What the new W-2 reporting requirements mean for your payroll
If you have employees who earn tips or work overtime, the way you report their compensation on W-2s has changed.
The changes come from the One Big Beautiful Bill Act, signed into law on July 4, 2025. Tip income and overtime pay now have specific reporting requirements that affect how you file at the end of this year.
Most payroll software will need to be updated to reflect this correctly. If you’re running payroll through a provider, check with them now to make sure that your setup is already capturing the right data. If you’re doing it manually, this is a good time to get a second set of eyes on your process.
Getting this wrong won’t just create a headache at year-end. Incorrect W-2s can trigger IRS notices, require amended filings and create problems for your employees when they file their own returns.
The earlier you sort this out, the easier it is to fix.
If you’re not sure if your current payroll setup is capturing everything correctly, reach out and we can take a look.
Saver’s Match: What you need to do if you offer a 401(k)
Starting in 2027, the federal Saver’s Credit will be replaced by a Saver’s Match under SECURE Act 2.0.
Instead of a tax credit, eligible employees will receive a direct federal matching contribution of up to $1,000 deposited straight into their retirement account.
If you sponsor a 401(k) and want your plan to be able to accept these contributions, your plan documents will need to be amended and your recordkeeper will need to be ready to receive them.
That process takes time. Start talking to your plan administrator now.
Student loan repayment is now a permanent tax-free benefit
Employers can already offer student loan repayment assistance as a tax-free benefit under Section 127.
That status is now permanent and, starting in 2027, the amount you can offer tax-free will be indexed for inflation and adjusted annually.
If you already offer this as a benefit, build that annual adjustment into your planning now. If you’re considering it as a recruitment tool, it’s worth knowing the ceiling will move each year rather than staying fixed.
The EEOC pulled its 2024 harassment guidance, but should you care?
In January 2026, the EEOC rescinded its 2024 Workplace Harassment Enforcement Guidance.
EEOC Chair, Andrea Lucas, was clear that this does not give employers license to allow or engage in unlawful harassment. The underlying law is unchanged.
What it does mean is that employers have less detailed regulatory guidance to lean on, particularly around areas like gender identity and workplace conduct.
For small businesses, that increases the weight on your own internal policies and how consistently you apply them.
A recent case makes the cost of getting this wrong clear. In EEOC v. JACO Coach, the employer paid $95,000 to settle a harassment claim.
Clear policies, consistent complaint handling and documented decision-making are not optional extras right now. They are your first line of defense.
Probationary periods: What they actually mean under U.S. law
A lot of small business owners put new employees on a probationary period assuming that it gives them extra legal cover in those first 90 days.
In most cases, it doesn’t work the way they think.
Under federal law, probationary periods have no special legal status. There is no federal statute that defines what one is or what rights an employee has during one.
It’s a management practice, not a legal protection.
In most U.S. states, employment is at-will by default, meaning that you can terminate an employee at any time for any lawful reason. A probationary period doesn’t add to that.
Where employers get into trouble
The most common mistake is implying that completing a probationary period means something it doesn’t.
Language like “after 90 days you will become a permanent employee” can create an implied contract that restricts how and when you can let someone go.
The second mistake is using probation as a reason to delay documentation. If a termination is ever challenged on discrimination or retaliation grounds, the EEOC and the courts will look at what you documented and whether you followed a consistent process. Being in a probationary period is not a defense on its own.
What to do instead
The goal of the first 90 days should be active management and clear documentation, regardless of what you call the period.
Set written expectations early, document check-ins as you go, address performance issues in writing at the time they come up and conduct a formal review at the end.
Probationary periods can be a useful management framework when they’re backed by real structure. What they can’t do is replace that structure.
If you want to make sure that your onboarding process and documentation would hold up if challenged, reach out and we can talk it through.
Q&A
Can I ask a candidate why they left their last job?
Yes, and many employers do. Where you need to be careful is in how you use the answer. If a candidate mentions something that touches on a protected characteristic, like a medical condition or a pregnancy, that information can’t play any part in your hiring decision. Keep interview questions consistent across candidates and document your hiring rationale based on qualifications and fit.
Can I monitor my employees’ work devices or emails?
Generally yes, if you own the devices and have a clear written policy in place. Your employee handbook should state that company devices and accounts may be monitored and that employees have no expectation of privacy on those systems. Personal devices are a different question entirely and carry significantly more legal risk. Don’t go there without specific legal advice.
My employee keeps calling out sick on Mondays and Fridays. Can I do anything about it?
Yes. Make sure that you have an attendance policy in writing, then have a direct, documented conversation with the employee noting the pattern. Where employers run into trouble is disciplining for absences that may be covered by FMLA or that relate to a disability under the ADA. If the employee discloses a health condition at any point, the situation changes. Get in touch before you take any formal action.
