2025 Year-End HR Compliance Checklist for Employers

As the year winds down, HR teams face more than open enrollment and holiday schedules — they're managing the compliance deadlines that keep the business running smoothly. A detailed HR year-end checklist helps you organize those tasks, stay on schedule, and avoid costly penalties. Looking ahead to 2026, HR responsibilities are expanding. According to SHRM’s 2025 State of the Workplace Report, 57% of HR leaders said compliance-related workloads increased again year-over-year, largely due to new pay transparency laws and AI-driven regulatory oversight.

A structured HR compliance checklist helps translate these shifting requirements into a clear plan, ensuring every policy, record, and report stays up to date. This guide simplifies the process so you can close out the year confidently and start the next one ready for success.

What's New for 2026: Critical Compliance Changes

Staying ahead of 2026's major HR regulatory updates can help prevent year-end scrambling, penalties, and operational disruptions. When it comes to compliance changes, Lisa Samples, HR Services Strategy Partner at Paychex, emphasizes: “With pay transparency requirements expanding rapidly, employers must make pay equity audits and clear communication a routine part of their annual compliance process.” It is important to note that pay equity audits should be conducted with the assistance of legal counsel.

Use this summary as an early guide to update your HR compliance checklist and prioritize high-impact changes before they take effect.

1. Pay transparency laws expanding
   1. More than a dozen states, plus Washington, D.C., now require employers to include pay ranges in job postings, with several more expected to follow.
   2. Employers should review and update job descriptions, update posting procedures, and prepare for expanded disclosure obligations that may include current employee access to pay range data.
2. Updated FLSA overtime thresholds
   1. Employers should monitor developments from the U.S. Department of Labor (DOL) for any potential changes to the FLSA salary exemption thresholds.
   2. In the meantime, employers should continue to audit exempt vs. nonexempt classifications to ensure ongoing compliance with current standards.
3. Multi-state remote work tax compliance
   1. Expanding remote and hybrid work arrangements increases state tax withholding and unemployment insurance complexities.
   2. Review where employees are performing work, identify nexus triggers, and confirm proper state income tax and state unemployment insurance (SUI) reporting before year-end.
4. AI hiring tool compliance
   1. Jurisdictions, including New York City and California, now regulate the use of artificial intelligence (AI) and automated decision-making tools in employment decisions through New York City’s Local Law 144 and California’s FEHA regulations. Additional laws and regulations will take effect in 2026, including California CCPA regulations, Illinois AI Act, Texas Responsible AI Governance Act, and the Colorado AI Act.
   2. Employers using these tools are advised to conduct bias audits, provide advance applicant notices, and document compliance as part of their human resources compliance checklist.
5. State paid family leave program expansions
   1. Several state programs are launching or expanding in 2026, with updated employee contribution and employer reporting requirements. States with notable PFML program activity in 2026 include Delaware, Maine, Maryland, Minnesota, Colorado, Washington State, and New York.
   2. Review payroll systems, update handbooks, and coordinate with benefits providers to ensure readiness.

What Is an HR Compliance Checklist and Why Is It Important?

Maintaining HR compliance is crucial for business success, but it can be a complex process with many moving parts. With ever-changing employment laws and regulations, non-compliance poses a significant risk of penalties and fines. Our research showed that 34% of business leaders spent more than 10 hours a week on HR administration, and 56% of leaders found record-keeping and documentation to be the most challenging aspect of compliance work.¹ This is where an HR compliance checklist can be helpful.

But you may be wondering: What is an HR compliance checklist? This resource functions as a compass for businesses and HR teams, guiding them toward information, key dates, important documents, and best practices related to HR — from benefits to payroll, hiring and recruiting, and much more. For a detailed overview of upcoming compliance deadlines, visit our 2026 HR Compliance Calendar: Key Deadlines.

Payroll and Tax Compliance Review

When completing taxes and payroll for year-end, reference the HR end-of-year items for payroll and tax reporting below to help reduce the risk of mistakes during year-end:

Verify Employee Information

• Validate employee addresses. Incorrect information could delay the receipt of W-2 forms for some workers and create waste for your business with extra printing and mailing.
• Check your records for employees who left the company during the year to ensure their employment status was correctly updated.
• Verify remote worker locations, as state tax withholding and unemployment insurance obligations may differ based on where employees perform work.

