Guide to Illinois employee benefits and HR rules

Is your organization compliant with Illinois's employment laws?

If you have an Illinois-based company or employ staff in Illinois, gathering everything you need to know about HR compliance in the state is vital to your company’s success. This guide will dive deep into Illinois's employment and benefit regulations for small to medium-sized businesses.

Topics covered in this guide include:

• What are employment laws in Illinois?
• What are employee rights in Illinois?
• Required and non-required employee benefits in Illinois
• Health insurance in Illinois
• Wage laws in Illinois

What are employment laws in Illinois?

The federal government sets minimum benefits and HR requirements for employers across the country, such as the standard minimum wage and regulations regarding health insurance for large employers. But many states create their own employment laws to offer additional employee protections—and Illinois is no exception.

Illinois has many employee-focused laws, making it an excellent place for individuals to work. Before opening or growing your business in Illinois, it’s essential that you fully understand the state’s employment laws.

In Illinois, employers must follow several state-specific laws in addition to federal employment laws, such as the following:

• At-will employment
  • Illinois is an “at-will” employment state, meaning employers and employees can end an employment agreement at any time, with or without cause. However, by law, employers can’t terminate an employee due to discrimination or other illegal factors.
  • Employees who believe their employer fired them illegally can file a complaint.
• Child Labor Laws
  • Illinois’s child labor laws offer guidelines for minor workers younger than 16. It requires employers to obtain employment certificates, prohibits work in hazardous occupations, limits working hours, and requires child performers to set up a trust fund in their name to protect their earnings.
• Illinois Human Rights Act
  • This act protects employees against discrimination for protected classes, including ancestry, national origin, marital status, protective order status, military status, citizenship status, work authorization status, conviction records, and more.
• Illinois Employment Record Disclosure Act
  • This act protects employers from civil actions related to submitting information about a current or former employee’s job performance for an employment reference as long as they gave it in good faith. Employers may be responsible if the information was purposely false or violated the individual’s civil rights.
• Consumer Coverage Disclosure Act
  • Any employer providing group health coverage to Illinois-based employees must give them a list of state-regulated essential health benefits and a comparison of those benefits and their employer-sponsored plan. This also applies to employers whose group health plan isn’t state-regulated.
  • Illinois doesn’t have coverage requirements for state essential benefits for employers, but they must disclose the list to employees.
• Job Opportunities for Qualified Applicants Act (ban the box)
  • Except for certain positions, it’s illegal for employers to inquire about or consider an applicant’s criminal record until they determine the applicant to be qualified for the job or selected for an interview. If there isn’t an interview, they can’t consider an applicant’s criminal record until they make a conditional offer of employment.
  • Employers may notify applicants in writing beforehand that certain offenses may disqualify them from employment.
• Equal Pay Act of 2003
  • The law requires employers with six or more employees to pay their male and female employees the same wages if they have vastly similar tasks and responsibilities requiring the same skill, effort, and working conditions. Employers can vary salaries based on seniority, merit, quantity or quality of production, and other non-gender-related factors.
  • This act also prohibits employers from paying African-American employees less than another non-African-American employee for the same or similar work.
  • Employers also can't use salary history to screen applicants for a job or determine a salary for the applicant’s desired position. There’s no violation if the candidate gives their salary history voluntarily and the employer doesn’t use it to decide whether to make an offer or determine compensation.
• Right to Privacy in the Workplace Act
  • This law prohibits private and public employers from gaining access to a job applicant’s or current employee’s personal social media accounts. This includes asking applicants and employees for their usernames or passwords, compelling an individual to add their employer to their social media contact lists, or requiring them to change their privacy settings.
• Employee Credit Privacy Act (ECPA)
  • It’s illegal for employers to get or use an applicant's credit history to make a hiring decision. Employers seeking to fill a position where a satisfactory credit history is a bona fide job requirement are exempt.
• Illinois Freedom to Work Act
  • This law prohibits employers from drafting non-compete agreements for employees earning $75,000 or less per year. However, the law may allow certain non-compete agreements if they’re reasonable with adequate consideration.
• Artificial Intelligence Video Interview Act
  • Employers must notify applicants if they’ll use artificial intelligence (AI) to analyze their interview. They must also explain how the process works and obtain consent from the applicant to use the AI program.
  • If the applicant requests it, employers must delete the person’s interviews and instruct others with copies of the file to delete their videos within 30 days.
• Nursing Mothers in the Workplace Act
  • Employers must provide nursing mothers breaks to express breast milk for up to two years after their child is born. The break time may be during the same time as another break time the employee already receives, like a meal break. Additionally, employers can’t reduce an employee's compensation when they take time to express break milk.

