If you're an Illinois employer, it's critical to stay informed about the upcoming Illinois payroll regulations for 2025. Key changes are on the horizon, including updates to wage and hour laws, payroll tax rates, worker classification rules, and pay transparency requirements. Failure to comply could lead to steep penalties. Here’s everything you need to know about Illinois payroll compliance for 2025.
In 2025, the Illinois state unemployment tax law will maintain a minimum employer contribution rate of 0.3% (0.85% with fund building) and a maximum rate of 8.1% (8.65% with fund building) on a taxable wage base of $13,590. While these rates remain unchanged from 2023, they may be subject to further updates in January 2025.
Pay transparency is a growing focus in Illinois. An amendment to the state's Equal Pay Act requires employers with 15 or more employees to disclose salary ranges and benefits in job postings. As of January 1, 2025, Illinois employers must include:
Additionally, employers must post publicly accessible information about employee benefits in a central and public location on their website. Illinois employers using third parties for job posts must provide those third parties with comprehensive benefits information to use in the job posts.
Payroll Freedom can assist with complying with this new mandate, and ensuring that prospective employees and third parties have thorough information about your benefit programs and payscales that comply with Illinois employment laws.
Illinois employers will face various federal, state, and local changes to wage and hour regulations, primarily paid leave. Payroll systems will need to adjust for these incoming changes. They include:
The federal Department of Labor has not yet posted final rules regarding overtime exemptions, but changes will go into effect in 2025. The current proposal increases the salary threshold under the FLSA to $55,068 to be exempt from minimum wage and overtime regulations. It is currently $35,568. The "highly compensated employee" threshold is also proposed to increase to $143,988; the current threshold is $107,432.
If the final rule is issued, a much larger group of employees will be entitled to overtime pay and minimum wage protections. This applies to employers around the nation regardless of number of employees.
The current state minimum wage in Illinois is $14 per hour. It will increase to $15 per hour in 2025.
There are numerous laws affecting paid leave that go into effect in 2025:
Under Illinois' Freelance Worker Protection Act, there are now additional protections for freelancers and administrative requirements for employers that work with independent contractors.
Organizations that work with independent contractors (or their non-governmental entities) who provide products or services in Illinois worth at least $500 within a 120-day period must pay all of their compensation within 30 days of the completion of work unless their contract dictates they be paid earlier. Contracting entities cannot ask freelancers to accept less pay than what's in their contracts in order to pay them on time.
Freelance contracts also need to include:
Organizations that work with freelancers must keep a copy of these contracts on hand for at least two years and readily available for the Illinois Department of Labor to inspect upon request. Payroll Freedom can ensure that your contracts are compliant with Illinois state law so that workers are not reclassified as employees, vastly increasing payroll tax obligations as a result.
Failure to comply with the new payscale transparency laws can result in steep penalties. If a job posting is active, the following penalties may occur:
If a job posting is inactive but not compliant, the following penalties may also apply:
Need help navigating Illinois payroll regulations for 2025? Contact Payroll Freedom today for expert guidance and payroll solutions tailored to your business.