Payroll Illinois: Employer Tax and Software Guide

If another founder asked me what makes Illinois payroll hard, my answer would not be the tax. This guide covers what Illinois requires of employers, the wage and compliance layer that trips people up, and how 10 payroll providers compare, with published prices modeled at 5, 15, and 50 employees.

Illinois has one of the easiest state income tax calculations in the country. One flat 4.95 percent rate covers all wage income, with no brackets and no local income tax anywhere in the state, because Illinois does not let cities or counties levy one. Take gross wages, subtract the exemptions claimed on Form IL-W-4, multiply what is left by the rate, 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 separately with two state agencies, the Department of Revenue and the Illinois Department of Employment Security (IDES), each with its own account and filing schedule.

A retirement plan facilitation mandate kicks in at five Illinois employees. The Biometric Information Privacy Act (BIPA) makes fingerprint time clocks a genuine liability question. None of that appears in a withholding table.

What Illinois actually requires from employers

Two state agencies, two registrations, and two filing rhythms. That split is the first thing that catches new employers: the Department of Revenue handles income tax withholding and IDES handles unemployment insurance, and each needs its own registration, even though you can start both in the MyTax Illinois portal.

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. According to the Illinois Department of Revenue, the 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 a common cause of incorrect Illinois withholding. Employers register for withholding through MyTax Illinois and file Form IL-941 quarterly.

Paying Illinois withholding: monthly or semi-weekly

Everyone files IL-941 quarterly, but the money moves on one of two schedules. The Department of Revenue assigns the schedule from a look-back, the one-year period ending June 30 of the preceding calendar year. Report $12,000 or less in that window and you pay monthly; report more and you pay semi-weekly.

The threshold also bites mid-year. Cross $12,000 in withholding inside a single quarter and you move to semi-weekly payments from the next quarter, for the rest of that year and the whole of the following one. Semi-weekly payers must also make those payments electronically.

Unemployment insurance through IDES

Paid entirely by the employer, with nothing withheld from employees. Quarterly reporting runs on Form UI-3/40. IDES also requires a monthly wage report from employers that had 25 or more employees in the prior calendar year.

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. Most full-service payroll plans file it automatically; self-service tiers generally do not.

The penalties are small but real. An employer that knowingly fails to report owes $15 for each person left off, and anyone who conspires with a new hire to skip the report or file a false one commits a Class B misdemeanor, a criminal offense that carries a fine of up to $500 per employee.

Pay frequency, pay stubs, and the final paycheck

The Illinois Wage Payment and Collection Act sets the schedule every Illinois paycheck has to follow. Most employees must be paid at least semi-monthly, with wages due no later than 13 days after the end of the pay period in which they were earned. Executive, administrative, and professional employees as defined under the Fair Labor Standards Act may be paid once a month, and commissions may be paid monthly too.

Since January 1, 2025 each pay period also requires an itemized pay stub showing hours worked, pay rates, overtime pay, and deductions. Failing to furnish one carries a civil penalty of up to $500 per violation, payable to the Illinois Department of Labor, so the record matters as much as the payment.

Employers keep a copy of each pay stub for three years from the date of payment, whether or not the person still works there, and an employee or former employee may request copies at least twice in any 12-month period.

Final compensation is due in full at separation where that is possible, and no later than the next regularly scheduled payday in every case. It includes earned commissions, bonuses, and the cash value of earned vacation.

Three minimum wages and a municipal patchwork

This is where Illinois payroll 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.

When more than one rate applies, the highest one governs. The complication is the opt-out: according to the June 2023 list Cook County publishes, more than 80 percent of its municipalities had 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 you to give covered employees written notice of the new rates and to post updated notices. In Chicago, the notice goes out with the first paycheck issued to a covered employee and again every year with a paycheck issued within 30 days of July 1.

Chicago layers a Fair Workweek predictive scheduling ordinance on top. It covers seven industries including restaurant, retail, healthcare, and warehouse services, and as of July 1, 2026 it reaches employees earning up to $33.85 per hour or $64,945.55 per year.

The coverage thresholds are high. An employer needs 100 or more employees globally (250 for not-for-profits) and at least 50 covered employees in Chicago. A restaurant is covered only at 250 or more employees and 30 or more locations globally.

Most small employers fall below these thresholds, but a business that grows past them takes on a scheduling 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: the Illinois Secure Choice retirement mandate, the Biometric Information Privacy Act, and the Paid Leave for All Workers Act. None of them shows up in a withholding calculation.

Illinois Secure Choice retirement mandate

Every employer that had at least five Illinois employees in every quarter of the previous calendar year, and has been in business for at least two years, must either offer its own qualified retirement plan or facilitate enrollment in the state-run program, now called My Illinois Savings.

The mandate 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 the mandate squarely in small business territory. Because the test looks back at the previous calendar year, a company that keeps five or more Illinois employees through every quarter of one year, and has been in business two years, carries the obligation into the following year. From then on, the deduction has to be configured in payroll.

According to the Illinois State Treasurer, workers are enrolled by default at 5 percent of pay in a Roth IRA and can change that rate or opt out at any time. The program ran as Illinois Secure Choice before the rename, and the statute that creates the mandate still carries that name.

