Hiring Employees in Illinois: Registration, Withholding and New Hire Reporting

The moment you hire your first employee in Illinois, you enter a web of registration requirements, tax withholding obligations, and compliance deadlines. These are not optional, skip them and you face penalties, back taxes, and potential liability. This guide walks you through what an employer actually needs to do.

Employer Registration: IDES and IDOR

Before you can legally employ anyone in Illinois, you must register with two state agencies. These are separate registrations with separate deadlines and purposes.

Illinois Department of Employment Security (IDES) Unemployment Insurance Account

Every business that has employees must register with the Illinois Department of Employment Security to participate in the state's unemployment insurance (UI) program. This is true even if you have just one employee, and it is true whether your employee is full-time or part-time.

You register by filing a Form UI-1 (Application for an Illinois Unemployment Insurance Account Number). You can file online through the IDES website at https://www2.illinois.gov/ides or by mail. The application asks for your business structure, the nature of your business, your expected payroll, and employee information.

IDES will issue you an account number. Use this number on all unemployment insurance filings and correspondence. You pay unemployment insurance contributions as a percentage of your payroll; the exact rate depends on your industry and claims history. New employers pay a standard new-employer rate on a taxable wage base that IDES sets each year; check IDES for the current rate and wage base.

Registration is free. Do this before you hire, if possible, not after.

Illinois Department of Revenue (IDOR) Withholding Registration

You must also register with the Illinois Department of Revenue to withhold income tax from employee paychecks. File Form REG-1 (Application for Employer Registration) with IDOR at https://tax.illinois.gov/. You can apply online through MyTax Illinois, which is the state's business tax portal.

Illinois has a flat personal income tax rate of 4.95 percent. This is the rate you use to withhold from employee pay each pay period, after the allowances on Form IL-W-4. IDOR will set up your withholding account and tell you your payment schedule and filing deadlines.

Withholding registration is also free and typically processes within one to two business days if you file online.

New Hire Reporting Requirements

Within 20 days of hiring any employee, you must file a new hire report with the Illinois Department of Employment Security. This report serves multiple purposes: it helps establish child support obligations, identifies duplicate unemployment insurance claims, and assists in fraud prevention.

The new hire report must include the employee's name, address, Social Security number and first day of work, plus your business name, address and FEIN. You can file the report electronically through IDES at https://www2.illinois.gov/ides or by paper mail.

Penalties for late or missing new hire reports include fines and potential liability. An employer that knowingly fails to report, after IDES notifies it and it does not supply the information within 21 days, faces a civil penalty of $15 per unreported employee. This is not something to neglect.

Most payroll services and HR platforms now handle new hire reporting automatically. If you are processing payroll yourself, set a calendar reminder for day 20 of the hire date.

Illinois Withholding Tax: Rates and Compliance

Withholding income tax from employee paychecks is mandatory. Illinois withholds at the flat 4.95 percent rate on wages after the allowances each employee claims on Form IL-W-4. Federal income tax withholding is separate and is determined by each employee's W-4 form and IRS tables.

You must remit withheld taxes to IDOR according to a schedule based on the amount you withhold. The general rule is that you remit monthly, but employers with certain tax liability amounts may be required to remit more or less frequently. Check your IDOR notice or contact IDOR directly to confirm your payment schedule.

Penalties for failing to remit withholding taxes include interest on the unpaid balance plus late-payment penalties. The state can also assess civil and criminal penalties for willful non-compliance.

Report withheld taxes to IDOR on Form IL-941, Illinois Withholding Income Tax Return, each quarter, and file your employees' W-2 information with IDOR each year.

Equal Pay Registration Certificate

If your business has 100 or more employees in Illinois, you must obtain an Equal Pay Registration Certificate from the Illinois Department of Labor. This requirement applies to all employers that meet the threshold, regardless of industry or location.

The certificate demonstrates that you have reviewed your pay practices and are in compliance with Illinois equal pay laws, which prohibit pay discrimination based on sex and other protected characteristics. The application carries a $150 filing fee and includes wage records and a signed compliance statement, and you must recertify every 2 years. The Illinois Department of Labor assigns your filing dates.

Failure to register can result in penalties and makes you vulnerable to additional enforcement action by the state Department of Labor or by employees in wage-and-hour lawsuits. If you are at or near the 100-employee threshold, confirm your count early in the calendar year and file the registration by the deadline.

Illinois Biometric Privacy Act (BIPA) Compliance

If you use biometric time clocks, fingerprint scanners, or any other biometric data collection for employee timekeeping or identification, you must comply with the Illinois Biometric Information Privacy Act (740 ILCS 14).

BIPA requires you to obtain written employee consent before collecting, storing, or using biometric data. The consent must specifically describe how the biometric information will be used and must comply with all privacy safeguards outlined in the law. You must also have a clear data retention and destruction policy.

