How the One Big Beautiful Bill Act Impacts Payroll and HR for Restaurants and Bars

How the One Big Beautiful Bill Act Impacts Payroll and HR for Restaurants and Bars

H.R. 1/The One Big Beautiful Bill Act (OBBBA) is now law, and if you run a restaurant, bar, or nightclub, it is time to understand how it affects your payroll and HR operations.

From how you handle tips and overtime to what forms you file and when, H.R. 1 includes several provisions that directly impact hospitality employers.

Here is what you need to know to stay compliant and competitive:

No Federal Income Tax on Tips (2025 to 2028)

Employees earning less than $150,000 per year ($300,000 if married filing jointly) can deduct up to $25,000 per year in tips from their federal taxable income.

What employers need to know:

You must still track and report tips for tax and compliance purposes

Social Security and Medicare taxes still apply

IRS withholding tables will not change, so employees will not see this benefit in their paychecks but may receive a larger refund during tax season

Only discretionary tips qualify; service charges do not

Overtime Pay Exemption (2025 to 2028)

Employees earning less than $150,000 per year ($300,000 if married filing jointly) can exclude up to $12,500 per year of overtime premium pay from federal taxable income.

What employers need to know:

• The exemption only applies to the premium portion of overtime pay
• Standard overtime calculations under FLSA and state law still apply
• Withholding remains unchanged; employees will see the benefit at tax time

1099 Reporting Threshold Increases

Beginning in 2026, the reporting threshold for Form 1099-NEC increases from $600 to $2,000. This reduces the number of forms required for small vendor and contractor payments.

ERTC Deadline Shortened

The law retroactively bars new Employee Retention Tax Credit (ERTC) claims for Q3 and Q4 2021 if filed after January 31, 2024.

Why It Matters for Hospitality Employers

Restaurants and bars already manage complex payroll needs, including tipped wages, high turnover, unpredictable schedules, and employees working multiple roles. H.R. 1 adds new payroll reporting and compliance responsibilities that cannot be ignored.

If your current payroll provider is not actively preparing you for these changes, it may be time for a new partner.

How CTR Payroll | HR Can Help

CTR has been helping hospitality businesses stay compliant and efficient for decades. We understand the intricacies of tip income, overtime, and hospitality payroll. Our technology is built to handle shift differentials, local tax rules, and complex scheduling, and our dedicated team knows what it takes to keep you on track.

If you want a payroll and HR partner who is already ahead of H.R. 1, we are ready to help.

Need help getting ready for these changes?
Contact CTR Payroll | HR today and find out how we can support your restaurant, bar, or club.