Top Compliance Issues of 2025

20th March 2025

HR needs to stay on its toes in today’s ever-changing regulatory landscape.

By Marsha Akpodiete

As 2025 unfolds, small businesses are encountering a changing regulatory landscape that demands vigilance and proactive planning. New compliance obligations could significantly affect operations, from tax adjustments and retirement plan requirements, to wage and hour laws and data privacy regulations. Understanding and monitoring for these changes will enable businesses to mitigate risks, optimize financial planning, and stay competitive in an increasingly complex environment. Below are five key regulatory issues that HR should prioritize this year.

Tax Policy Changes: The Expiration of TCJA Provisions

Several tax provisions from the Tax Cuts and Jobs Act (TCJA) of 2017 are scheduled to sunset at the end of 2025. This includes the potential expiration of the 20% pass-through tax deduction (Section 199A), which allows qualified business owners to deduct a portion of their qualified business income. Small businesses structured as sole proprietorships, partnerships, or S-corporations may face higher tax burdens if not given an extension.

Another provision is the alteration of research and development (R&D) expensing. In general, businesses prior to the TCJA were able to deduct R&D expenses in the year they incurred. However, effective in 2022, they need to amortize these expenses over multiple years, which could impact cash flow and financial planning. Similarly, the 100% bonus depreciation provision, which allowed businesses to deduct the costs of qualifying equipment and property immediately, began phasing out in 2023 and will be fully phased out by 2027 without Congressional action. These provisions will likely be part of the larger discussion on tax policy which may affect investment decisions and long-term financial strategies. To navigate these potential changes, small businesses should work with financial advisors to explore potential tax strategies, such as adjusting investment timing and maximizing deductions.

Retirement Plan Mandates Take Effect

The SECURE Act 2.0, signed into law in 2022, is introducing new retirement plan requirements in 2025. The most notable change (effective January 1, 2025) is mandatory auto-enrollment for new 401(k) and 403(b) plans established after December 29, 2022. Employers must enroll eligible employees automatically. Initial contribution rates will be between 3% and 10%, increasing annually by 1% until they reach at least 10% (but no more than 15%).

Furthermore, several states are introducing state-backed retirement programs for companies that lack retirement offerings. Starting in 2025, states including Minnesota, Missouri, and Nevada will mandate that specific employers join these programs or establish a qualifying retirement plan, with potential financial penalties if they fail to comply.

These changes highlight the importance of reviewing current retirement benefits and ensuring compliance with federal and state laws. Organizations should consider options like employer-sponsored 401(k) plans, pooled employer plans, or state-facilitated programs to fulfill their obligations while also providing competitive benefits to employees.

Expanding Paid Leave Legislation

Paid leave requirements are increasingly expanding throughout the United States, with more states and local jurisdictions introducing new laws or modifying existing ones. During 2025, states like Alaska and Nebraska will implement Paid Sick and Safe Leave (PSSL) laws.

Additionally, several states, including Delaware, Maine, Maryland, and Minnesota, are rolling out Paid Family Leave (PFL) programs. Benefits will begin in 2026, although employer contributions start in 2025 or early 2026. These state-run programs generally mandate that businesses offer paid leave to eligible employees facing personal illness, caring for a family member, or dealing with domestic violence situations.

As paid leave laws become more complex, HR needs to thoroughly examine their leave policies to ensure alignment with specific state and local regulations. Employers operating across multiple jurisdictions may consider implementing standardized leave policies that incorporate all applicable requirements, streamlining administration, compliance and promoting fairness across their workforce.

The regulatory landscape for HR in 2025 is dynamic and complex, with changes in tax policy, retirement requirements, paid leave mandates, wage and hour laws, privacy, and AI regulations all demanding attention.

Wage and Hour Regulations: Overtime and Minimum Wage Adjustments

Changes to wage and hour laws are another significant concern for 2025. The U.S. Department of Labor (DOL) issued a Final Overtime Rule in 2024, which was vacated by a U.S. District Court in Texas. Employers should continue to monitor enforcement efforts at the U.S. DOL.

At the same time, minimum wage increases continue at both state and local levels. Roughly 70 jurisdictions implemented minimum wage hikes on January 1, 2025, with additional increases scheduled throughout the year. Businesses operating in multiple locations should ensure they are current with these wage adjustments to help them avoid compliance issues and potential penalties.

Another growing trend is pay transparency legislation. Fourteen states and seven local jurisdictions have implemented laws requiring businesses to disclose pay ranges in job postings or provide employee pay information upon request. HR should prioritize reviewing their compensation strategies and ensure hiring practices align with applicable transparency requirements.

Artificial Intelligence and Data Privacy Regulations

As businesses increasingly rely on artificial intelligence (AI) for hiring, employee monitoring, and customer interactions, regulatory scrutiny and enforcement over AI usage is intensifying at the state level. The California Attorney General issued non-binding advisories reminding entities who develop, sell, or use AI about their obligations under existing California law and new laws that went into effect on January 1, 2025. Employers using AI for recruiting and hiring should implement controls for their technology use, such as conducting regular audits (i.e. evaluating systems for fairness and bias), applying human reviews, closely monitoring and following state regulations, and aligning their use with applicable fair employment practices and agency guidance.

Additionally, data privacy laws are expanding rapidly, with eight new state-level laws set to take effect between January and October 2025. These include laws in Iowa, Delaware, Nebraska, New Hampshire, New Jersey, Tennessee, Minnesota, and Maryland. These regulations will require businesses handling consumer and employee data to implement stronger security measures, provide transparency regarding data collection, and offer individuals greater control over their personal information.

Small businesses that collect or store personal data should examine their privacy policies and ensure compliance with emerging and existing state regulations. Consulting with legal and IT professionals can help mitigate risks and avoid costly penalties.

Staying Ahead of Compliance Challenges

regularly reviewing tax and employment law updates;
consulting with legal experts to help ensure compliance;
updating internal policies to reflect new regulatory requirements; and
leveraging technology to streamline processes and data management.

By staying informed and adaptable, HR can mitigate risks and use these regulatory changes as opportunities to improve workplace policies, attract talent, and enhance long-term sustainability. The key to success in 2025 will be preparation, strategic planning, and a commitment to compliance in an ever-evolving regulatory environment.

Marsha Akpodiete is HR services, senior advisor at Paychex.