Double-Check W-2s

• Confirm all Social Security Numbers or federal employer identification numbers (FEIN). Missing or incorrect numbers can result in IRS penalties ranging from $60 to $680 per W-2, depending on how late the correction is filed. For 2026 the penalties are as follows:
  • Up to 30 days late: $60
  • 31 days through August 1: $130
  • After August 1 or not filed: $340
  • Intentional disregard: $680
• Include any taxable cash or non-cash benefits (e.g., use of a company car) on the W-2.
• If your business doesn't already do so, consider setting up a secure online portal where employees can authorize the receipt of electronic or digital pay stubs and W-2s. This may help minimize labor and paper waste while also increasing the security of sensitive information.

Prepare Year-End Documents Required for Tax Filings

• FICA and FUTA Reporting: Note filing deadlines and various tax responsibilities for your end-of-year HR checklist. For example, per the IRS, if your FUTA tax liability is more than $500 for the calendar year, you must deposit at least one quarterly payment. If your liability is $500 or less in a quarter, carry it forward to the next quarter.
• Affordable Care Act Requirements: Companies that must comply with the ACA must prepare and file Forms 1094-C and 1095-C with the IRS and distribute 1095-C forms to applicable employees. For 2026 filings, the deadlines are March 2 for employee distribution, February 28 for paper filing, and March 31 for electronic filing.
• Independent Contractor Payments: In addition to preparing employee tax forms, make sure that qualifying independent contractors whom you paid more than $600 in the calendar year receive their correct statements for tax purposes. You must typically report these amounts using Form 1099-NEC.

Update Payroll Tax Rates for the New Year

• Conduct a year-end tune-up of payroll tax rates for 2026 to ensure accurate payroll processing and compliance.
• Set new wage base limits to take effect on January 1, 2026, including the projected Social Security taxable maximum of $184,500 based on the latest OASDI Trustees Report. This increase could raise the maximum Social Security withholding to about $11,364.
• Check FUTA, SUTA, Medicare, Social Security, and all federal, state, and local employment tax requirements.

Multi-State Payroll Considerations

As remote work continues to expand, multi-state payroll compliance remains a growing challenge. According to the U.S. Bureau of Labor Statistics, 36% of private-sector employers now manage at least one remote employee in another state, and 71% of large firms report multistate payroll obligations.

• Confirm state tax withholding for remote and hybrid employees based on where services are performed.
• Review "convenience of employer" rules in states such as New York, Pennsylvania, Delaware, and Nebraska, which can create unexpected withholding obligations.
• Verify state unemployment insurance (SUI) reporting and contribution requirements for employees working across state lines.
• For more information, explore Paychex state resources to stay current on local payroll rules.

Employee Benefits Compliance Review

Open enrollment will be here before you know it. Include the following tasks on your HR compliance checklist to help refresh your benefits packages and meet compliance requirements.

Review Coverage Plans and Health Insurance Policies

• Group Health Plan Renewal: Many group health insurance policies renew on December 1 or January 1. Review coverage plans and pricing to determine if changes are needed.
• ACA Requirements: Review the provisions of the Affordable Care Act for ongoing compliance, including:
  • Employer Shared Responsibility (ESR) provision under which companies employing an average of 50 or more full-time employees,50 or more full-time employees, including full-time equivalents (such as part-time and variable-hour employees), during the prior year must offer affordable and 60% minimum value plan medical coverage to full-time employees and their dependents or risk a potential assessment if at least one full-time employee receives a premium tax credit.
• IRS 2026 Employer Health Plan Affordability Threshold change: The tax year 2026 health plan affordability threshold — set by the IRS and used to determine if an employer's lowest-premium health plan meets the ACA affordability requirement — will increase to 9.96% of an employee's household income for plan years beginning in 2026 (up from 9.02% in 2025).
• Open enrollment: Prepare communications with employees and schedule informational meetings as part of your end-of-year HR checklist.
• FSAs: If you plan to establish different types of flexible spending accounts, allowing employees to set aside pre-tax money for medical or dependent care expenses, your business needs to set up the plan, and employees must enroll before the new year.
• Review healthcare plan filing requirements and deadlines.

Gather Payroll Records

Gather payroll records if your workers' compensation policy mirrors the calendar year. An auditor may want to review payroll records in accordance with the policy period to verify if any adjustments need to be made to your initial premium. Be sure to include Form 941s and certificates of insurance for any 1099 contractors used during the policy term, as these may be required for audit purposes.