Importantly, BIPA provides for private right of action. An employee can sue if you collect biometric data without proper consent. Since the 2024 amendment (SB 2979), repeated collection of the same biometric data from the same person by the same method counts as a single violation, so there is one recovery per person. The potential liability is real and can be substantial.

If you use any biometric-based systems, review your written policies immediately and ensure all current and new employees provide documented consent. If you have not collected consent from existing employees, consult with an employment attorney about how to address past use.

Noncompete Agreements and the Freedom to Work Act

Illinois restricts noncompete agreements under the Freedom to Work Act. If you use a noncompete clause in your employment agreements, you must ensure it complies with Illinois law or risk it being unenforceable in court.

The law sets income thresholds above which noncompetes are allowed. A noncompete is allowed only for employees whose annualized earnings exceed $75,000, rising to $80,000 on January 1, 2027. A non-solicitation covenant requires earnings above $45,000 ($47,500 from January 1, 2027). For employees below that threshold, noncompete clauses are void and unenforceable.

Additionally, noncompetes must be reasonable in scope (the geographic area and time period covered). The law also requires you to advise the employee in writing to consult an attorney and to give the employee at least 14 calendar days to review the covenant before signing.

If your current agreements contain noncompetes for lower-wage employees or do not comply with reasonableness standards, have an employment attorney review and revise them. Attempting to enforce an illegal noncompete can expose you to litigation and damages.

Chicago Fair Workweek Ordinance

If you have employees working in Chicago, you may be subject to the Chicago Fair Workweek Ordinance. It covers lower-paid employees of employers with at least 100 employees globally (250 employees and 30 locations for restaurants) in seven industries: building services, healthcare, hotels, manufacturing, restaurants, retail and warehouse services.

The ordinance generally requires employers to provide employees with schedules at least 14 days in advance, pay 1 hour of predictability pay for shift changes within 14 days, and meet other scheduling requirements. There are also limits on on-call scheduling.

Even if you are not based in Chicago, if you employ workers who are based there, the ordinance likely applies to you for those employees. Review the Office of Labor Standards pages of the Chicago Department of Business Affairs and Consumer Protection to confirm whether your industry and employee situation are covered, and ensure your scheduling practices comply.

Wage Payment and Leave Laws

Illinois requires that you pay employees at least the state minimum wage, which has been $15.00 per hour since January 1, 2025 (some local governments, such as Chicago, set higher rates). Check current rates with the Illinois Department of Labor. Wages must be paid on a regular schedule, at least semi-monthly.

Employees are also entitled to paid time off under various Illinois laws. The Illinois Paid Leave for All Workers Act (effective January 1, 2024) requires up to 40 hours of paid leave per year that employees can use for any reason, and Chicago and Cook County have their own paid leave ordinances. Illinois has no state paid family and medical leave program.

Federal law also requires you to track and properly classify employees as exempt or non-exempt from overtime under the Fair Labor Standards Act (FLSA). Misclassification exposes you to overtime liability and penalties.

Workers' Compensation Insurance

Illinois requires most employers with one or more employees to carry workers' compensation insurance. This insurance covers medical expenses and lost wages if an employee is injured or becomes ill due to work.

You can obtain workers' compensation insurance through private insurers or, if approved, by self-insuring. Illinois has no state workers' compensation fund. Coverage is mandatory and failure to carry it exposes you to significant penalties, including criminal liability in some cases. Before your first employee starts work, ensure you have a workers' compensation policy in force.

Secure Choice and Retirement Plans

Illinois has an auto-IRA program, now called My Illinois Savings (formerly Illinois Secure Choice). If you had at least 5 Illinois employees in every quarter of the prior calendar year, have been in business at least 2 years, and do not offer a qualified retirement plan, you must register for the program or offer your own plan.

This is a relatively new requirement, and the specifics depend on your payroll size and whether employees are eligible. Check the Illinois State Treasurer's My Illinois Savings page for current enrollment rules and deadlines.

Key Takeaways

Hiring your first employee in Illinois requires you to register with IDES and IDOR, establish payroll withholding procedures, and report new hires within 20 days. Beyond these basics, you must comply with equal pay requirements if you reach 100 employees, protect employee biometric data if you collect it, honor Freedom to Work Act restrictions on noncompetes, and meet wage, leave, and benefits obligations.

If you are in Chicago, add Fair Workweek compliance to your checklist. If you hire in any regulated industry or profession, additional state licensing or registration may be required.

Disclaimer: This content is informational and describes Illinois employer requirements as of October 2026. It is not legal or tax advice. Hire a qualified employment attorney and a CPA or tax professional to review your specific hiring practices and employment agreements before you hire. Employment law is detailed and state-specific, and professional guidance is not optional for risk management.

For official state resources and current requirements, contact the Illinois Department of Employment Security at https://www2.illinois.gov/ides or the Illinois Department of Revenue at https://tax.illinois.gov/.