1.2.1. Social Security Act of 1935: Includes Federal Insurance Contributions Act (FICA) tax withholding to pay for Social Security benefits and Federal Unemployment Tax Act (FUTA), to pay for Unemployment Insurance benefits.
FICA rate, 2007: 6.2%, on the first $97,500 of wages
Note: HI (Medicare) tax adds 1.45%, with no wage limit
FUTA rate depends on employer experience rating: Illinois employers start at 3.9% of the first $11,500 of wages (more for mining, construction, and waste management).
1.2.2 Fair Labor Standards Act of 1938 (FLSA)
FLSA regulations cover:
o Minimum wage
o Overtime (maximum hour) pay
o Nondiscrimination in compensation (equal pay)
o Child labor (employment of young people)
o Record keeping
FLSA applies to businesses with gross sales of $500,000 or more (or to certain named industries, regardless of size), and two or more employees engaged in interstate commerce. Family businesses employing only family members are generally exempt.
Illinois Minimum Wage
Statute: 820 ILCS 105/4
(Applicable to employers of 4 or more employees, excluding family members) Current:
Those under 18 years of age may be paid at the rate of $7.00 per hour.
For tipped employees, the rate is $4.95 per hour. Tipped employees must be paid minimum wage, but an employer may take credit for the employee's tips in an amount not to exceed 40% of the wage.
Overtime Requirements And Exceptions
Illinois law requires overtime after 40 hours of work per week. You are entitled to pay at time and one half your regular rate of pay if you worked over 40 hours in a workweek. Compensatory time off in place of payment for overtime is not legal in the private sector.
The Equal Pay Act covers wage discrimination based upon gender.
Employers must post a notice in their workplace summarizing the requirements under the Act. The notice is downloadable from the Illinois Department of Labor website.
Employers are prohibited from:
o remedying violations of the Act by reducing the wages of other employees, and from
o discharging or otherwise discriminating against any employee exercising his/her rights under the Act.
Illinois Child Labor Law regulates the employment of workers under 16 (14 and 15 year olds may work) years of age. The law protects children by
(1) Requiring employment certificates. The certificate, which can be obtained from the local high school or school administration office, confirms that a minor is old enough to work, physically capable to perform the job, and that the job will not interfere with the minor's education;
(2) Prohibiting work in hazardous occupations; and
(3) Limiting working hours. All work before 7 a.m. and after 7 p.m. is prohibited. However, work until 9 p.m. is allowed from June 1 through Labor Day.
Payroll Records Required
Every employer covered by the FLSA must keep certain records for each nonexempt worker. You don't need to keep the records in any particular form, but each record must include the following items (among others) accurately: The employee's full name, Social Security number, address, birthdate (if under 19), sex and occupation, time and day of week when the employee's workweek begins, hours worked each day, total hours worked in each workweek, regular pay rate, and total earnings including overtime, deductions from earnings, date of payment and period covered by the payment.
Employee Records Access
An employee may seek review of his/her personnel records up to one year after leaving employment. Although certain documentation is exempt, an employee must be provided an opportunity to inspect his/her personnel records. 820 ILCS 40/2.
An employee may request his/her personnel records from their employer two times per year. A former employee may request this information for a period of up to one year after separation. If the employer refuses, the employee may file a complaint with the Illinois Department of Labor. 820 ILCS 40/12.
Illinois law allows an employee to obtain a copy of the information or part of the information contained in hir or her record, however, the employer is allowed to charge a fee for providing a copy. The fee is limited to the actual cost of duplicating the information. 820 ILCS 40/3.
Typically a business is required to make unemployment insurance contributions to the Illinois Department of Employment Security (IDES) if they have: 1) employed one or more workers in each of 20 or more calendar weeks; or 2) paid at least $1,500 in total wages during the calendar quarter. IDES offers a New Employer Packet. To request this packet, contact:
o Department of Employment Security
Division of Unemployment Insurance
401 South State Street
Chicago, Illinois 60605
The Illinois Division of Professional Regulation (IDPR) is the main licensing agency for the State of Illinois. IDPR provides an on-line database listing every individual licensed with their agency.
Visit the IDPR web site and click on "License Look-up" to learn if an individual is licensed in a certain profession or determine if a licensed number is valid.
The Equal Employment Opportunity Commission (EEOC) is responsible for the enforcement of all anti-discrimination laws. These laws include: Title VII of the Civil Rights Act of 1964, Equal Pay Act, Age Discrimination in Employment Act, Rehabilitation Act of 1973, Title I of the Americans with Disabilities Act, and the Civil Rights Act of 1991. Business owners should acquaint themselves with these laws because they affect the company's hiring practices. To order information on these laws, contact:
o EEOC Publications Office
PO Box 12549
Cincinnati, Ohio 45212
Material Orders Only TDD: 1-800-669-6820
Workers Compensation Laws
1. Obtain workers' compensation insurance
2. Post a notice in each workplace that lists the insurance carrier and explains workers' rights
3. Keep records of work-related injuries and report to the Commission those accidents involving more than three lost workdays;
4. NOT harass, discharge, refuse to rehire, or in any way discriminate against an employee for exercising his or her rights under the law;
5. NOT charge the employee in any way for workers' compensation insurance premiums or benefits that the employer is required to pay.
