Hiring your first employee in Illinois: the payroll checklist
Every registration, form and deadline between the offer letter and the first paycheck for an Illinois small business, in the order you will meet them.
Lucia Castellanos, bookkeeper since 2011 Sample
Published · 8 min read
The first hire is the moment a business picks up a new set of government accounts. None of the steps is hard, but there are about a dozen of them, and several have deadlines counted from the start date. Work through this list before the first day if you can.
Two to three weeks before the start date
Get or confirm your federal EIN. A sole proprietor with no employees may have been using a Social Security number. You need an Employer Identification Number to run payroll. It is free and immediate on IRS.gov.
Register for Illinois withholding. Through MyTax Illinois, register with the Illinois Department of Revenue to withhold state income tax. The Illinois rate is a flat 4.95%.
Register with IDES for unemployment insurance. The Illinois Department of Employment Security assigns your account number and a new-employer tax rate. You report wages and pay this tax every quarter.
Buy workers’ compensation insurance. Illinois requires it for almost every employer, including one with a single part-time employee. Have the policy start on or before the first day of work.
Choose how you will run payroll. A payroll service, a payroll add-on to your bookkeeping program, or your accountant. Doing it by hand is possible and almost never worth it.
On or before day one
Have the new employee complete:
- Form W-4, for federal withholding.
- Form IL-W-4, for Illinois withholding. It is a separate form with its own allowances.
- Form I-9, to confirm they may work in the United States. The employee completes their part by the first day, and you must see their documents and complete your part within three business days of the start date. Keep I-9s in a separate file from the personnel file.
Put up the required federal and Illinois workplace posters where employees can see them. The Illinois Department of Labor publishes the current state set.
Within 20 days of the start date
Report the new hire to the Illinois New Hire Directory, run by IDES. Most payroll services file this for you; check that yours does.
Pay rules to get right from the first check
- Minimum wage. Illinois’s minimum wage is $15.00 an hour, and $9.00 an hour for tipped workers whose tips bring them to at least $15.00. Some cities and counties set their own higher rate; Naperville follows the state rate.
- Paid leave. Under the Paid Leave for All Workers Act, employees earn one hour of paid leave for every 40 hours worked, up to 40 hours a year (you may allow more), and may use it for any reason. Track it from the first hour.
- Pay frequency. Illinois requires most employees to be paid at least twice a month.
- Overtime. Hourly employees earn time and a half after 40 hours in a workweek.
After the first payroll: the recurring calendar
| What | When |
|---|---|
| Federal income tax, Social Security and Medicare deposits | By the 15th of the following month in your first year (most new employers are monthly depositors) |
| Illinois withholding payments | On the schedule IDOR assigns, often monthly |
| Form 941 (federal quarterly return) | April 30, July 31, October 31, January 31 |
| Form IL-941 (Illinois quarterly return) | Same dates as Form 941 |
| IDES quarterly wage report and unemployment tax | End of the month after each quarter |
| Form 940 (federal unemployment) | January 31 |
| Form W-2 to employees and the Social Security Administration | January 31 |
Federal unemployment tax is usually 0.6% of the first $7,000 of each employee’s wages once the Illinois tax is paid on time.
Two more Illinois rules to know
Illinois Secure Choice. If you have five or more Illinois employees and do not offer a retirement plan, you must register with the state’s Secure Choice program or set up a plan of your own. Count your employees each year.
Expense reimbursement. Illinois requires employers to reimburse employees for necessary business expenses they pay on your behalf, such as mileage for deliveries. A short written policy sets the limits; write it before the first claim.
How we help
Our payroll service handles every registration above except the I-9 and the insurance policy, runs the first payroll with you on the phone, and files every quarterly and annual form after that. Set-up takes about two weeks, so call the week you post the job.
General information, not tax advice for your situation. This article explains rules as they stood on its last update date. Tax law changes, and the right answer for your business depends on facts we would need to see. Full disclaimer.
