People and payroll
Hiring your first employee and using contractors
First-employee checklist
- Get an EIN and register for Illinois withholding with IDOR through MyTax Illinois.
- Register with IDES for unemployment insurance within 30 days, through MyTax Illinois or Form UI-1.
- Buy workers’ compensation insurance. It is required from the first employee, even part-time, with no waiting period.
- Report the new hire to IDES within 20 days. This reporting requirement includes independent contractors.
- Collect Form W-4, Form IL-W-4, and Form I-9.
- Withhold Illinois tax at 4.95% and file Form IL-941.
- Check Illinois Secure Choice. It applies only once you have had at least 5 employees in every quarter of the prior year, have been in business 2 years, and do not offer a qualified retirement plan.
- Post required notices and set up paid leave.
Minimum wages
| Location | Rate and coverage |
|---|---|
| Illinois | $15.00 for adults; $9 tipped; $13 under age 18. |
| Chicago | $16.60 as of July 1, 2025, for employers with 4 or more employees. Adjusted each July 1. |
| Suburban Cook County | $15.40 and $9.25 tipped as of July 1, 2026. Some municipalities have opted out. |
The Chicago figure is dated July 1, 2025; because it adjusts each July 1, confirm the applicable rate before setting payroll. Confirm whether a suburban Cook County municipality has opted out.
Paid leave
- The Illinois Paid Leave for All Workers Act gives 1 hour per 40 worked, up to 40 hours a year, usable for any reason.
- Chicago gives 1 hour of paid leave plus 1 hour of paid sick leave per 35 hours worked, each up to 40 hours. It applies to employers with 1 or more employees.
- Cook County gives 1 hour per 40 worked.
Employees or independent contractors?
IDES generally presumes a worker is an employee unless all three ABC-test conditions are met. In construction, the Employee Classification Act deems a worker an employee unless strict conditions are met.
Misclassification risks back payroll taxes, unemployment contributions, workers’ compensation exposure, and penalties.
Freelance contracts and tax forms
The Freelance Worker Protection Act, effective July 1, 2024, requires a written contract and on-time payment for freelancers earning $500 or more over 120 days. It applies whether you hire freelancers or work as one.
File Form 1099-NEC at the $2,000 threshold for payments made after 2025.
See tax filings and dates and insurance and payroll help.
Not sure which structure fits? Try the Structure Finder, or request help. Call (331) 261-4788
General information, not legal or tax advice.