As a business owner in Illinois, part of the job is paying your employees. To get it right, you’ll need to follow state laws surrounding benefits, overtime pay, taxes, and more.
Whether your business is brand-new or a few years along, Gusto’s guide will help you understand the most important regulations and how payroll taxes work in Illinois. Here’s what to know before you cut the next round of paychecks.
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Key Illinois regulations payroll professionals need to know
Illinois minimum wage
Illinois is gradually raising its minimum wage over the next few years. In January 2025, non-tipped workers will need to earn at least $15 an hour. Tipped workers will need to earn at least 60% of that amount.
Here’s how Illinois minimum wage will increase for non-tipped workers:
- As of January 1, 2020: $9.25/hour
- As of July 1, 2020: $10/hour
- As of January 1, 2021: $11/hour
- As of January 1, 2022: $12/hour
- As of January 1, 2023: $13/hour
- As of January 1, 2024: $14/hour
- As of January 1, 2025: $15/hour
Tipped workers will see their minimum wage increase as follows:
- As of January 1, 2020: $5.55/hour
- As of July 1, 2020: $6/hour
- As of January 1, 2021: $6.60/hour
- As of January 1, 2022: $7.20/hour
- As of January 1, 2023: $7.80/hour
- As of January 1, 2024: $8.40/hour
- As of January 1, 2025: $9/hour
Youth workers under 18 (working less than 650 hours per calendar year) will increase as follows:
- As of January 1, 2020: $8/hour
- As of July 1, 2020: $8/hour
- As of January 1, 2021: $8.50/hour
- As of January 1, 2022: $9.25/hour
- As of January 1, 2023: $10.50/hour
- As of January 1, 2024: $12.00/hour
- As of January 1, 2025: $13.00/hour
Both Chicago and Cook County have set higher minimum wages than the state of Illinois. If your local government sets a higher wage, then you need to follow the higher standard.
Illinois pay stubs
Each paycheck should be accompanied with a pay stub that includes:
- The number of hours worked during the pay cycle
- Rate of pay
- Overtime pay
- Number of overtime hours
- Gross wages
- Itemized deductions for the pay cycle
- Year to date Itemized deductions
Illinois pay periods
Illinois employers must pay employees at least twice per month using a standard schedule. Here are your options:
- Pay employees semi-monthly or bi-weekly, at most 13 days following the end of the pay period.
- Pay employees weekly, at most seven days following the end of the pay period.
Determining time worked in Illinois
Illinois employers must track the number of hours each employee works. Once an employee puts in more than 40 hours during a workweek, you must pay overtime.
Illinois overtime pay and tracking
When you ask employees to work overtime, you’ll need to pay them for the effort. Employees are entitled to time and a half once they work more than 40 hours in a week. Include details of their overtime hours and pay rate on their pay stub.
Illinois final wage payment
If an employee parts ways with your company for any reason, you must pay the employee’s final compensation in full—either immediately or on your next scheduled payday. Include wages, earned commissions, and bonuses. You also must pay employees for unused vacations and holidays.
Income tax withholding in Illinois
Illinois employers must withhold 4.95% of an employee’s taxable wages for state income taxes, but there are no municipality taxes.
Illinois benefits
Illinois employees are entitled to federal Social Security and Family and Medical Leave Act (FMLA) benefits. Additional Illinois state requirements include:
- Sick leave:. The state law allows employees to use a portion of this time to care for sick relatives instead of themselves. Municipalities might also have their own regulations.
- Workers’ compensation: With limited exceptions, all Illinois businesses must get workers’ compensation insurance.
- Health insurance: According to the federal Patient Protection and Affordable Care Act (ACA), Illinois businesses with at least 50 full-time (or equivalent) employees must offer health insurance benefits. Illinois employers are allowed to withhold health insurance costs from employee paychecks.
Voting: Employers in Illinois must offer employees two hours time off during open polling hours to vote.
Finding the right payroll provider in Illinois—Why Gusto?
1. Unlimited payroll
Some online payroll platforms cap how many times your business can run payroll. With Gusto, your business can run payroll as often as you need. Our flexible payroll management platform is designed to meet your team’s needs regardless of how many employees you have or the number of states in which you operate. By using Gusto, you can run payroll in just a few clicks for your team, including independent contractors, employees based in different states, and employees paid at differing rates. You can also customize your pay schedules in any way you want. With dozens of payroll features, Gusto easily adapts to the rhythm of your workplace.
2. Tax filings and payments
Whether your business is headquartered in Chicago or you operate satellites in Springfield, Gusto completes your tax filings and payments no matter where in Illinois your business is situated. Our platform works seamlessly with local, state, and federal tax authorities to make sure your company doesn’t miss a beat.
Everything is just easy and intuitive. I rarely have to call anyone for anything — I can just do it all myself in the app.
Brandon Hawkins, Owner of 1114 Group, LLC
You can fulfill most of your tax-filing and payment obligations without leaving the Gusto platform. We’ll even help your new hires right in our system and report their hiring to relevant authorities. Come year-end tax time, you can use Gusto to quickly gather and submit all wages, payments, and tax liabilities that your business has made under the Federal Unemployment Tax Act (FUTA). We continuously update our system so your business remains on top of all new payroll regulations and obligations.
3. Forms and reports
Through Gusto, you can automatically generate digital copies of W-2s, 1099s, year-end tax forms, quarterly tax forms, and customized payroll reports. You can also send employees copies of their forms and get them e-signed, e-faxed, and e-filed directly from the platform.
With Gusto, you also have access to advanced payroll features so you can create and download reports exactly as you need them, at no additional cost.
4. Employee benefits
Easily provide your employees with the benefits they want and need—all from the Gusto platform. Use Gusto to offer and administer all your employee benefits, such as:
- Health insurance
- 401(k) programs
- Flexible spending accounts
- And more
Frequently asked questions about payroll in Illinois
What does an Illinois payroll provider need to track?
In Illinois, payroll providers must track employee hours worked, wages, bonuses, commissions, and overtime pay. Illinois payroll providers must also track earned vacations and holidays, as employers may be required to pay the monetary equivalent of these days off if the employee leaves the company.
How often do employees in Illinois get paid?
Employees in Illinois get paid at least twice a month. Some employers will pay their employees semi-weekly or biweekly, whereas others will issue weekly checks. Employers on a semi-monthly or biweekly pay schedule must pay employees no later than 13 days following the end of a pay period, and employers on a weekly pay schedule must pay employees no later than seven days after the end of a pay period. Certain industries may be exempt from these payment schedules.
What types of payroll taxes are paid in Illinois?
Employers in Illinois are required to contribute to the state unemployment fund. Employers are assessed unemployment insurance tax on an employee’s first $12,740 in taxable wages. The tax rate can range from 0.625% to 6.825% for experienced employers, and 3.125% to 3.425% for new employers. Employers must send in these taxes along with any income tax withheld from their employees. These payroll taxes are in addition to federal payroll deductions and employer contributions for income tax, Medicare, and Social Security.
Do employees in Illinois pay state taxes?
Yes. All employees in Illinois pay a flat state income tax rate of 4.95%.
