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Quick Guide to Illinois' Mandatory Employee Benefits

Navigating Illinois employment law can be a challenge. Regulations change, and obligations often scale with your company's size, creating a complex compliance landscape. This guide simplifies the mandatory benefits and rights you must provide to your employees, helping you mitigate risk and manage your human resources effectively.

A key feature of Illinois law is its tiered structure. Your compliance duties increase significantly as your business grows, with new rules triggered at thresholds of 5, 15, 20, 25, and 50 employees. Understanding where your business falls on this spectrum is the first step toward compliance.

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Foundational Insurance Mandates

At the heart of employer obligations are foundational social insurance programs. Compliance with Workers’ Compensation, Unemployment Insurance, and Social Security/Medicare (FICA) is non-negotiable and represents the basic safety net for your workforce.

Illinois Workers' Compensation Act

This Act establishes a no-fault insurance system for employees who suffer job-related injuries or illnesses. Nearly every Illinois employer, even those with a single part-time employee, must carry workers' compensation insurance. Failure to comply can result in fines of up to $500 per day (with a $10,000 minimum) and exposes your business to unlimited liability from civil lawsuits.

• Coverage: Covers medical care, disability benefits, and death benefits for work-related injuries, illnesses, and even stress-induced mental health conditions.
• Employer Duties: Purchase a policy, post a notice of rights for employees, and never charge an employee for premiums.

Unemployment Insurance (UI)

Administered by the Illinois Department of Employment Security (IDES), UI provides temporary wage replacement to those who lose their jobs through no fault of their own. You must register with IDES within 30 days of starting your business. Key duties include:

• New Hire Reporting: Report all new employees to the IDES New Hire Directory within 20 days.
• Quarterly Reporting: File Form UI-3/40 to detail wages paid and calculate your UI contribution.
• Provide Information: Give a copy of the IDES publication "What Every Worker Should Know About Unemployment Insurance" to any separating employee.

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Health Insurance & Continuation Coverage

While not all employers must offer health insurance, federal and state laws create a web of requirements, especially for larger businesses. The Affordable Care Act (ACA) functions as a mandate for large employers, while state laws ensure employees can continue coverage after leaving a job.

Affordable Care Act (ACA) Employer Mandate

The ACA applies to Applicable Large Employers (ALEs)—those with 50 or more full-time equivalent employees. ALEs must offer health coverage that is both "affordable" and provides "minimum value" to at least 95% of full-time employees to avoid steep IRS penalties. This requires meticulous annual reporting via Forms 1095-C and 1094-C.

Health Coverage Continuation (COBRA & Illinois Mini-COBRA)

Illinois ensures that employees have an option to continue health coverage after a job loss, regardless of company size. The applicable law depends on your number of employees.

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Mandatory Leave Entitlements

Illinois provides an expanding array of mandatory leave rights. The most significant is the Paid Leave for All Workers Act (PLFAW), which establishes a baseline of paid time off that can be used for any reason.

Paid Leave for All Workers Act (PLFAW)

Effective January 1, 2024, PLFAW applies to nearly every private employer in Illinois. It requires you to provide employees with up to 40 hours of paid leave during a 12-month period, which they can use for any reason without providing documentation.

• Accrual: Employees earn 1 hour of leave for every 40 hours worked.
• Front-loading: You can grant the full 40 hours at the start of the year. This method allows for a "use-it-or-lose-it" policy and means you don't have to pay out unused time upon separation.
• Record-Keeping: You must maintain records of hours worked, leave accrued, and leave taken for at least three years.

Family and Medical Leave

For larger employers, the federal Family and Medical Leave Act (FMLA) provides up to 12 weeks of unpaid, job-protected leave for qualifying family and medical reasons. This applies to businesses with 50 or more employees. Illinois also has several other family-related leave laws:

• Family Military Leave Act: Provides unpaid leave when an employee's family member is called to active duty.
• Victims' Economic Security and Safety Act (VESSA): Grants up to 12 weeks of unpaid leave for employees who are victims of domestic or sexual violence.
• School Visitation Rights Act: Allows up to 8 hours of unpaid leave per year to attend school-related functions for a child.

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Retirement Savings Mandates

To expand retirement savings access, Illinois created a state-facilitated program that places a new administrative duty on many small and mid-sized businesses.

Illinois Secure Choice Retirement Savings Program

This program mandates that certain employers facilitate a retirement savings plan for their employees. Your role is purely administrative; you do not contribute funds or provide investment advice. The mandate applies if you:

• Had 5 or more Illinois employees in every quarter of the previous calendar year.
• Have been in business for at least two years.
• Do not already offer a qualified retirement plan (like a 401(k)).

Your responsibility is to register your business on the Illinois Secure Choice portal, upload your employee roster, and facilitate payroll deductions for employees who choose to participate.

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The Evolving Landscape: Key Changes for 2025

Recent legislation significantly expands employee rights and employer transparency obligations, with most changes taking effect on January 1, 2025.

• Pay Transparency: Employers with 15+ employees must include a good-faith pay scale and a description of benefits in all job postings.
• Expanded Human Rights Act: The law now prohibits discrimination based on "Reproductive Health Decisions" and "Family Responsibilities" and extends the time to file a claim to two years.
• Freelance Worker Protection Act: Requires written contracts and timely payment (within 30 days) for freelance workers on projects valued at $500 or more.
• Worker Freedom of Speech Act: Prohibits employers from forcing employees to attend meetings about the employer's political or religious views.

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