Payroll Illinois: Employer Tax and Software Guide
Illinois payroll for employers: the flat 4.95% rate, IDES unemployment, three minimum wage tiers, BIPA and Secure Choice, and 10 providers compared.
Illinois Payroll: The Employer Guide
One of the simplest state income taxes in the country wrapped in one of the heaviest employment law layers, plus how 10 payroll providers price the work
Illinois has one of the easiest state income tax calculations in the country. A flat 4.95 percent on all wage income, no brackets, and no local income tax anywhere in the state, because Illinois does not permit cities or counties to levy one. Multiply gross wages by the rate, subtract the allowances from Form IL-W-4, and the state withholding math is finished.
The complexity moved somewhere else. Three different minimum wages apply across the Chicago metropolitan area, and which one governs depends on the specific municipality where the work happens. Employers register with two separate state agencies that do not coordinate with each other. A retirement plan facilitation mandate kicks in at five employees. A biometric privacy statute makes fingerprint time clocks a genuine liability question. None of that appears in a withholding table.
This guide covers what Illinois requires of employers, the wage and compliance layer that catches people out, and how 10 payroll providers price the work at 5, 15, and 50 employees.
What Illinois actually requires from employers
Two state agencies, two registrations, and two filing rhythms. This is the first thing that catches new employers, because the Department of Revenue and the Department of Employment Security operate independently and neither will tell you about the other.
State income tax withholding
A flat 4.95 percent on all wage income. Employees complete Form IL-W-4 to claim a basic personal allowance plus allowances for dependents and additional allowances for being 65 or older or legally blind. The Illinois personal exemption is $2,925 for the 2026 tax year, up from $2,850.
Because the rate is flat, the allowance count is the only variable in the calculation. That makes the IL-W-4 disproportionately important: a missing form or one that was never updated after a life change is the single most common cause of incorrect Illinois withholding. Employers register for withholding through MyTax Illinois and file Form IL-941 quarterly.
Unemployment insurance through IDES
Paid entirely by the employer, with nothing withheld from employees. Registration with the Illinois Department of Employment Security is separate from the Department of Revenue registration, and quarterly reporting runs on Form UI-3/40.
| Item | 2026 figure | Notes |
|---|---|---|
| Taxable wage base | $14,250 | Per employee per calendar year |
| New employer rate | 3.350% | Includes a fund building surcharge; higher for some NAICS sectors |
| Experience-rated range | 0.750% to 7.050% | Assigned annually by Notice of Contribution Rate |
| Liability threshold | $1,500 in a quarter | Or one worker in any part of a day in 20 or more calendar weeks |
New hire reporting
Employers must report new and rehired employees to the IDES New Hire Directory within 20 days of the hire date. Since January 1, 2024 the requirement extends to independent contractors as well, which is a change many small employers still have not absorbed. Penalties run $15 per unreported individual and up to $500 for a knowingly false report. Most full-service payroll plans file it automatically; self-service tiers generally do not. See our guide to new hire reporting for what the report must contain.
Three minimum wages and a municipal patchwork
This is where Illinois payroll actually gets difficult, and it has nothing to do with tax. Which minimum wage applies depends on where the work is physically performed, and in the Chicago metropolitan area that question has three possible answers.
| Jurisdiction | Standard rate | Tipped base | Coverage |
|---|---|---|---|
| Illinois statewide | $15.00 | $9.00 | Reached January 1, 2025; no automatic annual adjustment |
| Chicago | $17.05 | $12.96 | Employers with four or more workers, from July 1, 2026 |
| Cook County outside Chicago | $15.40 | $9.25 | From July 1, 2026, where the municipality has not opted out |
| Opted-out municipalities | $15.00 | $9.00 | State rate applies; over 80 percent of Cook County municipalities opted out |
When more than one rate applies, the highest one governs. The complication is the opt-out: more than 80 percent of Cook County municipalities have declined the county ordinance, so a suburban address does not tell you which rate applies. Two stores five miles apart in different suburbs can owe different minimums. Both Chicago and Cook County also require written notice of the new rates to covered employees, and both require posting updated notices.