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 had created. The same amendment 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 yields to the paid leave ordinances of Chicago and Cook County, which carry different accrual and carryover rules. It still covers any employer those ordinances do not require to provide paid leave. 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.

OnPay

OnPay sells one payroll plan at $49 per month plus $6 per employee, with HR tools and time tracking offered as optional add-ons rather than 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.

Gusto

Gusto is a 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 base increase from $40 during 2025. Onboarding and benefits tools come built in.

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 takes the bill for a 15-person team from $139 to $260 a month.

Patriot Software

Patriot Full Service is the lowest-cost published plan here at every modeled headcount: $37 per month plus $5 per employee, covering federal, state, and local tax filing, though new hire reports stay with you. Additional state filings cost $12 per month each. For a single-state Illinois business, Patriot stays the cheapest option on this list.

Basic at $17 plus $4 calculates only and leaves depositing and filing to the employer. Given the two-agency structure in Illinois, that is a poor trade for anyone without a bookkeeper.

QuickBooks Workforce Payroll

QuickBooks renamed its payroll tiers in 2026, and the entry tier, formerly Payroll Core, is now Workforce Payroll. It costs $50 per month plus $7 per employee after the per-employee fee rose on July 1, 2026. Federal and state tax filing is included on every tier.

The argument for QuickBooks is unchanged: if the books already live in QuickBooks Online, payroll entries land in the general ledger without an export step.

SurePayroll

SurePayroll is owned by Paychex and aimed at very small and household employers, at $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 from the second state on.

Square Payroll

Square Payroll is full-service payroll at $35 per month plus $6 per person paid, with tax filing and multi-state payroll included. For a Chicago restaurant or retail business already running Square point of sale, timecards and tips import straight into payroll, 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 employee self-service built in. For an Illinois company growing into a mid-size business or operating across several municipal wage ordinances, Paylocity becomes a reasonable candidate. Pricing is quote-only.

ADP RUN

ADP RUN's case is compliance depth, which in Illinois translates to handling the municipal wage ordinances and multi-state registration as routine work. ADP does not publish RUN pricing: the Essential, Enhanced, Complete, and HR Pro packages are all quoted individually. A separate state unemployment insurance management service starts on Enhanced.

Paychex Flex

Paychex sells a service relationship rather than a software subscription, with a payroll specialist included on its top Complete package. Every payroll package (Basic, Foundations, Advanced, and Complete) is priced on request. The argument in Illinois is specific: when a Cook County opt-out question or a My Illinois Savings notice arrives, having someone to call has real value.

Rippling

Rippling sells a unified employee record where payroll, HR, and IT provisioning share one data model. Its pricing page lists no rates, but Rippling's small-business page starts the platform at $8 per user per month plus a $40 monthly base fee, and its blog prices payroll as a separate module at $8 per employee billed annually or $10 billed monthly.

Real Rippling configurations land well above that headline rate. Multi-jurisdiction handling is strong, but the platform is overbuilt for a small 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. Paylocity, Paychex Flex, and Rippling publish no rates on their pricing pages, so they are not modeled, and ADP RUN appears without figures for the same reason.

Two patterns hold. Patriot stays the cheapest published option at every headcount, while SurePayroll's $7 per-employee fee pushes it above OnPay and Gusto Simple by 50 employees. 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.

Choosing a payroll provider for Illinois

Four questions separate providers that will work here from providers that will generate correction notices.

Payroll services in Chicago: a local firm or a national platform?

Payroll services in Chicago come in two shapes. One is national payroll software of the kind compared above. The other is a local payroll company or accounting practice that runs the payroll for you, often priced per payroll run rather than per employee per month. The real choice is who does the work, not who understands Illinois.

A Chicago payroll company is selling a person's attention. That is worth paying for when the pay rules themselves are complicated: tipped staff split across two municipal wage ordinances, union rate schedules, prevailing wage on public work, or a payroll that has been wrong long enough that it needs cleaning up before anything can be automated.

For a single-location business with salaried staff and no tipped or union complications, software wins on cost and on how fast you can run the first payroll. The wage rules are identical either way. Whichever route you take, the four questions above are the ones to ask, and the answer to the first one decides most of it.

Before you choose

FirstHR is an onboarding and HR platform, not a payroll provider. Payroll runs, payroll tax filing, and benefits administration come from the providers above, so if running payroll is the problem in front of you, one of them is the 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, hire details captured in time for the new hire report due 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 on offer letters and acknowledgments, document storage, and employee records for US small businesses at a flat $98 a month for up to 10 people or $198 for 11 to 50. 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 between 0.750 percent and 7.050 percent on the IDES rate chart. Your own Notice of Contribution Rate is the figure that governs your account.

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 local paid leave rules that displace the statewide act for the employers they cover.

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 has paused its tipped subminimum phase-out, keeping the credit at 24 percent through June 30, 2028.

What is the Illinois Secure Choice retirement mandate?

Employers with at least five Illinois 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, now called My Illinois Savings. 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 October 2026 rates run roughly $62 for Patriot Full Service, $64 for SurePayroll, $65 for Square Payroll, $79 for OnPay or Gusto Simple, and $85 for QuickBooks Workforce Payroll. At 50 employees the same plans land between $287 and $400. ADP RUN, Paychex Flex, and Paylocity quote individually.