Illinois Hourly Paycheck and Payroll Calculator

Illinois Hourly Payroll Calculator

This article will help you understand what you need to do to process Illinois payroll for your hourly workers.

Illinois payroll taxes

Here’s what you need to know about withholding payroll taxes in Illinois.

• Illinois payroll taxes start with employees filling out IL-W-4. This information helps you determine how much you should withhold. 
• If an employee does not complete this form, you will need to withhold tax as though no exemptions were claimed.
• Employees only need to update Form IL-W-4 in case of life events (such as marriage, divorce, birth or adoption of a child, etc.) which may impact their taxes.
• The personal income tax rate in Illinois is a flat rate of 4.95%.
• Illinois has reciprocity and requires Form W-5-NR with the following states: Iowa, Kentucky, Michigan, and Wisconsin.

Additional Illinois forms

In addition to IL-W-4 mentioned above, Illinois employers also need to file the following forms:

1. Illinois Withholding Income Tax Return (IL-941)
2. Illinois Withholding Schedule (Schedule P)
3. Illinois Withholding Tax Payment (IL-501)*
4. Wage and Tax Statement (State W2)
5. Illinois TaxNet Monthly Wage Report (IL UI MTHLY WG)
6. Illinois Annual W/H Reconciliation (IL W-3)
7. IL New Hire Report
8. Employer’s Contribution and Wage Report (UI-3/40) 

Illinois unemployment tax rate

Illinois requires most employers to pay unemployment insurance tax to help compensate workers who are out of work through no fault of their own. 

• Employers pay Illinois unemployment tax on the first $13,271 of an employee’s wages.
• New employers who are not in the construction industry pay at a rate of 3.95%.
• Experienced employers pay at a rate of 0.85%–8.65%.
• Unemployment tax in Illinois should be paid quarterly using Form UI-3/40. 

Paying Illinois taxes

Here’s what you need to know about paying Illinois taxes:

• How often employers pay depends on the amount of tax you withhold in a year. 
• Illinois’s payment frequencies are quarterly, monthly, annually

Illinois minimum wage

In 2023, the minimum wage in Illinois is $13 per hour. Different rates apply to tipped employees and employees under 18 years of age. 

Local minimum wage

The following municipalities have minimum wage rules:

• Chicago: $13/hr
• Cook County: $12/hr

Illinois overtime pay

Because Illinois doesn’t have any state law governing overtime pay, the federal rules under the Fair Labor Standards Act apply. Generally speaking, hourly employees are to be paid time-and-a-half for all hours worked over 40 hours in a week.

Workers’ Compensation

Requirements to obtain Workers’ Compensation vary by state. This table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information. 

New hires

Employers in Illinois need to report new employees.

• New hires must be reported to report new hires.
• New hires must be reported within 20 days of their first day of work. 

Payroll stubs

You must provide a pay stub to every employee that includes:

1. Company’s legal name and address
2. Employee’s name and last four digits of their Social Security number
3. Pay period beginning and end dates
4. Total hours worked
5. Rate of pay
6. Gross wages
7. The amount and reason for any deduction

Final paychecks

Employers must pay final wages to employees within a certain timeframe, depending on the circumstances for leaving.

• If a worker voluntarily resigns, final wages are due immediately if possible, but no later than the next scheduled payday.
• For layoffs and involuntary terminations of employment, final wages are due immediately if possible, but no later than the next scheduled payday.

Time off

Illinois law requires employers to provide the following types of time off to employees.

• Jury duty: this applies to all employers.
• Voting leave: In some circumstances, employers are obligated to provide up to two hours of paid time off to allow employees to vote.
• Family & parental leave: eligible employees can take up to 12-26 weeks. 
• Family and Medical leave: sick pay is not required to be paid at separation unless the employer’s written policy says so.

Federal payroll taxes

Federal income tax

Unless they are exempt, your employees will pay federal income tax.

• You must withhold federal income tax from employees’ pay, unless they are exempt. 
• Each employee’s Form W-4 will differ based on their filing status and dependents, among other details—so the amount of income tax to be withheld will vary.
• Form W-4 does not need to be sent to the IRS, but should be kept for your records.

FICA

Both you and your employees will pay Federal Insurance Contributions Act, or FICA tax.

• FICA is made up of the Medicare tax and the Social Security tax. 
• In 2023, the Social Security tax requires employers and employees to each contribute 6.2% of wages 
• up to $2,600. 
• The Medicare tax requires employers and employees to each contribute 1.45% of all wages. 
• See the IRS webpage for details, like maximum thresholds.

FUTA

Like the state, the federal government also has an unemployment tax, called FUTA, which is paid by employers.

• FUTA is an annual tax an employer pays on the first $7,000 of each employee’s wages. 
• The FUTA rate for 2023 is 6.0%, but many employers are able to pay less, for instance, up to 5.4% each year due to tax credits.
• Most employers will pay this tax annually with Form 940. But larger employers with more than $500 in tax due will have to pay quarterly. 

Additional Medicare tax

The Additional Medicare tax is paid by employees. Here’s what you should know:

• For employees who earn over $200,000 per year, 0.9% of earnings will need to be withheld for the Additional Medicare tax. 
• Whether or not your employee owes this tax may depend on their filing status.

Paying federal taxes

How often you’ll pay federal payroll taxes depends on how much you owe.

1. Semi-weekly or monthly payments are required for federal withholding, Additional Medicare, and FICA taxes. And every quarter, a summary payroll tax return is due on Form 941, Employer’s Quarterly Federal Tax Return.
2. Quarterly or annual payments are required for federal unemployment tax. Most employers will pay annually, but quarterly payments are necessary if you owe more than $500. Each time you make a payment, you’ll need to file a payroll tax return on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.

We’re here to help

If you don’t love manual number crunching and payroll taxes sound overwhelming to you, take advantage of Gusto’s full-service payroll options or use an experienced accountant to help you with the process.