What the Federal Government Shutdown Means for Employers

This blog on the U.S. federal government shutdown 2025 has been updated to reflect new information: 

When the federal government shut down in October, it brought much of Washington, D.C., to a standstill, halting routine operations, delaying agency responses, and leaving hundreds of thousands of federal employees nationwide furloughed or working without pay. Now, after 43 days of disruption — the longest shutdown in U.S. history — relief is on the way. 

Wednesday evening the House passed — and the president signed — the Senate-approved continuing resolution to fund the government through Jan. 30, 2026, officially reopening the federal government. Agencies are now resuming normal operations, and furloughed employees are returning to work. 

Key highlights from the bill 

• Temporary funding extension: The measure provides continued funding for most federal agencies at current levels through Jan. 30, 2026, giving lawmakers additional time to negotiate full-year appropriations.
• Full-year agency funding: Select departments — including Veterans Affairs, Agriculture, military construction, and the legislative branch — are funded through Sept. 30, 2026, ensuring stability for key public services.
• SNAP benefits protected: The bill secures full-year funding for the Supplemental Nutrition Assistance Program (SNAP), preventing disruptions to food-aid programs that millions of households rely on.
• Federal pay and back pay: All furloughed federal employees will be reinstated with full back pay, and those who worked without pay during the shutdown will receive full compensation once funds are released.
• Temporary relief from layoffs: The legislation pauses federal reduction-in-force (RIF) actions and layoff notices issued since Oct. 1, allowing agencies to re-staff and resume normal operations. 

What employers should know 

For employers — particularly those who contract with federal agencies or rely on federal funding — this measure offers immediate clarity and relief. With the government now reopened, agencies are expected to restore normal communication and operations quickly.  

Employers should anticipate a gradual return to standard processing timelines as agencies address backlogs in correspondence, paper filed returns, abatement requests, and refunds. The end of furloughs will also bring hundreds of thousands of federal employees back to work, reducing strain on industries that depend on federal reviews, certifications, and administrative approvals. 

While this legislation provides temporary stability, it funds most agencies only through January. Employers should continue monitoring developments and maintain contingency plans in case further negotiations stall. 

UKG's commitment to customers 

At UKG, we recognize that these changes have important implications for payroll filings, tax deposits, and compliance workflows. Our systems have remained fully operational throughout the shutdown, and we continue to monitor agency updates closely to ensure uninterrupted service for our customers. 

We’re also tracking the status of paper-filed returns, notice resolution, and refund disbursements as agencies resume normal operations. UKG will communicate any official guidance or procedural updates as soon as they are released to help employers remain compliant and minimize disruption. 

Previously, Nov. 10, 2025:

The U.S. federal government shutdown 2025, now the longest in history, has extended past 40 days. Though news Sunday signaled a deal to reopen the government may be in sight, roughly 670,000 federal employees remain furloughed, while an estimated two million are working without pay under contingency designations. Many of these essential workers include staff at the Internal Revenue Service (IRS) and the Department of Treasury, where limited personnel are keeping core systems running but leaving many non-essential functions paused. 

Employers are most likely feeling — or have begun to feel — the effects of these constraints. The IRS continues to process electronic filings and deposits, but operations relying on paper documents have slowed considerably. With a large portion of staff unavailable, employers should expect longer processing times for amended returns, mail-in correspondence related to abatement requests, and the resolution of IRS tax notice issues. These delays can create uncertainty for organizations waiting on responses or adjustments tied to payroll or compliance filings.

Shutdown’s ripple effects on payroll and compliance 

The shutdown’s financial impact extends beyond federal offices. Many businesses that depend on government contracts or reimbursements are managing delayed payments and slower project approvals. Even employers without direct federal ties may see indirect effects as furloughed workers and unpaid employees tighten spending, influencing local economies and consumer behavior. 

Despite these challenges, it’s important for employers to remember that payroll tax deposits, wage withholding, and filing obligations remain in effect. The shutdown does not suspend or extend federal deadlines. Employers should continue filing electronically and retain submission confirmations as part of their regular documentation process to avoid confusion once normal operations resume. Maintaining organized, accessible records will make it easier to reconcile any discrepancies or notices once agencies return to full staffing. 

