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Recently enacted Senate Bill 0001 (Public Act 101-0001) will increase the state minimum wage incrementally to $15 per hour by 2025, starting with a jump from the current $8.25 to $9.25 effective January 1, 2020 and to $10 per hour effective July 1, 2020. (Governor's press release.)

After the increase to $9.25 per hour effective January 1, 2020 and $10 per hour effective July 1, 2020, the state minimum wage will rise to $11 per hour on January 1, 2021, and then increase by $1 per hour every January 1st until it reaches $15 per hour on January 1, 2025.?

Youth workers under the age of 18 working 650 hours or less in a calendar year may be paid at $.50 less than the applicable minimum wage until December 31, 2019, then at $8 per hour effective January 1, 2020, $8.50 per hour effective January 1, 2021, $9.25 per hour effective January 1, 2022, $10.50 per hour effective January 1, 2023; $12 per hour effective January 1, 2024; and $13 per hour effective January 1, 2015. Workers under the age of 18 working more than 650 hours in a calendar year must be paid the full applicable minimum wage.

Tipped employees continue to have a minimum wage of 60% of the applicable state minimum wage (i.e., currently $4.95 per hour), as long as tips plus wages equals the applicable minimum wage.

Withholding tax credit against increased minimum wage for small employers

Employers of 50 or fewer employees will be allowed to take a withholding tax credit, up to the tax liability, during the reporting periods of January 1, 2020 to December 31, 2027. The percentage of credit will begin at 25% as of January 1, 2020, and steadily decrease each year until it ends for all employers of more than five employees in 2026 and for employers of five or fewer employees on December 31, 2027.

An employer may not take a credit for an employee who has worked fewer than 90 consecutive days immediately preceding the reporting period (however, such credits may accrue during the 90-day period and be applied to future reporting periods). Other conditions will apply.

Penalties to apply to employers that fail to keep records

The legislation adds a penalty for employers that fail to keep payroll records as required of $100 per affected employee, payable to the state's Wage Theft Enforcement Fund. In addition, the civil damages penalty for employers that fail to pay at the required minimum wage increases from 2% to 5% of the amount per month during which the underpayment occurred. Willful disregard of the minimum wage law may result in an additional penalty of $1,500, over and above the current 20% penalty.

Illinois localities may have other minimum wage requirements

Employers in the city of Chicago and county of Cook must currently pay at a higher minimum wage. Employers will need to take special care in meeting the minimum wage requirements of both the state and local government.

Ernst & Young LLP insights

Illinois joins several other states (most recently New Jersey) in establishing a $15 per hour minimum wage. For more information on the minimum wage in effect for other states, see EY Payroll Newsflash Vol. 20, #010, 1-10-2019.

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EY Payroll News Flash