Audit Dependent Eligibility

Include a dependent eligibility audit on your HR compliance checklist to verify the eligibility of all employee dependents enrolled in your benefits plan, including healthcare, dental, and vision. This includes asking employees for documentation of their relationship to the dependent, such as a birth certificate, marriage certificate, or adoption document. Auditing dependent eligibility can help ensure that your benefits plan functions as it should, helps reduce costs, and verifies compliance with insurance carrier requirements.

Review Fringe Benefit Policies

Voluntary fringe benefits such as 401(k) and retirement plans, wellness programs, company stock options, dental and vision insurance, and many others can help you attract quality talent and engage employees. At the end of the year, review your policies based on employee feedback and budget considerations and update them to ensure compliance with tax regulations and meet current workforce needs. For 2026, review and adjust plan contribution limits — including 401(k), HSA, and FSA caps.

Employers should also assess emerging benefits such as enhanced mental health coverage, student loan repayment programs, and caregiver support offerings, which continue to grow in popularity and regulatory focus.

Compensation Policy Review

The new year is a great time to review employee compensation and assess your competitiveness in the 2026 hiring market, considering your industry and your employees' geographic locations.

Confirm Year-End Bonuses

If your business awards year-end bonuses, work with your payroll provider to issue the checks as a separate line item or in separate checks (additional bonus taxation may apply).

Review Wage and Hour Updates

If your applicable state or local minimum wage rate is increasing as of January 1 or on a different date in 2026, ensure the updated rate is reflected for applicable employees' pay as of the effective date. In addition, review your obligations under applicable state and local laws concerning wage and hour matters.

For 2026, several states — including Arizona, California, New York, Oregon, and Washington — have scheduled minimum wage increases. Multi-state employers should confirm effective dates and updated rates for each jurisdiction to maintain compliance.

Review Updates To Wage Base Limits

Resetting wage base limits should also be part of your year-end HR processes. For the upcoming year, budget for the taxes you may not be paying now if employees have already met wage base limits. Wage base limits start every January 1, including federal and state unemployment tax, Medicare, Social Security, and state employment taxes.

For reference, the Social Security wage base increased to $176,100 for 2025 and is $184,500 in 2026, according to the latest OASDI Trustees Report.

Evaluate Compensation

To help ensure compliant compensation practices, review payroll data to identify potential discrepancies:

• Evaluate minimum wage rates and compensation requirements to ensure compliance.
• Review payroll data for accurate reporting purposes.
• Conduct internal assessments to review payroll policies and wage practices, and engage legal counsel should concerns be identified.

With pay transparency laws expanding across more than a dozen states and Washington, D.C., compensation audits have become increasingly important. Employers should review pay ranges, document job-related pay factors, and verify that pay equity aligns with posted ranges. Conducting a proactive review before publishing postings can help reduce risk and strengthen compliance documentation.

Important reminder: Compensation audits should generally be conducted with the support of outside legal counsel to help protect the employer. Employers should avoid conducting these audits independently without legal guidance.

Review Overtime Policies and Compliance

Review your overtime policies to ensure compliance with the Fair Labor Standards Act (FLSA) and any other applicable state and local wage and hour regulations. This is crucial for avoiding compliance issues.

This is also a good time to evaluate the FLSA-exempt/non-exempt status for any employees who may have experienced changes in their roles and responsibilities to help ensure compliance with applicable wage and hour requirements.

Pay Transparency and Wage Range Compliance

A growing number of states — now more than a dozen, plus Washington, D.C. — require pay ranges or wage rates to appear in job postings. Employers must:

• Include pay rates or pay ranges in all public and internal job postings in applicable states.
• Ensure internal employees have access to the same information for transparency and equity.
• Review applicable state laws and guidance.
• Understand that penalties for non-compliance can include monetary fines, required re-posting, or civil action.
• Conduct a pay equity audit with the support of outside legal counsel before posting ranges to identify and correct potential discrepancies.

“State and federal changes can have a ripple effect across compensation structures,” says Samples. “Employers should plan for these updates well before they take effect to minimize disruption and exposure.”

Staffing and Training Processes Review

With ongoing hiring challenges, it's important to ensure employees are trained appropriately and that you are conducting any mandated training moving into the new year. Your end-of-year HR checklist should include a plan for updating training processes to reflect new and existing guidelines and build awareness of policies.

