Federal employment law is never static, and the 2026 updates now taking shape are beginning to impact small to midsize businesses (SMBs) nationwide. New reporting rules, shifting benefit thresholds, and evolving leave policies mean HR teams have plenty to track. Even businesses already working with a PEO (like BBSI) may be missing opportunities to tighten compliance and streamline operations.
This checklist outlines the major federal HR compliance changes in effect for 2026, including:
Whether you’re handling HR in-house or through a shared model, these are the updates and actions worth prioritizing. Let’s start with what’s changing at the federal level in the year ahead.
Several federal updates in 2026 will directly impact payroll, benefits, and HR reporting for small and mid-sized businesses. Staying current now can help reduce risk and avoid costly corrections later.
In 2026, employers must report:
These updates support new employee tax deductions and require accurate tracking in your payroll system. Mistakes here can delay tax filings or trigger compliance reviews.
2026 brings several inflation-adjusted caps:
Review your plan documents early to ensure coverage remains compliant and contributions are updated across systems.
While no change is final, the Department of Labor may raise the current federal salary threshold for exempt employees from $684/week. Employers should:
Staying proactive with these updates helps you avoid retroactive corrections and positions your business for a cleaner year-end.
Next, we’ll look more closely at wage and hour compliance.
To improve compliance, start by reviewing how employees are classified. Misclassifying workers as exempt from overtime when they don’t meet both the salary and duties tests can result in back wages and penalties. This is especially relevant given the Department of Labor's consideration of an increase to the current exempt threshold of $684 per week.
Wage and hour compliance continues to be one of the most common and costly sources of risk for employers. In 2026, rising enforcement and evolving job structures make regular audits more important than ever. Take these actions now to avoid major problems:
The DOL also relaunched the Payroll Audit Independent Determination (PAID) program, which allows employers to voluntarily correct wage violations with reduced liability. It’s a valuable opportunity to clean up mistakes before they escalate.
Even minor compliance errors, like failing to count bonus earnings when calculating overtime, can add up fast. A short quarterly check-in on payroll practices, or an expert advisor, is often enough to keep things on track.
Up next: ensuring fair pay across your organization through transparency and equity.
To ensure transparency and equity, start with internal consistency. Pay differences should be based on clear, documented criteria like experience, education, or performance. Conducting a basic pay equity audit, even informally, can reveal unintended disparities and help you correct them before they become liabilities.
Pay equity is both a legal concern and a trust issue. As more states pass pay transparency laws and employees grow savvier about compensation, SMBs should proactively adopt fair pay practices, even if not legally required.
Key practices to support fair and transparent compensation:
Beyond compliance, transparency improves recruiting and retention. According to a 2023 Gartner survey, 66% of job seekers said they’re more likely to apply when a salary range is listed.
Pay transparency is also a competitive advantage. Fair, consistent compensation practices signal professionalism and build employee loyalty. Treating pay transparency as a strategic HR practice, not just a policy, helps future-proof your business.
Next, we’ll turn to leave laws and accommodations that may require updates to your handbook and manager training.
Recent federal laws have expanded employee rights around medical leave and workplace accommodations. SMBs must ensure their policies and training reflect these updates to stay compliant and reduce legal exposure.
Two laws in particular now apply to most employers:
These laws affect both your written policies and how managers respond to requests. A quick policy review and basic manager training can close the most common gaps.
Other key benefit-related updates for 2026:
Leave laws are expanding, not contracting. Businesses that treat compliance as an annual checkpoint (rather than a one-time fix) are better positioned to support their teams and avoid costly oversights.
Next: safeguarding your HR data and tech stack.
A key development is the Department of Justice’s Bulk Data Transfer Rule, which restricts the transfer of sensitive U.S. data to foreign-owned entities or systems. If you use third-party payroll, HRIS, or benefits platforms, verify where data is stored and who can access it.
HR departments manage highly sensitive data, including Social Security numbers, health information, and location data. As privacy regulations tighten and cyber risks increase, SMBs must take active steps to secure employee information and review vendor access.
Priority actions to strengthen data and tech compliance:
Employers should also tread carefully with AI tools. If you’re using automated systems for hiring or performance tracking, make sure they’ve been evaluated for bias and that any required disclosures are made to candidates. Several states are enacting AI-in-HR laws effective in 2026, and federal oversight is likely on the horizon.
Taking data privacy seriously isn’t just about avoiding fines. It builds employee trust and protects your business's integrity.
In the next section, we’ll look at how to leverage your PEO relationship to support compliance.
Working with a PEO like BBSI gives SMBs access to resources that many underutilize. If you tap into the full range of services, your PEO can support compliance across HR, benefits, safety, and risk management.
Ways to maximize your PEO relationship:
A good PEO helps you anticipate and avoid compliance pitfalls. Whether it’s classification audits, leave policy updates, or safety program evaluations, these are all areas where a second set of expert eyes can make a real difference.
Taking full advantage of these resources reduces risk, saves time, and positions your business for smoother operations as regulations evolve.
Navigating HR compliance in 2026 doesn’t have to be overwhelming. From new payroll rules to expanded leave protections and data security expectations, SMBs face growing responsibilities and new opportunities to strengthen internal processes. This checklist offers a starting point for smarter, more confident planning.
Whether you need a handbook review, classification audit, or support implementing updated policies, your local BBSI team is ready.
Don’t tackle compliance alone. Reach out to your representative to get the full benefit of your partnership.
This blog outlines the most important federal HR compliance updates for 2026, including new W-2 reporting requirements, shifting benefit thresholds, and possible changes to FLSA exemption rules. It highlights steps to improve wage and hour compliance, ensure pay equity, update leave policies, and secure HR data systems. The post also shows how small- and mid-sized businesses (SMBs) can get more value from their PEO relationship with BBSI. Each section is structured to help business owners quickly identify where they’re at risk—and how to stay ahead.