As we move closer to understanding the impacts of the 2024 presidential election, it's evident that employers and employees should brace for change. The contrasting governing philosophies of the two major parties often lead to shifts in workplace policies.
With the onset of a second Trump administration, significant adjustments in withholding and benefits are anticipated, along with potential reversals of policies from the past four years. Let's delve into what these election results might mean for HR and upcoming changes in workplace laws for 2025.
Income taxes and labor regulations were key topics during the recent campaign. Notably, significant components of the 2017 Tax Cuts and Jobs Act are set to expire in 2025, potentially leading to substantial changes in tax rates starting the following year. Congressional Republicans and President Donald Trump are advocating to extend these tax cuts and make them permanent. Additionally, President Trump has proposed eliminating taxes on tips for service workers and on overtime for certain employees.
Employee Impact: If these tax cuts are extended, employees might continue enjoying the current tax benefits, which could stabilize their net income. However, the elimination of taxes on tips and overtime could significantly increase the take-home pay for workers in the service industry, enhancing their financial well-being.
As for the classification of workers, there is expected to be a shift under the new administration. While the Biden administration had implemented stricter classifications, the Trump administration plans to relax these, which could simplify processes for employers but also raise concerns about the impact on workers' rights.
Employee Impact: This relaxation could lead to more individuals being classified as independent contractors, which might offer more flexibility but fewer employment protections and benefits such as health insurance and retirement plans.
Another contentious legislative piece is the Protecting the Right to Organize (PRO) Act, which is seen as the most significant worker empowerment legislation since the Great Depression. Currently pending in the Senate, the PRO Act is designed to update and strengthen labor laws, providing a robust platform for workers to have their voices heard, which is particularly important for rebuilding a fairer economy post-COVID-19.
Employee Impact: If the PRO Act is enacted, it could enhance job security and bargaining power for freelancers and other non-traditional workers, potentially leading to better working conditions and benefits across various sectors.
Critics of the PRO Act argue that it could disrupt the freelancing sector, affecting the livelihoods of approximately 64 million Americans. President Trump has expressed his intention to veto this act, citing potential negative impacts on the freelance economy.
The future of the Tax Cuts and Jobs Act of 2017, set to expire beyond 2025, hinges on the Republican-controlled Congress. While it seems probable that the Act will be extended and possibly made permanent, it's still too early for definitive predictions. If extended, there will be no changes to withholding for the 2026 tax year (based on 2025 income taxes). However, if the Act is allowed to sunset, taxpayers could face significant increases for the 2025 tax year.
In the House, several proposals aim to eliminate taxes on tips for service industry workers. To date, President Trump has not shown a preference for any specific bill. Eliminating taxes on tips would simplify income tax processes for these workers and payroll tax processes for their employers.
Regarding workplace safety, the Biden administration's Heat Illness and Injury Prevention (HIIP) rules, introduced by OSHA and effective as of January 2, 2025, mandate additional protections for workers in high-heat industries such as agriculture and oil and gas. These include required breaks, shaded rest areas, accessible drinking water, and comprehensive employer plans to address heat-related illnesses. President Trump has indicated plans to closely review these new HIIP standards, potentially leading to significant amendments or their complete revocation.
Many of the anticipated impacts of the election on employers are expected to simplify operations for HR departments. The priorities of the second Trump administration concerning organized labor are likely to stay consistent. With the opportunity to appoint two new members to the National Labor Relations Board (NLRB), President Trump is expected to establish a 3-2 Republican majority, fostering a more business-friendly environment and diminishing the influence of labor unions.
Employee Impact: The potential reduction in labor union influence could have a profound impact on employees' ability to negotiate for better pay, benefits, and working conditions. A more business-friendly NLRB might lead to decisions that favor employer interests, possibly at the expense of workers' rights and collective bargaining powers.
In 2024, the Department of Labor introduced a new rule that redefined "independent contractors" under the Fair Labor Standards Act (FLSA). Since this change was made through regulatory action rather than legislation, President Trump intends to revert to the earlier rules that simplified the classification of remote workers and freelancers.
Furthermore, diversity and inclusion initiatives implemented under the Biden administration are expected to be rolled back by the Trump administration, particularly affecting federal employers and contractors. This reversal will likely eliminate several layers of reporting currently required for these employers.
Employee Impact: The rollback of diversity and inclusion initiatives could affect the workplace environment, particularly for federal employees and contractors. This might lead to a workplace that feels less inclusive and potentially more discriminatory, impacting morale and productivity.
The Trump administration is expected to move swiftly on several key issues, potentially within the first 100 days in office. Employers and HR professionals should remain vigilant, prepare for changes, and stay informed about the administration's initiatives and priorities.
It’s wise for employers to be proactive in planning workplace policies to avoid being caught off-guard by significant changes. Fortunately, regulatory shifts typically do not occur overnight, providing employers with some time to adapt before new policies must be implemented.
Companies should also ensure they are prepared to communicate any changes in employment conditions to their staff, whether these changes pertain to taxes, withholding, overtime, or employee classification.
As we navigate the implications of the new administration's policies, it's crucial for employers and HR professionals to stay proactive and informed. Changes in workplace regulations, tax laws, and labor standards could have significant impacts on your business operations. While we've outlined potential shifts and what they could mean for your organization, the landscape is constantly evolving.
For personalized advice and to ensure you remain compliant with all new regulations, don't hesitate to reach out to Affiliated HR and Payroll. Our team is on hand to answer any questions you might have and to help you adjust smoothly to any changes. Staying ahead of these developments with expert guidance can make all the difference. Keep following us for the latest updates and insights.