Payroll Compliance 2025: What You Need to Know

Payroll compliance is seeing some big shifts as we head towards 2025, including raises in state minimum wage rates and major updates to state paid family leave laws.

To help you stay prepared and avoid costly payroll mistakes, we’re rounding up the most important compliance changes on the state and federal levels. Read on to find out what you can expect from payroll laws in the new year.

Federal Compliance Updates

The Social Security wage base for 2025 is $176,100. This is the maximum amount of wages subject to Social Security taxes. The wage base will go into effect on January 1, 2025.

Minimum Wage Updates

Effective January 1st, 2025, minimum wage rates will change in a number of jurisdictions. The jurisdictions that recently announced minimum wage rate increases include:

• California: increasing from $16.00 to $16.50
• Colorado: increasing from $14.42 to $14.81
• Connecticut: increasing from $15.69 to $16.35
• Florida: increasing from $12.00 to $13.00*
• Maine: increasing from $14.15 to $14.65
• Minnesota: increasing from $10.85 to $11.13
• Montana: increasing from $10.30 to $10.55
• Ohio: increasing from $10.45 to $10.70
• South Dakota: increasing from $11.20 to $11.50
• Vermont: increasing from $13.67 to $14.01
• Virginia: increasing from $12.00 to $12.41
• Washington: increasing from $16.28 to $16.66

*Note: Florida’s minimum wage increased from $12.00 to $13.00 effective September 30, 2024.

State Compliance Updates

California

Paid Family Leave

An amendment to California’s Unemployment Insurance Code means that effective January 1, 2025, employers can no longer require employees to use unused vacation time before receiving family leave benefits. Employees can still voluntarily decide to use their earned vacation time before receiving family leave benefits.

Maryland

Paid Family and Medical Leave

Maryland’s upcoming Paid Family and Medical Leave program has been delayed from October 1, 2024 to July 1, 2025.

Contribution rates for the program will be as follows:

• 15 or more employees: 0.9% of covered wages up to the Social Security limit. Employers may require employees to withhold up to half (0.45%) of the contribution rate.
• Fewer than 15 employees: 0.45% of covered wages up to the Social Security limit. Employers may withhold up to the full amount from employees’ pay.

Maryland’s program will allow employers to purchase private plans if the plan is approved by the state. Private plans must not require employees to deduct more than half of the contribution amount to fund the plan. Employees will be able to start receiving family leave benefits as of July 1, 2026.

Pay Statement Changes

As of October 1, 2024, new pay transparency laws are in effect, impacting open job postings and pay statements. The Maryland Department of Labor provides examples and templates of compliant job descriptions and pay statements for employers to use. New regulations require the following:

• Job openings must include salary ranges and benefits information.
• Pay statements must include:
• Employer’s name (as registered with the State of Maryland), address, and telephone number
• Date of payment
• Beginning and ending dates of the pay period
• Number of hours worked during the pay period (unless the employee is exempt from federal and state overtime requirements)
• All rates of pay
• Additional bases and amounts of pay, including bonuses, commissions on sales or other bases
• Applicable piece rates of pay and the number of pieces completed at each piece rate for each employee paid at a piece rate
• Gross and net pay earned during the pay period
• Amount and description of each deduction made from pay.

Minnesota

Minimum Wage Change

Effective January 1, 2025, Minnesota will have one minimum wage rate for all employers, eliminating the current two-tiered minimum wage rates based on employer size. As of January 1, Minnesota will apply the large employer minimum wage rate of $11.13 to all employers, regardless of the number of employees.

New York

Prenatal Leave

New York became the first state to pass paid leave provisions specifically for prenatal leave. Effective January 1, 2025, New York requires employers to provide 20 hours of paid prenatal leave in addition to the sick and safe leave employers are currently required to provide. The leave can be taken in hourly increments, and the balance of any untaken prenatal leave is not required to be paid to the employee upon termination.

Illinois

Pay Transparency

As of January 1, 2025, employers with 15 or more employees are required to include pay scale and benefits information for all job openings that will be physically performed, at least partly, within Illinois, and for all jobs where an employee will report to an office, supervisor, or worksite within Illinois.