Ask an HR Pro: What Do Employers Need to Know About the One Big Beautiful Bill Act?

The One Big Beautiful Bill Act, or OBBBA, is creating a stir for HR professionals, bringing significant updates to payroll, employee benefits, and recordkeeping requirements. These changes can impact your organization’s operations, so it’s important to understand what’s new and how to prepare.

We spoke with HR compliance expert and Principal HR Business Partner at iHire, Chrisanne Bowden, to break down what employers and businesses need to know about the OBBBA and offer guidance on how to stay ahead.

What payroll changes should employers expect?

“There’s a lot going on with the OBBBA, but the biggest shift is around tip and overtime deductions. Employees can now deduct up to $25,000 per year in ‘qualified tip income,’ which means you’ll need to track tip income separately from regular wages in your payroll system,” said Bowden. “Additionally, employees can deduct up to $12,500 in qualified overtime premiums.”

Many existing platforms may need upgrades to handle this kind of detailed tracking, especially for hospitality, retail, and food service employers. Expect more detailed payroll documentation and new IRS forms by October 2025.

“Now is the time to review current recordkeeping practices, ensuring you properly track wages, deductions, and tip income for compliance,” said Bowden.

How does the permanent Paid Family & Medical Leave (PFML) tax credit affect employers?

“The PFML tax credit is now permanent and larger, but it comes with tighter documentation standards. You need a written policy and must file IRS Forms 8994 and 3800,” Bowden continued.

Employers with only informal or verbal policies will need to document everything clearly to remain eligible for these savings.

What’s new about the childcare credits and dependent care FSAs?

Beginning in 2026, the maximum annual credit for employer-provided childcare (currently $150,000 to $500,000) and the annual contribution limit for dependent care FSAs (currently $5,000 to $7,500) will both increase.

“In the meantime, employers should document all childcare expenses to maximize eligibility. If you don’t yet offer childcare benefits, now is a great time to consider it. Options like on-site care or partnerships with local providers are good places to start,” Bowden advised.

How do expanded HSA uses affect employer health plans?

“HSAs can now cover telehealth and remote care. This is a win for everyone, but employers must update benefits communications so employees see the value,” Bowden explained. “Make these new HSA-eligible expenses clear during open enrollment.”

Which industries are most affected by the OBBBA?

“Hospitality, retail, and food service will most likely be impacted by tip tracking changes,” Bowden continued. “However, all industries must address the new PFML, HSA, and recordkeeping requirements.”

How should employers prepare?

“Start with a full review of your systems and programs. Identify gaps between your current practices and the new requirements, especially in payroll tracking and policy documentation,” recommended Bowden. “Don’t forget to budget for system or training upgrades, too.”

Non-compliance can mean tax penalties, missed credits, and even IRS audits.

“Poor compliance also harms employee trust and your reputation as an employer and business. Investing now in compliance is almost always less costly than fixing problems later,” Bowden said.

Get a Head Start on OBBBA Compliance

The One Big Beautiful Bill Act may require a significant shift in how you handle payroll, benefits, and recordkeeping, but with a focused plan, you can safeguard your business and stay compliant.

Assess your current systems, set up a transition plan, and tap into HR expertise if you need guidance. Schedule your free consultation with Bowden and iHire’s Outsourced HR Services Team today to learn how we can provide personalized support for your payroll systems, employee policies and handbooks, and more.