Understanding the Big Beautiful Bill and How Overtime is Calculated

Recent federal legislative changes under the Big Beautiful Bill (BBB) introduce new reporting requirements for certain types of overtime—specifically FLSA (Federal) overtime. Employers should be aware of these updates and confirm how their payroll provider will handle these calculations for 2025 and beyond.

What’s Included — and What Isn’t

The BBB and its new W‑2 reporting notice apply only to Federal (FLSA) overtime. This refers to the standard time‑and‑a‑half pay for hours worked over 40 in a workweek.

These federal rules do not include state‑specific overtime requirements, such as California’s daily overtime after eight hours. If your employees work in a state with daily overtime rules, those additional amounts are not part of the federal overtime estimation required by the BBB.

What’s Changing for Employers

Beginning in 2025, employers are required to report an estimated FLSA overtime premium amount for each employee. Payroll companies may automatically calculate this estimate using year‑to‑date earnings data. Employers should speak with their payroll provider to understand exactly how these calculations will be performed.

This estimated amount will appear on employee W‑2s in Box 14 under a label such as “Est OT Premium.”

A few important notes:

• This is an estimate only—it is not an extra payment or deduction

• The estimation method follows IRS guidance allowing a “reasonable method” for calculating qualifying overtime amounts

• Box 1 (taxable wages) will not be affected; this reporting is informational only

New Reports and Review Options

Many payroll providers may offer new or updated reports to help employers review how the estimate was calculated. These reports may be available at both the employer and employee level. Check with your payroll provider to understand which reports are available and how to access them.

The Bottom Line

• The BBB requires employers to estimate and report FLSA overtime premiums beginning in 2025

• Payroll companies may calculate and display this estimate on W‑2s (Box 14) for informational purposes only

• The estimate has no impact on taxable wages or take‑home pay

• State‑specific overtime rules are not included in this federal calculation

• Employers may have the option not to display the estimated amount on W‑2s

Employers should confirm how their payroll provider will handle these requirements in 2025 and onward through 2026.

If you need more information, reach out to Infinium HR or your payroll provider to ensure your company is meeting the new federal requirements and applying overtime rules correctly.