Chicago layers a Fair Workweek predictive scheduling ordinance on top. It covers seven industries including restaurant, retail, healthcare, and warehouse services, applies to employers with 100 or more employees globally, and as of July 1, 2026 reaches employees earning up to $33.85 per hour or $64,945.55 per year. Most small employers fall below the coverage threshold, but a business that grows across it acquires a scheduling compliance obligation without any change in where it operates.
The Illinois obligations that are not payroll taxes
Three statutes affect how an Illinois employer sets up its people operations, and none of them show up in a withholding calculation.
Illinois Secure Choice retirement mandate
Every employer with at least five employees in every quarter of the previous calendar year, in business for at least two years, must either offer its own qualified retirement plan or facilitate enrollment in the state-run program. This is a facilitation obligation rather than a contribution one: the employer does not match, but must register, run payroll deductions for employees who do not opt out, and maintain the roster. Penalties run $250 per eligible employee in the first year of noncompliance and $500 per employee after that.
The five-employee threshold puts this squarely in small business territory. A company that grows from four to five employees acquires the obligation, and the deduction has to be configured in payroll once it does.
Biometric Information Privacy Act
BIPA is the reason to think carefully before buying a fingerprint or facial recognition time clock in Illinois. The statute requires written consent before collecting biometric identifiers, and statutory damages run $1,000 for negligent violations and $5,000 for reckless or intentional ones. A 2024 amendment clarified that damages accrue per person rather than per scan, which reduced the extreme exposure that earlier case law created, and confirmed that an electronic signature qualifies as the required written release.
Paid Leave for All Workers Act
Since January 1, 2024, Illinois employers must provide up to 40 hours of paid leave per 12-month period that employees may use for any reason, without requiring documentation. The statewide act does not apply in Chicago or Cook County, both of which run their own paid leave ordinances with different accrual and carryover rules. As with minimum wage, the applicable rule depends on the work location.
10 payroll providers for Illinois employers compared
Every provider below files Illinois withholding and IDES unemployment. The differences that matter here are whether the platform tracks minimum wage by work location, what happens across a state line, and whether the price is published.
| Provider | Best For | Starting Price | Pricing Model | IL Tax Filing | Multi-State Included | Onboarding Tools | Trial |
|---|---|---|---|---|---|---|---|
| OnPay | All-in pricing, every state | $49 + $6/ee | Base + PEPM | 1 month | |||
| Gusto | First payroll purchase | $49 + $6/ee | Base + PEPM | Until 1st run | |||
| Patriot | Lowest cost, single state | $37 + $5/ee | Base + PEPM | 30 days | |||
| QuickBooks | Books already in QuickBooks | $50 + $6.50/ee | Base + PEPM | 30 days | |||
| SurePayroll | Micro and household employers | $29 + $7/ee | Base + PEPM | Varies | |||
| Square | Retail and food service | $35 + $6/ee | Flat + PEPM | Free trial | |||
| Paylocity | Growing past 50 employees | Quote | Quote | Demo | |||
| ADP RUN | Compliance depth under 50 staff | ~$79 + $4/ee | Quote | 3 months | |||
| Paychex Flex | A person to call about a notice | Quote | Quote | Varies | |||
| Rippling | Payroll tied to HR and IT | $35 + $8/ee+ | Modular PEPM | Demo |
OnPay
One plan at $49 per month plus $6 per employee with every feature included and no tiers to climb. Tax filing covers all 50 states with no multi-state surcharge, useful for an Illinois employer with staff across the Wisconsin, Indiana, or Missouri lines. Year-end W-2 and 1099 filing is included and the first month is free without a credit card.