What to expect when funding is restored 

When funding is eventually restored, agencies like the IRS will face a significant backlog of work. Employers can anticipate a surge in correspondence, delayed refunds, and a flood of notices related to filings submitted during the shutdown. It’s possible that the Treasury Department or IRS could issue guidance or temporary relief once operations resume, especially if processing delays or late responses create widespread challenges for taxpayers and employers. 

UKG continues to process payroll and tax filings without interruption and remains in close contact with industry and government partners. Our teams are monitoring developments, strengthening exception-tracking processes, and preparing resources to help customers manage the aftermath once federal operations resume. 

We’ll continue to share updates as new information becomes available. In the meantime, UKG remains committed to helping employers stay compliant, informed, and supported — no matter how long the shutdown lasts. 

— UKG Compliance & Government Relations Team 

Previously, Oct. 10, 2025:

With the U.S. federal government shutdown 2025 entering its second week, employers across industries are starting to feel the effects across payroll, tax compliance, and HR operations. Moments like this call on leaders to bring both strategy and empathy to the table to keep operations steady, support their people, and communicate with clarity. Here, we explore how the shutdown is affecting employers, what actions leaders can take now, and how organizations can use this disruption to strengthen policies and build greater resilience for the future.  

How the federal government shutdown impacts employers

• IRS Operations and Tax Filings: The Internal Revenue Service (IRS) remained open through Tuesday, October 7, operating under supplemental funding provided by the Inflation Reduction Act. Up until that point, employers could continue submitting tax deposits and electronic filings without interruption. With the shutdown persisting beyond that, the IRS has begun furloughing 34,000 employees—nearly half of its workforce. Roughly 54% of the staff remain active in performing “essential” operations such as processing electronic payments, maintaining core IT systems, and protecting government property. Employers can still submit electronic tax filings, but expect major delays in paper filings, amended returns (such as Forms 941-X), and taxpayer correspondence could face significant delays.
• Employer Verification (E-Verify): The E-Verify system, which employers use to confirm employee work eligibility, may experience limited availability or downtime with Department of Homeland Security operations curtailed. Employers should continue to complete and retain Form I-9 documentation as required and note any system outages for compliance purposes.
• Federal Agency Correspondence and Refunds: Employers waiting on IRS correspondence, abatement requests, or refund checks should anticipate longer processing times until normal staffing resumes.
• Contractors and Federal Vendors: Employers doing business with federal agencies may experience delayed payments, paused projects, or extended procurement timelines as contracts are temporarily placed on hold.  
   

What employers can do now

• Continue filing electronically through your HR and Payroll system. For example, at UKG, our systems and connections to federal networks remain active and stable.
• Submit payroll adjustments or corrections as early as possible to avoid bottlenecks when agency staffing is reduced.
• Monitor your IRS accounts for updates and keep records of all submissions.
• Maintain communication with your solutions representative for guidance if you experience rejected filings or delayed notices.  
   

A real-time test of organizational resilience strategies

Dealing with unexpected changes and disruptions can be frustrating. But these very real “what if” scenarios serve as reminders to prioritize policies that keep teams agile and your organization moving forward the best it can. Solutions with real-time insights help you make smarter decisions when it matters most. At the same time, building a culture of transparency and trust with your workforce is key to sustaining strong performance longer-term.

Here are some key areas to focus on:  

• Identify critical roles and skills: Pinpoint where teams add the most value and reallocate talent as needed.
• Audit resources and processes: Ask which tools are essential, which are “nice-to-haves,” and what can be automated.
• Lean into what employees are saying: Employ listening tools and feedback loops to build trust and improve policies and practices.
• Highlight business impact: Use data to show how teams directly influence revenue and productivity. 

Facing uncertainty? UKG experts are here to help you navigate HR, payroll, and workforce challenges with confidence. Connect with us today.
 

This information is provided as a courtesy and should not be construed as legal or tax advice. The information may change or be subject to revision without notice. We encourage you to consult with your legal and tax advisors regarding the needs and requirements of your particular business.