Create or Update Your 2026 Training Calendar

As you look ahead to next year, consider developing a calendar of required training for managers and employees. Examples include harassment prevention training, hiring practices, workplace safety, and effective management. Also, schedule time to update managers and staff on protocols and compliance to help ensure continued compliance with OSHA, CDC, and local guidance.

For 2026, consider adding new training priorities such as cybersecurity awareness, ethical and compliant AI tool usage, and pay transparency communication for managers involved in hiring and compensation discussions.

Review Employee Time Off

If you have a self-service portal, remind employees to review their vacation, discretionary, holiday, sick, and other paid-time-off banks, especially if you have a "use-it-or-lose-it" policy or caps on carryover amounts (where permitted). If your business tracks this for employees, let them know about their balances.

Note that several states now require PTO payout at termination or have introduced expanded paid family and medical leave programs. Review state-specific laws to ensure your PTO and leave policies comply with updated requirements for 2026.

Review Your Business Continuity Plan (BCP)

Review your company's policies on severe weather, natural disasters, and health emergencies, and ensure a business continuity plan is in place in case an emergency affects your business operations at year-end or in 2026. Include cybersecurity and data breach response procedures in your BCP to ensure readiness for potential system outages or cyber incidents.

Update Your Employee Handbook

An annual employee handbook review should be included in your year-end HR checklist if not conducted earlier in the year or on an ongoing basis. All new policy updates should be included in the handbook and communicated to employees. Review any remote or hybrid work policies you have implemented in the past few years.

In 2026, review handbook sections addressing pay transparency laws, AI use and monitoring, remote and hybrid work expectations, and data privacy protocols to align with emerging compliance standards. Samples underscores the importance of this process, noting: “Your handbook reflects your compliance culture. Annual updates must incorporate legislative changes, but they also provide an opportunity to clarify expectations and reinforce your organizational values.”

Year-End Performance Reviews and Goal Setting

Conduct year-end performance reviews to help employees evaluate their strengths, weaknesses, and opportunities for improvement. Using this information, guide employees to set career goals that align with both their professional growth and the organization's objectives for the coming year.

Evaluate Skills Gaps and Plan Training for Next Year

Use performance review data to identify skills gaps in your workforce. For example, employees may need additional technical expertise, role-specific skill updates, leadership skills, communication skills, and team-building strategies to succeed. Plan training programs to address these gaps in the new year.

For 2026, prioritize training on AI and automation literacy, data analysis, and cross-functional collaboration to help employees adapt to evolving technologies and workplace tools.

Review Staffing Needs for the New Year

Evaluate staffing needs and distribution to identify skill gaps. Review hiring needs at every level, from the C-suite to entry-level roles, and plan for adjustments as needed to align the workforce with business goals for 2026. With training and staffing aligned, your HR year-end checklist can now shift toward final compliance reporting, documentation, and readiness for the new year.

Remote Work and Multi-State Compliance

Remote and hybrid work arrangements continue to reshape compliance responsibilities for employers. Each state has its own tax, employment, and workers’ compensation requirements, making it essential to understand where employees physically perform their work. Without clear documentation and understanding of requirements, businesses risk incorrect tax withholding, wage reimbursement issues, and gaps in workers' compensation coverage.

• Multi-State Tax Withholding: In most cases, state income tax must be withheld based on where an employee performs their work — not where the company's headquarters are located. This can create dual obligations when employees live in one state and work remotely from another. Reciprocal agreements may simplify withholding, but employers should still verify nexus thresholds and filing requirements in each state. A best practice is to maintain updated records of each employee's work location and regularly review state tax rules.
• Equipment Reimbursement: Several states now require reimbursement for necessary business expenses incurred while working remotely. California (Labor Code §2802) and Illinois (Wage Payment and Collection Act) both require employers to reimburse employees for reasonable and necessary costs such as internet, phone, or home office equipment. Even in states without specific statutes, reimbursing remote work expenses can help employers avoid potential wage and hour issues, such as unintentional deductions or out-of-pocket costs that may affect employee net pay. However, it's important to note that expense reimbursements are not considered wages and cannot be counted toward minimum wage or overtime requirements under the Fair Labor Standards Act (FLSA). Employers should ensure reimbursements are handled separately and in accordance with federal and state laws.
• Workers' Compensation Coverage: Remote employees should be generally covered by workers' compensation if they sustain an injury arising out of and in the course of employment. Employers should confirm coverage extends to remote work environments and verify which state's workers' comp laws apply when employees reside outside the company's primary location.