Gusto
The most common first payroll purchase for US small businesses. Tax filing is automatic, pricing is published, and the Simple plan runs $49 per month plus $6 per employee after a March 2026 base increase. The onboarding and benefits tooling is the best among the payroll-first providers.
The catch is that Simple covers single-state payroll only. One hire in Wisconsin or Indiana moves the account to Plus at $80 plus $12 per employee, which more than doubles the bill for a 15-person team.
Patriot Software
The cheapest legitimate full-service payroll at $37 per month plus $5 per employee, covering federal, state, and local tax filing plus new hire reporting. Basic at $17 plus $4 calculates only and leaves depositing and filing to the employer, which given the two-agency structure in Illinois is a poor trade for anyone without a bookkeeper.
Additional state filings cost $12 per month each. For a single-state Illinois business under 20 people, nothing else comes close on cost.
QuickBooks Payroll
Core runs $50 per month plus $6.50 per employee with full-service tax filing on every tier, following a per-employee price increase across the Workforce plans on July 1, 2026. The argument for it is unchanged: if the books already live in QuickBooks Online, payroll entries land in the general ledger without an export step.
SurePayroll
Owned by Paychex and aimed at very small and household employers at roughly $29 per month plus $7 per employee. The distinguishing feature is a flat $9.99 monthly multi-state fee regardless of how many states are involved, which beats per-state pricing for anyone in three or more.
Square Payroll
Full-service payroll at $35 per month plus $6 per person paid, with tax filing included. For a Chicago restaurant or retail business already running Square point of sale, hours and tips flow into payroll with nothing to configure, which matters in a city with its own tipped wage schedule. Outside the Square ecosystem the product is competent but unremarkable.
Paylocity
A full HR and payroll platform headquartered in the Chicago suburbs, aimed above the smallest end of the market, with strong multi-jurisdiction handling and a well-regarded self-service experience. For an Illinois company crossing 50 employees or operating across several municipal wage ordinances, it becomes a reasonable candidate. Pricing is quote-only.
ADP RUN
The deepest compliance operation in the category, which in Illinois translates to handling the municipal wage ordinances and multi-state registration as routine work. Third-party estimates put the Essential tier near $79 per month plus $4 per employee, but ADP does not publish rates and most buyers report paying more once add-ons land.
Paychex Flex
A service relationship rather than a software subscription, with a named contact at higher tiers. Pricing is quote-only, and quarterly administrative charges are a recurring theme in customer reports. The argument in Illinois is specific: when a Cook County opt-out question or a Secure Choice notice arrives, having someone to call has real value.
Rippling
A unified employee record where payroll, HR, and IT provisioning share one data model, starting at $35 per month plus $8 per employee for the core platform with payroll as a separate module. Real configurations land well above the headline figure. Multi-jurisdiction handling is genuinely strong, but the platform is overbuilt for a 15-person Illinois business with a single location.
What each provider actually costs an Illinois employer
The table below models published rates at three headcounts plus what happens when a second state enters the picture, which for an Illinois employer usually means Wisconsin, Indiana, or Missouri.
| Provider | 5 employees | 15 employees | 50 employees | 2nd State Cost | Notes |
|---|---|---|---|---|---|
| Patriot Full Service | $62 | $112 | $287 | $12/mo per extra state | Cheapest single-state option |
| SurePayroll | $64 | $134 | $379 | $9.99/mo flat | Micro-employer focus |
| Square Payroll | $65 | $125 | $335 | Included | Strong for hourly staff |
| OnPay | $79 | $139 | $349 | Included | No tier to climb |
| Gusto Simple | $79 | $139 | $349 | Forces Plus tier | A Wisconsin or Indiana hire changes this |
| QuickBooks Core | $83 | $148 | $375 | Fee per extra state | General ledger sync |
| ADP RUN Essential | ~$99 | ~$139 | ~$279 | Quote | Quote-only above Essential |
Two patterns hold. The budget providers stay genuinely cheaper at every headcount, with Patriot at 50 employees costing less than most competitors at 25. And the second-state column reorders the ranking: Gusto Simple is competitive until one Indiana hire forces the Plus tier, at which point a 15-person payroll jumps from $139 to $260. For a wider view, see the payroll software for small business comparison and the payroll pricing guide.
