Under recent legislation commonly referred to as the One Big Beautiful Bill Act, employers must pay closer attention to how overtime compensation is calculated and reported. In particular, payroll systems should clearly distinguish between base overtime pay (the portion of overtime tied to an employee’s regular rate of pay) and premium overtime pay (the additional statutory premium paid for overtime hours).This distinction is no longer just a technical payroll issue. Beginning this year, employees may be able to rely on the premium overtime pay amount when applying certain deductions on their individual tax returns. If payroll records do not clearly separate base and premium overtime, employees could be unable to substantiate those deductions—creating confusion, employee relations issues, and potential compliance exposure for employers.To stay compliant, employers should review overtime calculations, earnings codes, and payroll reports to ensure base and premium overtime pay are separately identified and accurately tracked. Coordinating with payroll vendors and conducting a proactive payroll review now can help avoid downstream problems for both employers and employees.If you have questions about how this change affects your payroll practices, please reach out to the Employer-Lawyer team. We're happy to assist!