Update Your Employee Policies Before the New Year: What to Review

As 2026 approaches, many states and cities are rolling out new workplace laws—from minimum wage increases to expanded paid leave and updated pay transparency rules. For growth-stage businesses, these changes can have big operational impacts, especially if your workforce spans multiple states or includes both employees and contractors.

What to Review Before January 1

1. Pay and Wage Adjustments
Many states update minimum wage rates on January 1. Check both state and local laws to ensure your pay structure meets the latest thresholds—especially for tipped employees, exempt vs. non-exempt workers, and salaried staff. Even if you already comply, rising pay transparency expectations mean this is also a good time to review pay equity across roles.

2. Time Off and Leave Policies
States like California, Illinois, and Minnesota have expanded paid leave and sick time requirements recently. Make sure your policies reflect any changes to accrual rates, carryover limits, or eligible leave types. Also confirm that your policy language matches the law—vague or outdated language can create confusion or risk.

3. Contractor vs. Employee Classifications
Misclassifying workers remains a major compliance pitfall. Review your contractor agreements and ensure they meet IRS and Department of Labor standards. If someone functions like an employee—set hours, regular oversight, or company-provided tools—they may need to be reclassified.

4. Employee Handbook and Onboarding Materials
Your employee handbook should evolve with your company. Check that it reflects updated policies, new technology use rules (like AI or remote monitoring tools), and workplace safety or conduct expectations. This is also a good time to confirm that every employee has a signed acknowledgment form on file.

Questions SMBs Should Be Asking Before January

Before finalizing your updates, take time to assess where your business stands. Ask yourself—and your HR or legal advisor:

• Do our pay practices comply with 2026 wage laws? Have we adjusted salaries and hourly rates where new minimums apply?
• Are our time-off policies compliant and clearly written? Do they match state and local leave requirements for next year?
• Are contractors correctly classified? Could any part-time or project-based roles now qualify as employees under new regulations?
• When was our employee handbook last updated? Does it reflect current workplace expectations, safety standards, and technology use?

What to Do Next

1. Run a quick HR audit. Use Rocket Copilot to generate a policy checklist tailored to your state or industry.
2. Review pay rates and classifications. Confirm that all changes are documented and effective before the first payroll of 2026.
3. Update and distribute your handbook. Send the revised version to all employees and collect updated acknowledgment forms.
4. Consult a Legal Pro. A short review can help catch compliance gaps before they turn into costly penalties.

A few proactive updates now can prevent major headaches later. With clear, compliant policies in place, your business—and your team—can start the new year stronger and more confident.