JULY 8, 2025
As the workplace continues to evolve in 2025—driven by remote work, shifting regulations, and new technologies—compliance remains one of the most pressing (and confusing) responsibilities for small business owners. One missed update or unintentional oversight could lead to fines, lawsuits, or costly audits.
To help you stay ahead, we’ve compiled the top 10 compliance issues businesses are facing in 2025—and how to avoid them.
1. Misclassification of Employees vs. Contractors
The debate between 1099 vs. W-2 is more active than ever. With gig economy regulations evolving and new state-level protections for workers, it's critical to correctly classify your workers. Misclassification can result in back taxes, penalties, and lawsuits.
✅Pro Tip: When in doubt, treat gray-area workers as employees—or consult a compliance specialist.
2. Outdated Labor Law Posters
Federal and state laws change frequently, and failing to update your labor posters can lead to fines during inspections. Remote work adds an extra layer of complexity—yes, even virtual employees often require access to digital versions.
✅Stay current with a labor poster subscription service that updates you automatically.
3. Overtime Pay Miscalculations
The Department of Labor has adjusted the salary threshold for overtime eligibility again in 2025. If your business hasn’t reviewed roles and pay structures, you could be noncompliant without realizing it.
✅ Audit your employee classifications and exempt status at least once per year.
4. Inaccurate Time Tracking
Manual timecards are a compliance risk in today’s digital age. Inaccurate time tracking can lead to unpaid wages and potential wage-and-hour claims.
✅ Adopt a digital timekeeping system with geofencing, real-time clock-ins, and audit trails.
5. PTO and Remote Work Policies
The shift to hybrid and remote work has made PTO tracking more complicated. Without clear documentation, businesses risk wage violations, inequity claims, or internal disputes.
✅Ensure your PTO policies are up-to-date and legally sound—and that they’re consistently applied.
6. Incomplete or Incorrect I-9 Forms
Immigration enforcement continues to be a priority, and Form I-9 violations can add up quickly. Employers are required to complete and retain these for every employee, with strict timelines.
✅Consider digital I-9 verification tools and regular audits of your employment records.
7. Payroll Tax Compliance
2025 has brought updates to state and local payroll taxes, particularly in states like California, Illinois, and New York. Falling behind on payroll tax remittance or filings can trigger steep penalties.
✅ Use a payroll provider that offers local expertise and real-time filing.
8. Inconsistent Wage and Hour Practices
From meal breaks to tip credits to scheduling laws, states are introducing more nuanced wage protections.
✅ Train your managers and supervisors on applicable wage-and-hour laws in your area.
9. Failure to Document Policies and Procedures
If it’s not documented, it didn’t happen. Courts and agencies rely on written evidence to evaluate employer practices.
✅Maintain updated handbooks, training logs, disciplinary records, and policy sign-offs.
10. Lack of Compliance Training
Even well-meaning businesses get in trouble when employees or managers aren't trained on basic compliance topics like harassment prevention, confidentiality, or disciplinary procedures.
✅ Schedule recurring compliance training tailored to your industry and workforce.
Need Help Navigating Compliance in 2025?
Payroll Vault specializes in helping small businesses stay up to date with labor laws, time tracking tools, PTO management, and so much more. Whether you’re struggling with misclassification issues or just want a second set of eyes on your policies, we’re here to help.
Contact us today at (219) 247-8767 to get started and ensure your business is compliant!
