Illinois Hiring Laws for Small Businesses
Illinois has a corporation franchise tax on capital (not just LLCs), Chicago's higher minimum wage, and one of the more complex state tax environments. The rules you need before hiring your first Illinois employee.
$15.00/hr
as of 2025
Next scheduled payday
Income-based
Yes
Wage & Hour
Minimum wage: $15.00/hr
This is the Illinois statewide minimum as of 2025. The federal minimum ($7.25) applies where a state has no higher rate. Some cities within Illinois may set higher local minimums — check municipal ordinances.
Break requirements
Federal FLSA only — no state-specific break requirements.
Overtime
Federal FLSA requires 1.5x pay for hours over 40 in a workweek for non-exempt employees. Some states (notably California) also require daily overtime after 8 hours in a day.
Paid sick leave
Illinois has a statewide paid sick leave law. Accrual rate typically 1 hour per 30-40 hours worked, with annual usage caps.
Termination & Final Pay
Final paycheck timing
- Involuntary termination: Next scheduled payday
- Voluntary quit: Next scheduled payday
Vacation payout on separation
Not automatically required by state law — depends on your written policy and offer letters. Written "use it or lose it" policies are generally allowed.
At-will employment
Illinois is an at-will state — either party can end employment at any time, for any legal reason (not for a discriminatory or retaliatory reason). Written employment contracts and public policy exceptions can limit this.
Non-Compete Agreements
Non-competes are banned for employees below a state-defined income threshold. Above that threshold they may be enforceable with reasonable scope.
Contractor vs Employee Classification
IRS common-law test — control, financial arrangement, and relationship type. More flexible than ABC.
Why this matters: Misclassifying an employee as a contractor exposes you to back wages, unemployment tax, workers comp, and penalties. State enforcement has tightened significantly since 2018.
First-Employee Onboarding Checklist
- Federal: Get EIN (irs.gov), register for federal payroll (Form 941 quarterly)
- State withholding: Register with Illinois Department of Revenue
- State unemployment insurance (SUI): Register with Illinois unemployment agency and pay quarterly
- Workers' compensation: Required at 1 employee. Purchase through private market.
- New hire reporting: Report to Illinois new hire directory within 20 days of hire (federal PRWORA requirement)
- I-9 verification: Complete within 3 business days of hire (federal requirement)
- W-4: Get federal W-4 and state equivalent (if income tax applies)
- Required posters: Federal + Illinois labor law posters (available free from state DOL)
Illinois-Specific Employment Rules
The rules and quirks that make hiring in Illinois different from other states.
- Illinois minimum wage is $15.00/hr for 2025 statewide, with Chicago higher ($16.20 for businesses with 4+ employees).
- Illinois' Paid Leave for All Workers Act (2024) requires 40 hours of paid leave annually for employees at all employers.
- Illinois' Freedom to Work Act restricts non-competes to employees earning $75K+ and non-solicits to $45K+ (2022 update).
- Illinois' Equal Pay Registration Certificate requires businesses with 100+ employees to report pay data to the state.
Reference only — not legal advice.
Employment law changes frequently and turns on facts. For specific hiring decisions, terminations, or contractor classifications, consult a Illinois-licensed employment attorney. City-level rules (Seattle, NYC, SF, etc.) may add requirements beyond state law.