As remote work becomes more prevalent, knowing what is required and maintaining accurate documentation of employee work locations is key. It not only helps ensure proper payroll tax and insurance coverage but also strengthens compliance across multiple jurisdictions heading into 2026.

AI and Data Privacy Compliance

Artificial intelligence and data-driven technologies are transforming HR operations, from recruiting to employee engagement. But with these advances come new compliance risks. Employers must understand how automated decision-making, monitoring tools, and data privacy laws intersect to help set up processes to avoid potential violations and maintain transparency with employees.

• AI Hiring Tool Compliance: Several jurisdictions now regulate the use of automated employment decision tools. New York City's Local Law 144 requires employers using AI in hiring or promotions to conduct annual bias audits and notify candidates in advance when such tools are used. Illinois has similar restrictions under its Artificial Intelligence Video Interview Act, and other states are considering comparable measures. Employers using AI for screening, scheduling, or performance evaluations should inventory all tools, retain documentation of vendor audits, and update their policies to reflect AI-related disclosures.
• Employee Monitoring and Transparency: With remote and hybrid work now common, more organizations use productivity tracking and monitoring software.
  • Several states — including Connecticut, Delaware, and New York — require employers to disclose electronic monitoring practices to employees. Employers should review their monitoring policies to ensure they clearly define what data is collected, how it's used, and how long it's retained. Communicating these policies upfront builds trust and aligns with emerging state privacy expectations. Employers should consider working with legal counsel to help ensure compliance with emerging laws and regulations
• Data privacy and breach notification: Employee data is increasingly covered under state privacy laws. The California Consumer Privacy Act (CCPA) now extends full privacy rights to employees, requiring employers to provide privacy notices and allow data access, correction, and deletion requests. Other states — including Colorado, Connecticut, and Virginia — have enacted similar statutes. In addition, most states now require prompt employee notification of data breaches involving personal or payroll information. Employers should coordinate with IT and legal teams to ensure procedures meet each state's timing and content requirements.

As HR teams integrate new technologies, the focus should remain on transparency, documentation, and policy alignment. Conducting a year-end review of AI tools, updating privacy notices, and reinforcing employee disclosures can help reduce risk and prepare your organization for evolving 2026 compliance expectations.

How To Keep Track of Compliance Reporting Deadlines

An HR compliance checklist is a great way to stay on top of key due dates related to applicable federal, state, and local laws and regulations. Consider that there are certain compliance matters with specific deadlines you can anticipate and will need to handle every year. A few examples of these predictable compliance deadlines include:

• Filing W-2s: Generally, by February 2, 2026, employers must provide Form W-2 to employees to file their federal and state taxes. A copy of each employee's W-2 must also be sent to the Social Security Administration (same deadline).
• Affordable Care Act (ACA) Reporting: Applicable large employers must furnish Form 1095-C to applicable employees by March 2, 2026. The deadline for filing paper Forms 1094-C and 1095-C with the IRS is March 2, 2026, or March 31, 2026, if filing electronically. These dates are based on prior-year schedules — confirm with the IRS once official 2026 deadlines are released.
• EEO-1 Reporting: Certain employers must report demographic workforce data, including data by race/ethnicity, sex, and job categories. Employers should monitor EEOC announcements for the 2026 filing window for the 2025 collection period which typically opens in the spring.

Other deadlines may be more unpredictable or triggered by certain events, such as when you bring on a new hire or an employee leaves the organization. Knowing what's required and the window of time to meet your responsibilities is the best way to prepare. Regardless of the type of deadline, an HR compliance checklist is an effective way to have visibility into your business's HR compliance-related tasks.

Start 2026 HR Compliance on the Right Path

Preparing now with an HR compliance checklist can help your business run more smoothly during year-end and beyond. Remember to use available resources such as assistance with legislative and regulatory compliance, payroll, human resources, and time and attendance management to make preparation much easier.

The 2026 compliance landscape introduces new complexities — from expanding pay transparency laws across more than a dozen states to evolving AI hiring regulations and increased oversight of multi-state work arrangements. Employers that take time now to document policies, update systems, and train managers will be better positioned to meet these expectations with confidence.