The One Big Beautiful Bill Impact is Reshaping HR: What HR Professionals Need to Know

2025 has brought a wave of regulatory changes that are reshaping how HR teams manage payroll, benefits, and compliance. From federal legislation like the One Big Beautiful Bill Act (OBBBA) to evolving state-level mandates, the pressure to stay compliant is real.

Namely understands the pressures HR and business leaders face and is committed to helping you navigate a workforce where change is constant. In this guide, we’ll unpack:

• Federal Changes: What the One Big Beautiful Bill Act Impact Means for HR
• State-Level Trends: What HR Teams Need to Watch
• How Technology Can Make Compliance Easier
• What HR Teams Should Do to Get Ahead of OBBBA’s Impact

Federal Changes: What the One Big Beautiful Bill Act Impact Means for HR

The OBBBA is extensive—spanning 1,000+ pages and covering everything from immigration enforcement to tax reform and healthcare policy. For HR professionals and business owners, the bill introduces a series of changes that will directly affect payroll operations, benefits administration, and workforce compliance.

Here are the key provisions you should be preparing for:

Tax-Free Tips and Overtime

Under the OBBBA, employees earning less than $150,000 annually (or $300,000 for couples) can now deduct up to $25,000 in tips and $12,500 in overtime premium pay from their federal taxable income. This provision is designed to offer tax relief to workers in tipped and hourly roles, particularly in industries like hospitality, retail, and healthcare. Time & attendance and payroll are front and center with this tax-free tip and overtime adjustment.

Impact on HR and Employers:
HR teams will need to ensure that payroll systems can accurately track and report these earnings separately. Employers must also prepare for new W-2 formatting requirements, which will require tips and overtime to be listed as distinct line items. For small businesses, this means additional administrative oversight and potential updates to payroll software and employee communication protocols.

HSA Expansion and Telehealth

Beginning in 2026, Health Savings Account (HSA) funds can be used for direct primary care services (up to $150/month for individuals and $300/month for families) and for ACA bronze or catastrophic health plans. Additionally, pre-deductible telehealth coverage is now permanently allowed for HSA-compatible plans.

Impact on HR and Employers:
HR teams will need to work closely with benefits providers to update plan documents and ensure employees understand how to take advantage of these expanded options. While this presents an opportunity to offer more flexible, cost-effective healthcare solutions, it also requires clear communication and thoughtful plan design to avoid confusion or noncompliance.

Dependent Care FSA Limit Increase

The annual contribution limit for Dependent Care Flexible Spending Accounts (FSA) will rise from $5,000 to $7,500 starting in 2026. This change is intended to help working families better manage the rising costs of childcare and eldercare.

Impact on HR and Employers:
HR teams must update benefits systems to reflect the new limits and ensure compliance with nondiscrimination testing rules. This change can enhance recruitment and retention by offering more meaningful support to working parents—but it also requires careful planning to ensure equitable access and understanding across the workforce.

ICE Enforcement and I-9 Compliance

The OBBBA significantly increases funding for immigration enforcement, including plans to hire over 10,000 new agents and expand workplace audits. Employers should expect heightened scrutiny of I-9 documentation and employment eligibility verification.

Impact on HR and Employers:
HR teams must ensure that I-9 forms are completed accurately and stored securely, with processes in place for regular audits and updates. Companies that lack dedicated compliance staff are especially vulnerable to fines and penalties if documentation is incomplete or outdated. This makes proactive compliance and training essential.

State-Level Trends: What HR Teams Need to Watch

While the One Big Beautiful Bill Act (OBBBA) is a federal law, its ripple effects are being felt across states—many of which are introducing or updating their own employment regulations in response to broader national shifts.

For HR teams and business owners, these state-level changes add another layer of complexity to workforce management, especially for organizations operating in multiple jurisdictions.

Here are the key trends to monitor:

Earned Sick Leave Expansion

At least nine jurisdictions—including Philadelphia, Chicago, and Alaska—have introduced or updated earned sick leave laws. These changes vary widely in terms of accrual rates, eligibility, and usage rules.

Impact on HR and Employers:
HR teams must stay on top of local ordinances and ensure that leave policies are compliant in every location where employees work. This includes updating employee handbooks, adjusting accrual tracking systems, and training managers on new requirements.

For businesses with lean HR teams, the administrative burden of managing multiple leave policies can be significant—and noncompliance can lead to costly penalties.

