI, Paychex says. Businesses should anticipate a ramp-up of state-level AI regulations in 2025 to address hiring bias, threats to copyright protections, and breaches of data privacy. In addition to those already in place, eight new state-level laws are coming into effect between January and October 2025 in Iowa, Delaware, Nebraska, New Hampshire, New Jersey, Tennessee, Minnesota, and Maryland.
For more information and helpful resources on each of the top regulatory issues of 2025, visit Top Regulatory Issues of 2025: What Business Should Know and Prepare For.
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