There are also some Chicago-specific laws employers must keep in mind:

• Chicago’s Anti-Retaliation Ordinance
  • Employers can’t retaliate against employees for following a city or public health order regarding COVID-19. They also can’t take any hostile action against an employee who must care for someone needing to follow specific orders related to COVID-19.
• Chicago’s Vaccine Anti-Retaliation Ordinance
  • It’s illegal for a Chicago employer to retaliate against workers who take time off to get the COVID-19 vaccine. They can’t require employers only to receive the vaccine during non-work hours and must allow employees to use their paid leave to get it during their shifts.

Now that we’ve reviewed a few Illinois-specific laws, we’ll review the state’s employee rights.

What are employee rights in Illinois?

Employees in Illinois have many rights under state and federal law. No matter your organization’s size, you must know your employees' rights if you have or plan to employ workers in the state.

Some state rights include:

• Fair wages
  • Employers must pay at least the state minimum wage (or the City of Chicago minimum wage) and overtime pay. We’ll cover minimum wages in more detail below.
• Meal periods
  • For every 7.5 hours worked, employers must give employees a 20-minute meal break. This break time should occur within five hours after the shift begins. The state requires employers to provide another 20-minute meal period if an employee works a 12-hour shift or longer. Employers must also provide reasonable restroom breaks in addition to meal breaks.
  • Minors must receive a 20-minute meal break for every five hours worked.
• Rest periods
  • Under the One Day Rest In Seven Act (ODRISA), employers must provide employees with at least 24 uninterrupted hours of rest during each consecutive seven-day workweek and regular rest periods at the end of each workday.
• Discussion of wages
  • Employers can’t terminate or discriminate against an employee who discusses or compares their wages or benefits with another employee. They also can’t require an employee to sign a contract forbidding them to do so.
• Access to personnel files
  • Employees can review, copy, and correct their personnel records.​​
• Biometric information protections
  • This act prohibits employers from collecting their employee’s biometric information without their knowledge. If an employer needs biometric information for work purposes, like fingerprints for accessing the company premises or equipment, they must have written consent from the employees.
• Telephone monitoring
  • With all parties' written consent and awareness, employers can only monitor and record phone calls between employees on company-provided devices.
• Drug testing
  • Employers can’t retaliate against employees who use legalized marijuana outside of work hours. However, employers can request drug and alcohol tests on employees who have reasonable suspicion that their usage is impacting their job performance.
• Whistleblower protections
  • Employees have the right to report someone they believe is committing a crime in the workplace. Employers may not retaliate against an employee with a penalty or termination if they report a crime.
• Gun laws
  • A licensed employee may transport a concealed firearm within their vehicle into an employer’s parking area or store a firearm in a glove compartment or trunk in a locked car in the parking area.
• Religious accommodations
  • Employers must reasonably accommodate an employee whose religious beliefs conflict with a work requirement. This includes employers not making any conditions that require a person to violate or withhold a religious practice, such as attire or facial hair, as a condition of their hiring or continued employment unless it places an undue hardship on the business.
• Smoke-free workplace
  • Illinois employees have a right to a smoke-free workplace. Employers must have signage describing the distance from the building’s entrance individuals must be before they can safely smoke.

