A Manager’s Guide to Employee Questions About the One Big Beautiful Bill

Ever since July 4th, when Trump signed the "One Big Beautiful Bill" (OBBB) into law, business owners across the country have been flooded with questions from their employees. 

From "When will my paycheck change?" to "Am I getting that overtime money back?" to "Do I still pay taxes on tips?" … well, the confusion is real.

Employees are getting conflicting information from everywhere. They're seeing headlines, scrolling TikTok, and getting guidance from their friends. And they're trying to decipher it all.

At Whirks, we've been helping business owners make sense of the changes and conversations around them since the OBBB passed. 

As a business owner or manager, you want to be able to respond clearly and confidently. This guide will help you:

• Explain what the OBBB means for your team
• Set realistic expectations about paychecks and tax savings
• Avoid the swirl of misinformation coming from social media and hearsay

Are Paychecks Changing Automatically?

Here's the most important thing your employees need to understand: Their weekly or bi-weekly paychecks will not change automatically because of the new tax law.

This might come as a surprise to employees who've been hearing about "no tax on tips" and "no tax on overtime." But here's what's actually happening:

• The tax benefits come as deductions on their individual tax returns, not through payroll.
• Employees can claim up to $12,500 in overtime pay as a deduction (single filers).
• Tip income deductions are available up to $25,000 per taxpayer.
• These are deductions, not credits. That means they reduce taxable income, not dollar-for-dollar tax owed.

Think of it this way: If your employee normally gets a $2,000 tax refund, they might now get a $2,500 or $3,000 refund, depending on their tax bracket. But their paycheck stub will look exactly the same unless they take action.

DID YOU KNOW?

• $12,500 – Maximum overtime deduction for single filers
• $25,000 – Maximum tip income deduction per taxpayer
• These are deductions, not credits—your employees’ paychecks won’t change automatically.
• Social Security & Medicare taxes still apply to overtime and tips.

Common Employee Questions and How to Answer Them

Your team is likely already asking these questions. And if not, they will be soon.

“When will I see more money on my paycheck?"

Your Answer: "Your regular paycheck won't change automatically. The tax benefits show up when you file your tax return next year. However, if you want to see a more on your paycheck throughout the year, you can fill out a new W-4 form and claim these expected deductions in the 'other deductions' section."

“Do I need to do anything special to get these tax breaks?"

Your Answer: "No extra steps are needed during the year. We'll track your overtime and tip income automatically and report it on your W-2. When you file your taxes, your tax preparer will be able to claim these deductions for you."

"I heard I don't have to pay taxes on tips anymore. Is that true?"

Your Answer: "Not exactly. You'll still see the same taxes taken out of your paycheck, including Social Security and Medicare taxes. The benefit comes at tax time when you file your return. That's when you can deduct up to $25,000 of tip income on your return, which will reduce your federal income tax."

“My friend said they're getting an extra $12,000 back. Will I?"

Your Answer: "That's not how it works. These are deductions, not dollar-for-dollar refunds. If you earn $12,500 in overtime, you might save anywhere from $1,250 to $3,750 in federal income taxes, depending on your tax bracket. It's still a great benefit, but not $12,500 cash back."

The W-4 Strategy For Seeing Benefits Sooner

If your employees want to see some benefit during the year instead of waiting until tax time, there is a way. But they will need to be proactive.

Here's how you can explain it:

1. Estimate annual overtime/tip income: If an employee consistently earns overtime or tips, they can estimate their annual total.
2. Complete a new W-4: On the W-4 form, there's a section called "other deductions."
3. Enter the deduction amount: They can enter their estimated overtime (up to $12,500) or tips (up to $25,000).
4. Submit the new W-4: This will reduce their federal tax withholding throughout the year, and they may see a slight increase in their paychecks.

Important caveats to share:

• The W-4 form is more complex than it used to be.
• Employees should be conservative in their estimates. Overestimating could mean owing money at tax time.
• If they're unsure about the amounts, it's safer to wait and claim the deduction on their tax return.

Setting Realistic Expectations About Tax Savings

One of the biggest challenges you'll face is managing expectations about how much employees will actually save. Here's what you can share to prevent employees from imagining huge windfalls:

For overtime deductions:

• Maximum deduction: $12,500 per person
• Actual tax savings: $1,250 to $3,750 (depending on tax bracket)
• Still subject to Social Security and Medicare taxes (7.65%)

For tip deductions:

• Maximum deduction: $25,000 per person  
• Actual tax savings: $2,500 to $7,500 (depending on tax bracket)
• Still subject to Social Security and Medicare taxes (7.65%)

While these are meaningful benefits, they're not windfalls. Most employees will see a few hundred to a few thousand dollars in additional tax savings…not the massive payouts some may be expecting.

Communication Templates for Managers

Email Template for All Employees:

Subject: Important Information About Recent Tax Law Changes

Hi Team,

You may have heard about recent changes to federal tax law that affect overtime and tip income. Here's what you need to know:

Your regular paycheck will not change automatically.
These benefits apply when you file your 2025 tax return next year.
We'll track and report the necessary information on your W-2.
If you want to see benefits sooner, you can submit a new W-4 form.

For personal tax advice, we recommend that you speak with a tax professional. We're here to help with your payroll-related questions.

Thanks,
[Your name]

Script for One-on-One Conversations:

I know there's been a lot of talk about the tax changes in the OBBB. The key thing to understand is that your paycheck won't automatically change. The benefits show up when you file your taxes next year. We'll track everything correctly on our end, and your tax preparer will handle claiming these deductions for you.

How to Get Ahead with Employee Education

The best approach is to be proactive about employee communication. Consider:

1. Holding a short team meeting to explain the basics
2. Sending a clear, simple email (like the example above)
3. Working with your payroll provider to ensure accurate tracking and reporting
4. Encouraging employees to consult tax professionals for personal advice

Remember, you're not expected to be a tax advisor for your employees. Your role is to share the payroll facts and direct them to experts for personal tax guidance.

Moving Forward with Confidence

The new tax changes provide real, meaningful benefits for employees who earn significant overtime or tip income. But managing expectations and providing clear communication is essential.

Your employees are looking to you for guidance during a time of change. By communicating early and clearly, you’ll:

• Set realistic expectations
• Avoid misinformation from social media
• Build trust with your team

If you're unsure how these changes affect your business or employees, now is the perfect time to connect with your payroll provider.

Want the Full Breakdown of the One Big Beautiful Bill?

Our team covered the major OBBB changes and exactly how they impact small business owners and managers in our recent webinar.

Here’s what you’ll get in the on-demand replay:

• A clear explanation of what the law actually says (and what it doesn’t)
• Insight into how OBBB affects payroll, tips, and overtime reporting
• Answers to the most common employee questions
• Guidance you can share with your leadership team and staff

Watch the webinar replay now!