Tax policy, AI, and retirement among top challenges for small- and mid-sized organizations

Paychex, Inc., a leading provider of integrated human capital management software solutions for human resources, employee benefits, insurance services, and payroll, today released its annual list of top regulatory issues small- and medium-sized businesses should be watching in 2025. Among them are taxes and tax credits, retirement, paid leave, wage and hour developments, and artificial intelligence and privacy.

“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,” said Kelee Delaney, director of compliance risk at Paychex. “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 to develop educational content for customers and update Paychex Flex^®, the company’s cloud-based SaaS solution. The Paychex team has identified the following topics that employers should watch closely in 2025:

• 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 January 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 December 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 January 1, 2025. Businesses should also keep a close eye on state pay transparency laws going into effect in the new year.
• AI 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. 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 (Iowa, Delaware, Nebraska, New Hampshire, New Jersey, Tennessee, Minnesota, and Maryland).

For more detailed 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.

This content is for informational purposes only, is not intended to provide, and does not provide, legal, tax, or accounting advice. Businesses should consult with a qualified attorney, accountant or other professional based on their individual circumstances.

About Paychex

Paychex, Inc. (Nasdaq: PAYX) is an industry-leading HCM company delivering a full suite of technology and advisory services in human resources, employee benefit solutions, insurance, and payroll. The company serves over 745,000 customers in the U.S. and Europe and pays one out of every 12 American private sector employees. The more than 16,000 people at Paychex are committed to helping businesses succeed and building thriving communities where they work and live. Visit paychex.com to learn more.

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