Overtime has always been one of the most heavily regulated and closely scrutinized areas of employment compliance. Even when the rules themselves don't change, new federal laws, tax updates, and reporting requirements can create confusion and risk for employers.
The passage of the One Big Beautiful Bill Act (OBBBA) has done exactly that.
While the Act did not change federal overtime eligibility rules or pay requirements, it did introduce new tax deductions for employees, expanded reporting expectations for employers, and added complexity to payroll and workforce planning decisions.
If your business relies on hourly labor, overtime coverage, or fluctuating staffing levels, this is something worth paying attention to.
Here, we break down what the OBBBA means for employers, what did not change, where compliance risks still exist, and how workforce planning plays a role in managing overtime exposure.
Many employers are hearing more about overtime than usual, even though the underlying labor laws remain the same, and that’s not an accident.
Much of the increased attention stems from a broader focus on how employers track, report, and document employee pay. With this, federal agencies are placing increased emphasis on wage-and-hour accuracy, payroll documentation, and tax reporting transparency.
When new tax provisions intersect with existing wage laws, employers often face greater scrutiny—not less.
Midyear changes, temporary deductions, and pending federal guidance also create gray areas that can lead to mistakes if employers are not proactive.
In short, overtime is not changing, but how it is tracked, reported, and reviewed now requires even more careful attention.
The One Big Beautiful Bill Act is a federal law that introduced a range of tax-related changes affecting workers and employers beginning in 2025. Several provisions are temporary and currently scheduled to expire after 2028.
Key areas that may affect employers include:
Though many headlines focus on employee tax relief, employers are still responsible for implementing and documenting these changes correctly. And while not all of these provisions apply to every business, employers should understand how they affect payroll, reporting, and workforce administration.
No.
The OBBBA did not alter the core overtime rules that employers must follow, as federal overtime requirements are still governed by the Fair Labor Standards Act (FLSA).
Employers must continue to properly classify employees as exempt or nonexempt, accurately track hours worked, and pay nonexempt employees time-and-a-half for hours worked over 40 in a workweek.
The OBBBA does not:
So, if an employee was entitled to overtime before the OBBBA, they are still entitled to it now.
Overtime requirements apply differently depending on whether an employee is classified as exempt or non-exempt under the FLSA.
Non-exempt employees are entitled to overtime pay when they work more than 40 hours in a workweek.
In most cases, non-exempt employees:
Common non-exempt roles include:
These employees must receive overtime pay at time-and-a-half for qualifying hours, regardless of any tax deductions that may apply at the individual level.
Exempt employees are not entitled to overtime pay if they meet specific federal criteria.
To be classified as exempt, employees generally must:
Common exempt categories include:
Job titles alone do not determine exemption status—actual job duties matter most.
Misclassification is one of the most common overtime compliance issues employers face.
Incorrectly classifying an employee as exempt can lead to:
The OBBBA did not reduce enforcement expectations. If anything, expanded reporting requirements make accurate classification even more important.
Exemption statuses should be reviewed periodically, taking into account how an employee’s role might change or if business needs shift.
Overtime compliance starts with proper classification, accurate time tracking, and consistent payroll practices.
Although overtime pay rules remain the same, the OBBBA introduced new tax and reporting considerations that directly affect employers.
Under the OBBBA:
Any tax deductions related to overtime apply only on the employee’s individual income tax return, not during payroll processing.
So from an employer perspective, payroll obligations remain unchanged.
One of the most important employer-facing changes involves reporting.
Employers must now:
Because the One Big Beautiful Bill Act was enacted midyear, 2025 was treated as a transition year for employer reporting.
For the 2025 tax year, employers were permitted to estimate the amount of overtime compensation reported on employees’ Forms W-2 using a reasonable method, as formal guidance was still being developed.
Beginning with the 2026 tax year, employers should expect to report more precise overtime compensation amounts on Forms W-2 as payroll systems and reporting processes normalize under the updated requirements.
This shift places more importance on accurate timekeeping, payroll coordination, and documentation to support year-end reporting.
Even without changes to overtime eligibility, overtime remains one of the most common sources of compliance violations.
Employers face risk from:
Expanded reporting requirements increase exposure if documentation does not align across systems.
Mistakes in overtime compliance can lead to issues such as wage disputes, audits or investigations, backpay obligations, and penalties and interest.
Compliance is not just about paying overtime; it’s also proving that it was handled correctly.
Overtime does not exist in a vacuum. It touches multiple areas of an employer’s operations:
Accurate overtime pay depends on:
Together, these operational touchpoints make overtime compliance as much an administrative challenge as a pay requirement. Especially in environments with fluctuating demand or last-minute coverage needs, errors become more likely.
Overtime affects many aspects of payroll processes, including calculations, tax withholding, and W-2 preparation.
Expanded reporting means payroll teams must ensure overtime data is consistent across everything. From timekeeping systems and payroll platforms to the all-important tax filings.
Employers must retain time records, payroll records, and supporting documentation
As reporting requirements grow, so does the importance of organized, defensible records.
While overtime rules apply broadly, certain employers feel the impact more than others.
These include businesses with:
Industries commonly affected include:
For these employers, overtime is often used to maintain coverage when hiring lags behind demand.
Even when employees may receive tax benefits, overtime remains expensive for employers.
Costs include:
Relying on overtime as a long-term staffing strategy can compound costs over time.
While you don’t need to overhaul your operations, proactive steps can reduce risk.
Consider reviewing overtime usage trends, auditing employee classifications, ensuring managers understand overtime approval rules, evaluating timekeeping accuracy, reviewing payroll reporting processes.
Workforce planning should also be part of this conversation, especially in roles with recurring overtime. Taking these steps now can help reduce errors, improve consistency, and support smoother reporting as requirements continue to evolve.
Staffing is not avoiding overtime laws—it is managing workload responsibly.
Working with a staffing partner can help employers:
Temporary, contract, or project-based staffing allows you to match labor supply with demand more precisely.
When reporting requirements expand, workforce decisions become more consequential.
Employers who plan proactively can:
Because overtime should be a tool, not a default solution.
Navigating overtime compliance and workforce planning can be challenging, especially as regulations evolve. FrankCrum Staffing works with employers nationwide to provide flexible staffing solutions that support compliance, productivity, and long-term growth.
👉 Partner with FrankCrum Staffing to build a workforce strategy that helps manage overtime risk while keeping your business moving forward.