Illinois payroll taxes for employers (2026)
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The Illinois Department of Employment Security (IDES) charges new employers 3.35% on the first $14,250 of each employee's wages in 2026, and Illinois withholds a flat 4.95% state income tax (checked October 16, 2026). The detail that trips up rate tables is the 0.55% fund building rate: it is built into the 3.35%, which is why some national summaries show Illinois at 2.80%.
- SUTA wage base
- $14,250
- New employer SUTA rate
- 3.35%
- State income tax
- Yes
- Minimum wage
- $15.00 (employers with 4+ employees)
On this page
Illinois payroll: the details that matter
Illinois has no state disability or paid leave payroll tax and no city wage tax, so the state side is two lines: IDES unemployment tax and state income tax withholding. The catches are in how those lines are figured and in Illinois labor rules.
3.35% or 2.80%?
The IDES 2026 rate notice (form EA-50) gives new employers 3.35%, including a 0.55% fund building rate. The US Department of Labor's state summary shows 2.80% because it leaves fund building out. You pay 3.35%. On a full $14,250 wage base, the gap is $78.38 per employee. Experienced employers range from 0.75% to 7.05%.
A high wage base
At $14,250, the Illinois base is roughly double the $7,000 used in Florida and California. Unemployment tax keeps accruing well into spring for most full-time staff, so budget for it across two quarters rather than one. Our state-by-state SUTA table puts the base next to other states.
PEOs register with the Department of Insurance
Illinois calls PEOs employee leasing companies. They register under the Employee Leasing Company Act (215 ILCS 113) on form ELC-1 through NIPR, with the Illinois Department of Insurance. We found no public list of registered companies, so ask the PEO for its registration.
Illinois employer payroll facts at a glance
| Item | Illinois rule or rate | Official source |
|---|---|---|
| SUTA taxable wage base (2026) | $14,250 | source |
| New employer SUTA rate | 3.35% (includes 0.55% fund building rate) | source |
| SUTA rate range | 0.75% to 7.05% | |
| Surcharges and admin fees | Fund building rate 0.55% (included). DOL sigpros shows 2.80% because it excludes fund building | |
| 2027 rates published? | no | |
| Unemployment agency | Illinois Department of Employment Security (IDES) | source |
| State income tax withholding | Yes. Flat 4.95% of net income (effective July 1 2017). 2026 exemption allowance not shown on the page read | source |
| Paid leave or disability programs | none (no state payroll-funded leave program) | |
| Minimum wage 2026 | $15.00 (employers with 4+ employees) | source ; source |
| Tipped cash wage 2026 | $9.00 (tip credit 40%) | |
| Minimum wage 2027 | none announced | |
| New hire reporting | Within 20 days of the employee's first day on the payroll (IDES); IL HFS New Hire site says within 20 calendar days of start date. Independent contractors must also be reported | source |
| Pay frequency rule | At least semi-monthly; executive, administrative and professional staff may be paid monthly (DOL payday table) | |
| Final paycheck rule | Fired or quit: at separation if possible, and no later than the next regularly scheduled payday (820 ILCS 115/5) | source |
| Workers comp required | Generally all Illinois employers must provide coverage (Illinois Department of Insurance). Headcount threshold and exemptions not stated on the page read. Not monopolistic | source |
| Local income taxes | no | |
| PEO license or registration | yes. Registration under the Employee Leasing Company Act (215 ILCS 113), form ELC-1 via NIPR, Illinois Department of Insurance. No public list found |
Checked October 16, 2026 against the official sources linked in each row.
Registering with IDES and the Department of Revenue
- Get a federal EIN.
- Create an IDES unemployment insurance account through MyTax Illinois. IDES links new employers there from its employer resources page.
- Register for state income tax withholding with the Illinois Department of Revenue.
- Arrange workers comp. The Illinois Department of Insurance says that generally every Illinois employer must provide coverage.
- Report new hires within 20 days of the first day on the payroll. Illinois also requires you to report independent contractors.
- Set paydays at least semi-monthly; executive, administrative and professional staff may be paid monthly.
Illinois worked example: $50,000 in wages
A new Illinois employer with one full-year $50,000 employee owes these taxes in 2026:
| What you pay | Rule | Amount |
|---|---|---|
| Federal: Social Security | 6.2% of wages up to $184,500 | $3,100.00 |
| Federal: Medicare | 1.45% of all wages | $725.00 |
| Federal: FUTA | 0.6% of the first $7,000 | $42.00 |
| IDES unemployment tax (new employer, with fund building) | 3.35% of the first $14,250 | $477.38 |
| Total employer tax | $4,344.38 |
Source: IDES 2026 rate notice EA-50; IRS Topics 751 and 759. Checked Oct 2026. The IDES figure is $477.375, rounded to the cent.
The employee also has 4.95% Illinois income tax withheld, which is $2,475 on $50,000 before the Illinois exemption allowance (IDOR's 2026 allowance was not on the page we read). That comes out of the paycheck, not your budget. Workers comp is separate; see how workers comp is priced.
Wage and final pay rules for Illinois employers
- Minimum wage is $15.00 for employers with 4 or more employees. Tipped workers can be paid $9.00 in cash, a 40% tip credit. No 2027 change had been announced on October 16, 2026. See minimum wages by state.
- Final pay is due at separation if possible, and no later than the next regularly scheduled payday, whether the worker quits or is fired (820 ILCS 115/5).
- Independent contractors go on your new hire report, not just employees.
Payroll providers and PEOs in Illinois
Most full-service providers handle IDES and IDOR filings. Check that yours uses 3.35% and not the 2.80% DOL figure, and that it reports contractors to the new hire registry. Gusto's single-state plan is $49 a month plus $6 per person (checked October 16, 2026); see ranked payroll options.
For benefits and workers comp in one bill, read Illinois PEO costs and registration and PEO scores and fees.
Frequently asked questions
What is the Illinois unemployment tax rate for 2026?
Why does the US DOL show 2.80% for Illinois?
What is the Illinois state income tax withholding rate?
How much does a $50,000 employee cost in Illinois payroll taxes?
Do Illinois employers have to report contractors as new hires?
Sources (13)
- IDES: EA-50: 2026 contribution rates (checked Oct 16, 2026)
- Illinois MyTax: MyTax Illinois (checked Oct 16, 2026)
- IDES: New hire reporting (checked Oct 16, 2026)
- Illinois Department of Revenue: Income tax rates (checked Oct 16, 2026)
- Illinois General Assembly: 820 ILCS 115/5 (final compensation) (checked Oct 16, 2026)
- Illinois Department of Insurance: Workers compensation coverage (checked Oct 16, 2026)
- Illinois Department of Insurance: Other licenses (employee leasing company registration) (checked Oct 16, 2026)
- US Department of Labor: Significant Provisions of State UI Laws, July 2026 (checked Oct 16, 2026)
- Gusto: Gusto pricing page (checked Oct 16, 2026)
- IRS: Topic 751: Social Security and Medicare withholding rates (checked Oct 16, 2026)
- IRS: Topic 759: Form 940, FUTA tax (checked Oct 16, 2026)
- Social Security Administration: 2026 COLA fact sheet (wage base $184,500) (checked Oct 16, 2026)
- dol.gov/agencies/whd/minimum-wage/state (checked October 2026)
This page is general information, not tax, legal or accounting advice. Rules and rates change, so check the official source linked above before you file or sign a contract. Read our disclaimer.