Employment law compliance continues to be a critical issue for HR teams across the U.S. As businesses navigate increasing regulatory complexity, understanding where to invest resources, what challenges to anticipate, and how to implement effective strategies is more important than ever. SixFifty’s State of Employment Law Compliance in 2025 report provides crucial insights into how HR teams are managing compliance, where they’re struggling, and what steps they can take to stay ahead.
HR Statistics and Compliance Investments
HR teams are dedicating significant time and money to compliance, with increasing pressure to keep up with evolving laws. Here’s what the data reveals:
91% of HR professionals say employment law has become more complex in the last five years.
HR teams spend over 25% of their job on employment law compliance.
Companies with employees in more than five states spend 3.6 times more time on compliance than others.
$39,072 per year is spent on outside legal help for employment law compliance.
562 hours per year is spent on compliance work by in-house HR teams.
HR teams of one spend 6.25 times more time per employee on compliance than large HR teams of 20+.
75% of companies don’t review handbooks and agreements frequently enough, increasing their legal risk.
Top Compliance Priorities for HR in 2025
HR teams are dedicating the most time to:
Hiring compliance – Keeping up with job posting laws and pay transparency requirements.
Paid leave and sick leave policies – Adapting to state-specific regulations.
Multi-state workforce management – Handling taxes, employee registration, and compliance across jurisdictions.
Pay requirements – Keeping up with minimum wage changes and overtime laws.
Employee classification – Navigating exempt vs. non-exempt status and independent contractor rules.
These areas are not only time-consuming but also present some of the highest risks for non-compliance.
Key Compliance Challenges in 2025
While compliance is a top priority, HR teams continue to face significant roadblocks, particularly in managing multi-state workforces.
1. Multi-State Compliance is Getting More Difficult
26% of companies have avoided hiring in certain states due to the complexity of employment laws.
Companies operating in more than five states spend over 82 hours per month on compliance, compared to just 22 hours for single-state employers.
California and Colorado rank among the most complex states due to frequent legal updates and severe penalties for non-compliance.
2. Compliance Complexity Creates Legal Risks
HR professionals report struggling with:
Pay transparency and wage laws – Keeping up with salary disclosures and pay equity requirements.
Employee classification – Avoiding misclassification penalties and adapting to evolving non-compete regulations.
Hiring and termination compliance – Ensuring legal job postings, separation agreements, and pay documentation meet new standards.
Leave policies – Managing different sick leave and paid family leave laws across states.
AI in hiring – Navigating bias audits and transparency requirements for AI-driven hiring tools.
3. Limited Resources Create Gaps in Compliance
Only 16% of HR teams update their policies quarterly—most do it once a year or less.
18% of companies don’t remember the last time they updated employment agreements.
Leadership and HR teams are not always aligned on compliance priorities, making it harder to secure budgets for legal updates.
Strategies to Improve Employment Law Compliance
With compliance demands increasing, HR teams must adopt proactive strategies to stay ahead of regulatory changes and minimize risk.
1. Automate Compliance Work
HR teams using employment law automation software spend significantly less time on manual updates.
AI-driven legal updates help teams stay ahead of state-specific changes without constant legal consultations.
2. Conduct Regular Compliance Audits
Quarterly or biannual reviews of employee handbooks, contracts, and hiring practices help prevent legal issues.
Benchmarking against multi-state compliance laws ensures companies remain up to date with key requirements.
3. Train HR and Leadership Teams
Educate managers on state-specific hiring, termination, and classification laws.
Implement ongoing compliance training to prevent costly mistakes in employee relations and workforce management.
4. Invest in External Compliance Support
51% of HR teams rely on external legal counsel for compliance.
Companies should consider employment law consultants or software solutions to streamline legal updates and document generation.
5. Align HR and Leadership on Compliance Goals
Only 14% of companies say HR and leadership give compliance equal priority.
HR teams should work with leadership to secure the necessary budget and resources for compliance initiatives.
Final Thoughts
As employment laws continue to evolve, businesses must adopt proactive compliance strategies to avoid costly penalties and lawsuits. Investing in technology, conducting regular audits, training HR teams, and aligning leadership priorities will be key to managing legal risk in 2025 and beyond.
Schedule a meeting with us today to take the stress out of employment law compliance!
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