OBBBA Explained: What Small Business Owners Should Know About HR, Benefits & Budgets

Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) brings sweeping changes to tax, labor, and benefits policy – yet many small businesses may feel effects in subtler, operational areas.

Without an in-house HR team, you’re likely fielding questions about coverage, costs, and deadlines on your own. Sound familiar?

While the OBBBA introduces permanent tax relief, it also imposes new compliance obligations. Employers must navigate updates to payroll systems, adjust benefit offerings, and ensure adherence to expanded reporting requirements. For businesses with fewer than 200 employees, proactive adaptation is crucial to leverage the opportunities and mitigate the challenges presented by this legislation.

If you're a small business owner, now is the time to take proactive steps – understanding the OBBBA's impact and aligning your strategies will position your business for long-term success. Let’s break down what matters most, and how your business can respond:

1. HR & Payroll Complexity Is Increasing

• New immigration-related hiring fees challenge small employers relying on immigrant or seasonal workers.
• Revised IRS rules for overtime and tip reporting require payroll system updates and new documentation.
• Permanent family leave tax credits are great in theory – but they require rigorous tracking to qualify.

Hidden risk: Industries like hospitality or retail that use tipped, part-time, or seasonal workers may face increased auditing risk and administrative overhead.

2. Health Plan Costs Are on the Rise

• ACA subsidies and Medicaid cuts may push more employees into employer-sponsored coverage.
• New IRS rules affect HSAs and telehealth eligibility, especially around Direct Primary Care plans.

Why it matters: Moving from a 60% to 80% participation rate can dramatically increase premiums in smaller groups. Employers may need to revisit plan designs or consider level-funded options to keep costs predictable.

3. Expanded Benefits – with a Catch

• Student loan repayment perks are now tax-free for employers, but require formal eligibility tracking.
• Dependent care FSA limits increase to $7,500, boosting recruitment appeal – but also adding administrative burdens.
• Childcare tax credits expanded, though not all small businesses can realistically offer on-site care.

Unseen impact: Even if a business can’t offer these benefits, employees expect them. Not addressing their absence intelligently can hurt retention.

4. Tax Relief Is Real, but Requires Strategy

Small business owners gain access to impactful tax perks thanks to the OBBBA, including:

• Permanent 20% QBI deduction for pass-through businesses
• Full first-year expensing on qualifying equipment via bonus depreciation
• Higher Section 179 deduction limits ($2.5M), plus retroactive R&D write-offs
• Enhanced Qualified Small Business Stock exclusion (up to 100% on gains after specified holding periods)

Tip: But these breaks require proactive planning and documentation – especially for businesses without dedicated tax expertise.

5. Watch for Strategic Risks Below the Surface

• The revised worker classification guidance could re-categorize gig or 1099 contractors as employees.
• Expanded IRS and DOL audit authority around payroll and benefits deductions may trigger scrutiny.
• Existing insurance policies (EPLI, fiduciary coverage) may need updating to reflect new employer obligations.

Even minor oversights in job descriptions, PTO tracking, or plan documents can create compliance gaps come 2026.

What Small Businesses Should Do Now

Here’s how you can reduce stress this season:

• Conduct a payroll & HR compliance audit

Ensure your systems align with updated IRS and DOL rules

• Review benefit plan documents

HSA, DPC, student loan and childcare credits require clarity

• Consult a PEO or benefits advisor

Streamline admin, stay compliant, and manage costs

• Communicate with staff

Set clear expectations around benefits eligibility and offerings

Navigating Change: Transform OBBBA Impacts into Strategic Advantages

Though OBBBA was designed with broader goals in mind, it presents a valuable opportunity for small businesses to strengthen their operations and plan ahead with confidence. Those who take stock now can position themselves to recruit strategically, manage costs proactively, and minimize risk as 2026 rolls in.

Want help navigating these changes? Contact OneDigital today to audit your systems, align your people strategy, and optimize HR, benefits, and budgets – building resilience and driving sustained growth.