Choosing a payroll provider for Illinois
Four questions separate providers that will work here from providers that will generate correction notices.
The Illinois HR compliance guide covers the surrounding employment law, and multi-state payroll processing covers what changes when staff work across a state line.
Before you choose
FirstHR does not process payroll, file payroll taxes, or administer benefits. Every provider above does something we do not, and if payroll is the problem you are solving, one of them is your answer.
What we handle is the layer underneath, and Illinois puts unusual weight on it. A correct Illinois paycheck depends on an IL-W-4 that was actually collected, a new hire report filed inside 20 days for employees and contractors alike, and if there is a biometric clock, a signed BIPA release stored somewhere retrievable. FirstHR covers onboarding workflows, e-signatures, document collection, and employee records for US teams of 5 to 50 people at a flat $98 to $198 per month. If the recurring failure is paperwork arriving late or unsigned rather than the tax math itself, that is a different problem than payroll processing, and it is the one we built for.
Frequently Asked Questions
What payroll taxes do Illinois employers withhold?
A flat 4.95 percent state income tax, with allowances claimed on Form IL-W-4 and a personal exemption of $2,925 for 2026. There are no local income taxes anywhere in Illinois. Employers separately pay unemployment insurance to IDES from their own funds, and employees contribute nothing to it.
Does Illinois have a state W-4 form?
Yes, Form IL-W-4, separate from the federal W-4 and required from every new hire. Employees claim a basic personal allowance plus allowances for dependents and additional allowances for age 65 or older or legal blindness. Since the rate is flat, the allowance count is the only variable in the withholding math.
What is the Illinois unemployment wage base and new employer rate?
For 2026 the taxable wage base is $14,250 per employee and most new employers pay 3.350 percent including a fund building surcharge, with experience-rated employers falling roughly between 0.750 percent and 7.050 percent. Third-party sources publish conflicting figures, so verify against your Notice of Contribution Rate. See our guide to state unemployment tax for the national picture.
Does Illinois have local payroll taxes?
No local income taxes, since Illinois does not permit cities or counties to levy one. What Illinois does have is heavy local employment regulation: separate Chicago and Cook County minimum wage ordinances, a Chicago Fair Workweek ordinance, and municipal paid leave rules that displace the statewide act.
What is the minimum wage in Illinois, Chicago, and Cook County?
The statewide rate is $15.00 per hour. From July 1, 2026, Chicago is $17.05 for employers with four or more workers and Cook County outside Chicago is $15.40. The highest applicable rate governs, and over 80 percent of Cook County municipalities have opted out of the county ordinance.
Does Illinois allow a tip credit?
Yes, with different bases by jurisdiction: $9.00 statewide, $12.96 in Chicago from July 1, 2026, and $9.25 in Cook County. Employers must make up any shortfall if tips do not bring the worker to the full minimum. Chicago is phasing its tipped subminimum out entirely by July 1, 2029. See our guide to the tipped minimum wage.
What is the Illinois Secure Choice retirement mandate?
Employers with at least five employees in every quarter of the prior year, in business two years or more, must offer a qualified retirement plan or facilitate the state program. It is a facilitation rather than contribution obligation, with penalties of $250 per eligible employee in year one and $500 per employee thereafter.
How much does payroll software cost for an Illinois small business?
At 5 employees, published July 2026 rates run roughly $62 for Patriot Full Service, $64 for SurePayroll, $65 for Square Payroll, $79 for OnPay or Gusto Simple, and $83 for QuickBooks Core. At 50 employees the same plans land between $287 and $375. ADP RUN, Paychex Flex, and Paylocity quote individually.