Illinois Payroll Guide for Employers

Illinois Payroll Requirements: What Employers Need to Know in 2026

Illinois payroll starts with a flat state income tax rate of 4.95% that applies to all wages regardless of income level—there are no brackets, no phaseouts, and no standard deduction to calculate. You withhold this amount from every employee's wages and remit it quarterly using the IL-941 return through the MyTax Illinois portal. For most employers, the flat rate makes the withholding math simpler than states with graduated brackets, but Illinois adds complexity in other ways: local income taxes in Chicago, a higher-than-average minimum wage, and a state unemployment insurance wage base that is substantially above the federal floor all require attention from employers setting up payroll for the first time in the state.

Illinois SUI for new employers is 3.525% on the first $13,590 of each employee's wages in 2026. This wage base is nearly double the $7,000 federal FUTA base, which means your SUI contributions continue longer into the year for higher-paid employees than they would in many other states. Your rate is experience-rated after you accumulate sufficient payroll history with the Illinois Department of Employment Security. The IL-941 covers both income tax withholding and unemployment insurance in a single quarterly filing. New hire reporting is due within 20 days of hire through the Illinois New Hire Reporting Center. For more on registering with IDES and understanding how your rate is calculated, see the Illinois IDES registration guide.

The statewide minimum wage is $15.00 per hour in 2026. Chicago employers must pay at least $16.20 per hour under the city's separate minimum wage ordinance. Chicago also requires employers to provide paid sick leave under the Chicago Paid Sick Leave Ordinance—employees accrue one hour of paid sick leave for every 40 hours worked, up to 40 hours per year. This is a city-level requirement, not a state-level one, but if you have employees working in Chicago it applies to you. Several other Illinois municipalities have adopted their own wage or leave ordinances, so verify requirements at every work location. The Illinois minimum wage guide covers the statewide rate history and Chicago's separate schedule.

Illinois does not have a statewide paid family and medical leave program as of 2026, and there is no state disability insurance program funded through payroll deductions. Workers' compensation is required for virtually all private-sector employers with at least one employee—there is no minimum employee count exemption. Illinois workers' comp coverage must be purchased through a licensed carrier or the state's assigned risk pool; self-insurance requires approval. Employers who operate without coverage can be fined and are personally liable for any work-related injury claims. One thing Illinois gets right for employees: the state has strong wage payment and collection laws that allow workers to recover attorney fees in successful wage claims, so late or short paychecks carry real legal exposure for employers.

Final paychecks are due on the next regular payday following separation, whether the employee resigned or was discharged. Illinois income tax withholding must be reported and remitted quarterly on the IL-941, with deposits typically required on a more frequent schedule depending on your withholding liability. 1099s for independent contractors are due by January 31, and employers must file copies with the Illinois Department of Revenue when the contractor performed services in Illinois. The state's income tax withholding rules include guidance on which workers require Illinois withholding even if they live in another state.

2026 Illinois payroll quick facts: Flat 4.95% state income tax | SUI new employer rate 3.525% on $13,590 wage base (IDES) | No state disability insurance | No statewide paid family leave | Statewide minimum wage $15.00/hr | Chicago minimum wage $16.20/hr | Chicago paid sick leave: 1 hr/40 hrs worked, up to 40 hrs/year | Final paycheck: next regular payday | New hire reporting: 20 days | Workers' comp: required for 1+ employee | Quarterly filing: IL-941 (MyTax Illinois)