Compliance has always been critical for employers, but in 2025 the risks are higher than ever. Small and medium-sized businesses (SMBs) face increased pressure to manage evolving employment laws, workplace policies, and record-keeping requirements. Noncompliance doesn’t just create stress — it can result in costly fines, lawsuits, and employee dissatisfaction.
State-level policies are rapidly shifting, from pay transparency requirements to workplace AI regulations. SHRM reports that new state policies are creating fresh compliance challenges for HR teams in 2025 (SHRM). For SMBs without dedicated legal departments, tracking these changes across multiple states can be overwhelming.
Tip: Subscribe to compliance alerts and consider outsourcing HR functions to a Professional Employer Organization (PEO) that monitors state-level updates for you.
One of the most common compliance mistakes is misclassifying employees as independent contractors. This can trigger IRS audits, back pay, and penalties. Small businesses often struggle with classification rules, especially as gig and hybrid work arrangements expand.
Tip: Use the IRS and Department of Labor guidelines to evaluate roles, or lean on HR compliance experts to avoid costly errors.
Even long-standing regulations like the Family and Medical Leave Act (FMLA) remain difficult for many employers. According to SHRM, 89% of employers say more training is needed on FMLA rights and responsibilities (SHRM). Without proper tracking, businesses risk denying eligible leave or mishandling employee requests, leading to compliance violations.
Tip: Automate leave tracking and ensure managers receive ongoing compliance training.
Payroll is at the heart of compliance. Missing tax filing deadlines, miscalculating overtime, or failing to track deductions accurately can all lead to fines. With changing minimum wage laws and tax codes, SMBs often lack the resources to stay current.
Tip: Adopt payroll software integrated with compliance tools or outsource payroll to a PEO to ensure accuracy.
Beyond payroll and leave, SMBs must manage accurate records for wages, hours, employee files, and I-9 documentation. At the same time, privacy laws are tightening. Mishandled employee data can result in penalties and damage employee trust.
Tip: Centralize HR data in secure systems with strong audit trails and clear retention policies.
Small businesses often don’t have the budget for in-house legal or compliance teams. SHRM notes that only 18% of organizations report outsourcing HR technology to support compliance and business needs (SHRM). That leaves most SMBs struggling to keep up with regulatory changes on their own.
Tip: Partnering with a PEO like ComployHR ensures you have compliance experts monitoring laws, handling payroll, and guiding HR processes — without the cost of a full-time legal team.
For SMBs, HR compliance in 2025 is more complex than ever. From managing leave laws to preventing payroll mistakes, the risks of falling behind are high. By addressing these common challenges and leaning on expert partners, small businesses can reduce compliance risks and focus on growth.
ComployHR helps small businesses simplify HR compliance with payroll accuracy, benefits administration, and regulatory support. Ready to protect your business and your employees? Let’s talk.