The passage of the “One Big Beautiful Bill” Act is one of the most sweeping legislative updates to labor and employment law in my recent memory.

With wide-ranging implications for employers, employees and compliance professionals alike, this legislation marks a turning point in how U.S. businesses will manage their workforce across pay, benefits, eligibility and audits.

Whether you operate a restaurant, manage a warehouse or lead a professional services firm, these changes will likely touch your payroll systems, benefits administration and HR policies.

Here’s what you need to know—and how your business can respond strategically.

1 | No Federal Tax on Overtime and Tips (2025–2028)

For the next three years, tipped and hourly workers will benefit from a temporary provision that allows significant portions of overtime and tip income to be exempt from federal taxation.

What it means:

• Employees in “customarily tipped” occupations — like servers, bartenders, hotel staff and hairstylists — can deduct up to $25,000 annually in eligible tip income.
• Only tips reported for payroll tax purposes and subject to federal withholding qualify.
• Overtime pay, as defined under the Fair Labor Standards Act (FLSA), is also partially deductible but only the premium portion (the amount paid above 40 hours at 1.5x rate).

Why it matters: This change may increase employee take-home pay, providing a valuable tool for recruitment and retention in industries with high turnover. Employers, however,...

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