Pay Transparency Laws

States such as Illinois, Minnesota, New Jersey, Vermont, and Massachusetts have enacted or proposed laws requiring employers to include salary ranges in job postings. Some laws also mandate internal pay audits and employee access to compensation data.

Impact on HR and Employers:
These laws are reshaping how organizations approach compensation strategy and talent acquisition. HR teams must ensure that job descriptions are updated and that salary bands are clearly defined and consistently applied.

For many businesses, this may require a cultural shift toward greater transparency and a review of pay equity practices—both of which can be resource-intensive but are increasingly expected by job seekers.

Minimum Wage Updates

More than 80 jurisdictions are expected to update their minimum wage rates by the end of the year. These changes may be tied to inflation, cost-of-living adjustments, or new legislative mandates.

Impact on HR and Employers:
HR and payroll teams must monitor wage changes closely and adjust pay rates accordingly to remain compliant. For businesses operating in multiple states or cities, this can create budgeting challenges and require frequent payroll updates. Failing to comply with minimum wage laws can result in back pay obligations, fines, and reputational damage.

E-Verify+ and Employment Verification

The federal government is piloting E-Verify+, a new system that integrates Form I-9 into a digital verification platform. While not yet mandatory, the system is expected to become a standard soon.

Impact on HR and Employers:
HR teams should begin preparing for a shift toward digital employment verification. This includes reviewing current I-9 processes, ensuring documentation is complete and accessible, and staying informed about rollout timelines.

Transitioning to a new system may require training and investment in updated tools, but early adoption can reduce risk and streamline onboarding.

How Technology Makes Compliance Easier

As outlined above, the OBBBA requires significant attention and potential adjustment to your current processes associated with payroll, time tracking, benefits, and compliance. The good news is there are solutions that can help—from HR and payroll systems to all-in-one Human Capital Management (HCM) platforms like Namely, technology can make navigating regulatory changes much simpler.

Here’s how:

• Automation: Reduce manual work with automated payroll, benefits, and compliance workflows.
• Configurability: Tailor policies and settings to meet federal, state, and local requirements.
• Visibility: Access real-time reporting and dashboards to monitor compliance status.
• Employee Experience: Empower employees with self-service tools and clear communication.
• Scalability: Adapt quickly as your workforce grows or regulations change.

What HR Teams Should Do to Get Ahead of OBBBA’s Impact

To stay ahead of the One Big Beautiful Bill Act and other regulatory laws, HR teams should take a proactive approach.

Here’s how to prepare:

1. Review Payroll and Benefits Configurations for 2026 Readiness

• Audit your payroll setup to ensure it can track and report tips and overtime separately, as required by new W-2 formatting rules.
• Update contribution limits for HSAs and Dependent Care FSAs in your benefits system.
• Ensure your payroll engine is configured to support new tax deductions and credits.

2. Update Job Posting Templates to Meet New Pay Transparency Laws

• Review job descriptions and compensation disclosures to comply with new state-level transparency mandates.
• Work with hiring managers to standardize salary bands and ensure consistency across postings.
• Use recruiting tools to embed compliant templates and streamline approvals.

3. Audit Sick Leave Policies for Local Compliance

• Check your leave policies against updated regulations in jurisdictions like Philadelphia, Chicago, and Alaska.
• Configure your time and attendance module to reflect local accrual rules and eligibility criteria.
• Communicate changes clearly to employees.

4. Monitor Federal and State Guidance on Employment Verification

• Stay informed about the rollout of E-Verify+ and potential mandates for digital I-9 integration.
• Use compliance tracking tools to ensure your documentation is complete and audit-ready.
• Prepare to transition to digital verification workflows as regulations evolve.

5. Educate Employees on New Savings Opportunities

• Launch internal campaigns to explain how the new HSA and FSA rules benefit employees.
• Make FAQs, webinars, and enrollment guides accessible to employees wherever it is convenient for them, including mobile devices.
• Encourage employees to review and update their elections during open enrollment.

6. Conduct a Compliance Health Check

• Schedule a review of your HR policies, payroll settings, and benefits offerings with your broker, attorney or a compliance expert. [Check out Namely’s Managed Services.].
• Use reporting tools within your current systems to identify areas of risk or non-compliance.
• Create a roadmap for implementing necessary changes before the 2026 deadlines.

Legislation like the OBBBA and state-level reforms are more than compliance updates—they’re opportunities to improve employee experience, streamline operations, and build trust. Namely is here to help with technology and services that enable you to turn complexity into clarity and stay focused on what matters most: your people.