There are also some Chicago-specific employee rights:

• Domestic worker rights in Chicago
  • Domestic workers in Chicago have several rights regardless of their immigration status, race, gender identity, or sexual orientation. This includes the right to a written contract, minimum wage, paid time off, overtime pay, and more.
• Chicago Fair Workweek Ordinance
  • Chicago employees who work in specific industries have the right to advance notice of their work schedule, the ability to decline unscheduled hours, one hour of predictability pay for shift changes, and rest time after the end of the previous day’s shift.

Health insurance in Illinois

The federal government doesn’t require employers to offer health insurance in Illinois if they have fewer than 50 employees. However, federal law requires employers with 50 or more full-time equivalent employees (FTEs) to provide affordable insurance with minimum essential coverage (MEC) that satisfies the Affordable Care Act’s (ACA) employer mandate.

Even if you have fewer than 50 FTEs, choosing to offer health benefits is a great way to attract and retain top talent. Traditional group health insurance remains a popular option for employers. But, rising healthcare costs can make it challenging for small to medium-sized businesses on a budget to afford the premiums. Plus, group health insurance often has limited plan options, steep participation requirements, and unpredictable annual rate increases.

Employers looking for a more flexible and customizable health benefit can consider two alternative options: a health reimbursement arrangement (HRA) or a health stipend. Let’s learn more about the two benefits in the sections below.

Health reimbursement arrangement (HRA)

An HRA is an IRS-approved, employer-funded health benefit. Depending on the type of HRA an employer offers, it allows you to reimburse your employees, tax-free, for their individual health insurance premiums and qualifying medical expenses.

With a stand-alone HRA like a qualified small employer HRA (QSEHRA) or individual coverage HRA (ICHRA), your employees choose the individual health insurance plan that suits their medical needs and budget. They can shop for a plan using a private exchange or through Illinois’s health insurance marketplace, Get Covered Illinois. You set a monthly allowance that your employees can spend on healthcare costs. Once employees make an approved purchase, you reimburse them up to their allowance amount.

HRAs have advantages for employers. Employers save more money by not purchasing a group health insurance plan, not experiencing annual rate hikes, and only reimbursing their employees when they incur an approved healthcare expense.

Some HRAs, such as the ICHRA, can satisfy the federal regulations for applicable large employers (ALEs), making an HRA a health benefit that can work for employers of all sizes.

Learn more about each HRA

Health and wellness stipends

With a health stipend, you can provide your employees with a set amount of money to help them pay for their medical expenses and insurance premiums. A health employee stipend isn't a formal group health plan, so you have complete control over which expenses are eligible for reimbursement.

You can offer as much stipend allowance as your budget allows, and employees can purchase the healthcare items that work for them and their families, making stipends a more flexible and personalizable option than group health insurance, able to cover various medical expenses and services.

While stipends are taxable for employees, small to medium-sized businesses looking for a benefit that covers items other than medical expenses, like mental health services and gym memberships, can easily do so with a wellness stipend. Offering a health and wellness stipend together gives your employees greater coverage for their overall well-being.

Wage laws in Illinois

Wages in Illinois are subject to various state laws. We've compiled the most important requirements to know below.

Minimum wage laws

As of 2024, the federal minimum wage is $7.25 per hour. But, Illinois has a state minimum wage requirement that exceeds the federal minimum wage.

Business owners that are located in or have workers within the City of Chicago must adhere to specific minimum wage rates that are above the state rates.

In Illinois, employers must pay their employees for all hours worked—whether salaried or hourly employees. If a tipped worker’s wages plus tips don’t equal at least the full minimum wage, the employer must make up the difference.

Effective January 1, 2025, Illinois law will require employers with more than 15 employees to disclose pay ranges and benefits in job postings to create greater pay transparency.

Subminimum wage

Illinois allows employers to pay certain classes of employees a subminimum wage, which is a lower amount than the standard hourly minimum wage.

Types of employees that can receive a subminimum wage are:

• Employers with fewer than four employees
  • This count shouldn’t include any employees who are the employer’s parents, children, spouse, or other immediate family.
• Agriculture and aquaculture employees
• Student learners
• Student employees
• Learners
• Apprentices
• Trainees
• Employees with physical and mental disabilities
• Youths that work less than 650 hours per calendar year

Employers must apply for licenses to pay subminimum wages to learners and workers with physical and mental disabilities on the Illinois Department of Labor website.

