Illinois payroll laws require employers to pay at least $15 an hour, issue wages at least twice a month with an itemized pay stub, withhold state income tax at a flat 4.95%, carry workers’ compensation insurance, and settle final pay by the next scheduled payday. Getting any piece wrong is expensive: unpaid wages accrue a 5% monthly penalty with no cap, and corporate officers who knowingly allow violations can be held personally liable. Here is what every Illinois employer needs to have in place.
Minimum Wage and Overtime
The Illinois minimum wage is $15 per hour for workers age 18 and older. Two groups may be paid less. Tipped employees can be paid 60% of the standard rate ($9 per hour), but if tips plus cash wages don’t reach $15 for the pay period, the employer covers the shortfall. Workers under 18 who put in fewer than 650 hours in a calendar year may be paid $13 per hour.1Illinois Department of Labor. Minimum Wage Law
Overtime kicks in at one and a half times the regular hourly rate for every hour worked past 40 in a single workweek.2Illinois Department of Labor. Minimum Wage/Overtime FAQ The employer defines the workweek, but it has to be a fixed, recurring seven-day period.
Salaried workers are exempt from overtime only if they clear both a salary test and a duties test. The current federal salary threshold for executive, administrative, and professional exemptions is $684 per week, or $35,568 annually.3U.S. Department of Labor. Earnings Thresholds for Executive, Administrative, and Professional Exemptions Paying above that line is not enough on its own. The employee’s actual duties must involve managing others, exercising independent judgment on significant business matters, or performing work that requires advanced knowledge. Misclassifying a non-exempt worker as exempt exposes the employer to back overtime, liquidated damages that can double the amount owed, and attorney’s fees.
Employers must keep accurate records of hours worked and wages paid for at least three years, an obligation that runs under both Illinois law and the federal Fair Labor Standards Act.4U.S. Equal Employment Opportunity Commission. Recordkeeping Requirements
How and When You Must Pay Wages
All earned wages must be paid at least twice a month, and the pay date can be no later than 13 days after the pay period ends.5Illinois Department of Labor. Wage Payment and Collection Act FAQ Paydays have to be set on a regular schedule, and any change to that schedule requires written notice to employees.
Since January 1, 2025, Illinois employers must also provide an itemized pay stub with each payment showing hours worked, pay rates, overtime pay, and every deduction.6State of Illinois. Pay Stub Requirement Takes Effect January 1, 2025 Illinois had been one of the few states without a pay stub mandate, so payroll systems built before 2025 may need to be updated.
Wages can be paid by check, direct deposit, or payroll card. Direct deposit needs the employee’s consent and cannot be the only option offered.7Illinois Department of Labor. Wage Payment and Collection Act Payroll cards carry extra requirements under federal Regulation E: employees must be told all fees before agreeing, must have at least one fee-free way to withdraw the full amount, and must be offered an alternative if they don’t want the card.
What You Can and Can’t Deduct
The Wage Payment and Collection Act tightly limits deductions. An employer may deduct only when the deduction is required by law, benefits the employee (such as health insurance premiums the employee chose), responds to a valid court-ordered wage assignment, or is authorized by the employee’s written consent given freely at the time of the deduction.8Illinois General Assembly. Illinois Code 820 ILCS 115/9
That last piece is where employers get in trouble. A blanket authorization tucked into an onboarding packet does not count. The statute requires consent given freely “at the time the deduction is made,” so a general sign-off at hire won’t hold up when the employer later deducts for a cash register shortage or damaged equipment.8Illinois General Assembly. Illinois Code 820 ILCS 115/9 And even where an employee agrees, federal law forbids any deduction that pushes effective pay below minimum wage or eats into overtime.
Illinois also mandates reimbursement for necessary work-related expenses. If an employee spends personal money on something required for the job that primarily benefits the employer, the employer must reimburse it. The employee has to submit the expense with documentation within 30 days unless the employer’s written policy allows more time.7Illinois Department of Labor. Wage Payment and Collection Act
Final Paychecks and Unused Vacation
When an employee leaves for any reason, all remaining wages must be paid no later than the next regularly scheduled payday.9Illinois General Assembly. Illinois Code 820 ILCS 115 – Wage Payment and Collection Act Voluntary and involuntary departures get the same deadline.
Earned but unused vacation time has to be included in that final check, paid at the employee’s final rate. Illinois does not allow “use it or lose it” policies that wipe out accrued vacation on separation. If the employer’s policy or an employment contract provides paid vacation, any accrued time the employee didn’t take must be paid out.9Illinois General Assembly. Illinois Code 820 ILCS 115 – Wage Payment and Collection Act The one exception is a collective bargaining agreement that provides otherwise.