For more information, contact:
o Illinois Workers' Compensation Commission
100 West Randolph, 8-200
Chicago, Illinois 60601
Toll Free: 1-866-352-3033 (in-state calls only)
Wage Withholding for Child Support
The Illinois Department of Healthcare and Family Services is the Child Support Enforcement Agency for the State of Illinois. If you (as an employer) are served a Notice of Withholding, you are required by law to withhold a portion of an employee's income for payment of child support. For a copy of "Ensuring A Child's Birthright: An Illinois Employer's Guide To Income Withholding", contact:
o Illinois Department of Healthcare and Family Services
Division of Child Support Enforcement
Employer Verification Unit
PO Box 19405
Springfield, Illinois 62794-9405
In Cook County: 312-793-3289
Remit withholding for child support to:
State Disbursement Unit, P.O. Box 8000, Wheaton, IL 60189-8000, tel. 800-327-4473
Immigration Reform and Control
The Federal Immigration Reform and Control Act of 1986 requires every employer to keep on file a form for every employee certifying that employee's identity and work eligibility. For further Information contact:
o U.S. Citizenship and Immigration Services
219 South Dearborn
Chicago, Illinois 60604
Chicago Employer's Expense Tax: Changed July 1, 2011
Payable quarterly to: Department of Revenue of the City Chicago, 121 North LaSalle Street, Chicago, IL 60610, tel. 312-814-5232
On November 17, 2010, the Chicago City Council amended the Employers Expense Tax ordinance by increasing the salary thresholds, in the definitions of the terms "Commission Merchant" and "Full-Time Employee" from $900.00 per calendar quarter to $4,300.00 per calendar quarter.
The new threshold is revised to coincide with the State mandated minimum wage in Illinois of $8.25 per hour, for employees working 40 hours per week, for thirteen weeks in a calendar quarter.
The new threshold will allow employers to eliminate from taxable employee counts subject to the $4.00 monthly tax, any employee making less than $4,300.00 per calendar quarter.
Biweekly, monthly: Every employer is required to pay all wages earned at least semi-monthly. The wages are to be paid no later than 13 days after the end of the pay period in which the wages were earned. Wages of executive, administrative and professional employees as defined in the Fair Labor Standards Act of 1938, may be paid once per month. Also, commissions may be paid once per month. 820 ILCS 115/3.
No requirement for direct deposit of paychecks
An employer must pay each of its employees his/her wages in a form that s/he may readily convert into cash (without the need of a personal bank account), unless an employee volunteers to be paid by direct deposit in an account at a bank or financial institution of his/her choice. For more information, click here. 820 ILCS 115/4 and 56 Ill. Adm. Code 300.600.
Cash Payment of Wages
The law allows wages or final compensation to be paid in lawful money of the United States or by check, redeemable upon demand and without discount at a bank or other financial institution, or by deposit of funds in an account in a bank or other financial institution designated by the employee. 820 ILCS 115/4.
Prevailing Wage Act
Prevailing wage is required to be paid when there is construction of a fixed work by a public body paid for in whole or in part with public funds. Additionally, all projects financed in whole or in part with bonds issued under the Industrial Project Revenue Bond Act, the Industrial Building Revenue Bond Act, the Illinois Development Finance Authority Act, or the Build Illinois Bond Act, and all projects financed in whole or in part with loans or other funds made available pursuant to The Build Illinois Act as now or when any of these Acts may hereafter be amended. 820 ILCS 130/2.
Industrial Home Work Prohibited
Illinois law regulates the processing or assembling of products in the home when parts or materials are supplied by an employer. The law prohibits certain types of manufacturing and requires registration of employers and certification of employees. 820 ILCS 240/2.
New Hire Reporting
Employers must report hiring, rehiring, and return
reporting to work within 20 days on Form W-4 (Employees Withholding Allowance Certificate) to:
OCSE, 36 West Randolph,6th Floor,Chicago, IL 60601, tel. 312-793-7141, 312-793-7392 (fax)
2.1 Applicable Regulations:
The general definition of "commissions" and that for applicable pay periods is provided. Readers are directed to the Code of Federal Regulations provisions otherwise cited for detail on the other general areas addressed. These are available online from the USDOL site and elsewhere in the online CFR.
29 CFR ?779.410
Permissible and Impermissible Deductions
Illinois law mandates that each employee shall be furnished with an itemized statement of deductions for each pay period. 820 ILCS 115/10.
Payments Owed On Termination
All final compensation (after an employee quits or is otherwise terminated), including bonus payments, vacation pay, wages and commissions must be paid on the next regularly scheduled payday. The Illinois Department of Labor enforces such pay, and employees have up to one year to complain of nonpayment or underpayment.
Additional resources provided by the author
The Illinois Department of Employment Security can assist you with finding new employees. Find out about labor market conditions and industry projections.
• www.illinoisskillsmatch.com finding new employees
• www.ilworkinfo.com labor market conditions and industry projections