Overtime pay

Under the Illinois Minimum Wage Law, employees must receive overtime pay of 1.5 times their regular rate for every hour they work over 40 in any seven-day period. Most hourly employees are eligible for overtime wages.

Some occupations, such as executives, administrators, professionals, and computer specialists, are exempt from overtime pay as long as they make at least $684 per week. Outside salespeople are exempt regardless of their salary amount.

Pay notifications

Illinois employers must notify their employees of their pay rate, timing, and payment method at the time of hiring. The employer and the newly hired employee should acknowledge this notification in writing whenever possible.

Employers must also notify employees of any changes to the individual’s pay rate, timing, or payment method before making any changes.

Pay methods

Employers must pay their employees their full wages at least semi-monthly. However, exempt employees in the executive, administrative, and professional categories can receive their wages once a month. Employees who receive commission can also receive payment once a month.

Under Illinois law, an employer may pay wages by:

• Cash
  • The employer must receive a signed receipt from the employee for a cash payment of wages.
• Payable checks
• Direct deposit or wire transfer
  • Employers can’t force employees to accept their wages by direct deposit.
• Electronic payroll debit or credit cards under certain circumstances.

Pay frequency

Pay frequency depends on the pay schedule you use. Employees should receive their payment within 13 days after a pay period ends if they’re on a semi-monthly or biweekly pay schedule. If you use a weekly pay schedule, your employees must receive their wages within seven days after the period ends. You must pay exempt employees on or before 21 calendar days after the pay period ends.

Pay deductions

Business owners may make a few deductions from an employee’s paycheck. However, Illinois law requires employers to give each employee an itemized statement listing their deductions each pay period for the employee’s awareness.

The following are allowable pay deductions under Illinois law:

• Any amount required by law, like state, federal, and social security taxes
• Any amount for employee benefits or related fees, like pre-tax deductions for health insurance, union dues, etc.
• Any amount for valid reasons with the written consent of the employee.

The law prohibits employers from deducting pay for uniforms, cash register shortages, and missing or broken equipment without the employee’s written consent.

Prevailing wages

Illinois’s Prevailing Wage Act requires independent contractors and subcontractors to pay laborers on public works projects no less than the general prevailing rate of wages for similar work in the area where they’re performing the work.

Violators must pay workers the difference between what they paid and the prevailing wage and may also receive a fine. The state government may disbar contractors that have violated the act on two separate occasions in a five-year period from public work projects for four years.

Additionally, the Employment of Illinois Workers on Public Works Act, also known as the Illinois Preference Act, requires contractors to use at least 90% Illinois laborers on all State-funded public works projects. Employers who hire non-Illinois workers on state public work projects may be subject to penalties.

Recordkeeping

Illinois employers must maintain certain wage and hour records for each employee for at least three years in the event of an audit.

The following is a list of an Illinois employer’s obligations regarding recordkeeping for each employee:

• Full name
• Social security number
• Occupation
• Date of birth
• Home address
• Gender
• Regular rate of pay per hour
• Payment method and frequency
• Total daily or weekly net wages
• Total daily or weekly gross wages
• Any pay deductions
• Each payment date

There are extra recordkeeping requirements for employers with employees who receive paid vacation wages, tips, and subminimum wages. There may also be separate recordkeeping regulations for employees hired through day and temporary labor service agencies.

Final pay

Regardless of whether an employee quits or an employer terminates them, employers should provide their final paycheck at the time of separation. If this is impossible, the employee must receive the final payment no later than the next regularly scheduled payday. There’s no law specifying how employers must furnish the final payment.

The last paycheck should include the employee's remaining wages from the most recent pay period, plus any other type of compensation, such as commission and bonuses. If the employer has a company policy that guarantees the employee vacation, severance, sick time, or holiday wages, they must also receive this payment upon separation.

Frequently asked questions