Meal Breaks and the Day of Rest
The One Day Rest in Seven Act sets two scheduling rules that affect payroll. Any shift of 7.5 continuous hours or more requires at least a 20-minute meal break, starting no later than five hours into the shift. Beyond 7.5 hours, another 20-minute meal period is required for every additional 4.5 continuous hours worked.10Illinois General Assembly. Illinois Code 820 ILCS 140 – One Day Rest in Seven Act
Every employee must also receive at least 24 consecutive hours of rest each calendar week. Employers needing workers to skip that day must obtain a permit from the Illinois Department of Labor. Violations are a petty offense with fines of $25 to $100 per occurrence.10Illinois General Assembly. Illinois Code 820 ILCS 140 – One Day Rest in Seven Act
Tax Withholding and Payroll Taxes
Illinois Income Tax
Illinois uses a flat income tax rate of 4.95% applied to all employee wages.11Illinois Department of Revenue. 2026 Illinois Withholding Tax Tables Every employee has the same percentage withheld regardless of income. Withholding is calculated using the allowances the employee claims on Form IL-W-4.
Federal Payroll Taxes
Employers withhold federal income tax based on the employee’s W-4, plus the employee’s share of FICA: 6.2% Social Security on wages up to the annual taxable maximum, and 1.45% Medicare with no cap. The employer matches both amounts. Employees earning over $200,000 in a calendar year owe an additional 0.9% Medicare tax that the employer withholds but does not match.
State Unemployment Insurance
Illinois employers pay unemployment insurance to the Illinois Department of Employment Security. For 2026, rates run from 0.750% to 7.050% based on the employer’s experience rating, and the tax applies only to the first $14,250 of each worker’s annual wages.12Illinois Department of Employment Security. 2026 Employers UI Contribution Rates New employers use a standard rate until they build enough history for an experience-based calculation.
Workers’ Compensation Coverage
Illinois requires workers’ compensation coverage for virtually every employer in the state, including those with a single part-time employee. Sole proprietors, business partners, corporate officers, and LLC members may choose whether to cover themselves, but they cannot opt out of covering their employees. Employers in extra-hazardous industries such as construction and trucking must carry coverage for everyone, owners included.13Illinois Department of Insurance. Workers Compensation Insurance Compliance
Operating without coverage is a criminal offense and leaves the business directly liable for any workplace injuries, with no policy limits to cap the cost.
New Hire Reporting and W-2 Deadlines
Within 20 days of a new employee’s first day, the employer must report the hire to the Illinois Department of Employment Security. The report includes the employee’s name, address, Social Security number, and date of hire, along with the employer’s name, address, and federal EIN.14Illinois Department of Employment Security. New Hire Reporting
Form W-2 must be furnished to each employee and filed with the Social Security Administration by January 31 following the end of the tax year. For the 2025 tax year, that deadline shifts to February 2, 2026, because January 31 falls on a Saturday. Late or inaccurate W-2 filings trigger IRS penalties that grow the longer the forms are delayed.
Hiring Workers Under 16
The Illinois Child Labor Law regulates the employment of workers under age 16. Before hiring one, the employer must obtain an employment certificate from the minor’s school or school district. The issuing officer reviews whether the job would harm the minor’s health or education before approving it.15Illinois Department of Labor. Child Labor Law Compliance
Hour restrictions for minors under 16 are strict:
- School days: no more than 3 hours of work, and school-plus-work combined cannot exceed 8 hours.
- Non-school days: no more than 8 hours in any 24-hour period.
- School weeks: no more than 18 hours total.
- Non-school weeks: no more than 40 hours total.
- Permitted hours: between 7 a.m. and 7 p.m. during the school year (Labor Day through May 31), extended to 9 p.m. from June 1 through Labor Day.15Illinois Department of Labor. Child Labor Law Compliance
Federal FLSA rules add restrictions on hazardous work for all minors under 18, including operating certain machinery, mining, and handling explosives. Federal civil money penalties reach up to $16,035 per affected minor, or up to $72,876 for violations causing death or serious injury, doubled for repeat or willful violations.16eCFR. 29 CFR Part 579 – Child Labor Violations Civil Money Penalties Employers must keep proof of age and the employment certificate for every minor on the payroll.
What Noncompliance Costs
Wage penalties in Illinois compound in a way that makes delay very costly. The baseline is 5% of the underpayment per month from the date the wages should have been paid, with no cap. The Illinois Department of Labor also assesses an administrative fee of $250 to $1,000 depending on the amount owed. If the employer ignores a formal demand or final order, the penalty jumps to 20% of the underpayment paid to IDOL, plus 1% per day paid to the employee until the balance clears.17Illinois Department of Labor. Wage Payment and Collection Act Penalties
Corporate officers and agents who knowingly allow wage violations face personal liability for the unpaid amounts and every fee and penalty attached to them. That personal exposure is the reason wage compliance is worth getting right from the first paycheck.