What is the minimum wage in Illinois for 2020?
The Illinois minimum wage as of July 1, 2020, is $10 per hour for non-tipped employees ages 18 and over, which is a fair bit higher than the federal minimum wage of $7.25 per hour. Minors (ages 18 and under) may be paid a minimum wage of $8.00 per hour. However, according to the Illinois minimum wage law, if your under-18 employee works more than 650 hours in a calendar year, they must be paid at the same rate as an employee who is 18 or over.
If you run a business with tipped employees, you may take credit for your employees’ tips; however, this amount may not exceed 40 percent of their wages. Additionally, non-tipped employees may be paid a minimum wage of $6.00 if applying the tip credit (or $9.50 if not utilizing the tip credit) during their first 90 days with an employer. Please keep in mind that the two local jurisdictions, specifically Chicago and Cook County, have a higher wage than the Illinois minimum wage.
The Chicago minimum wage is $13.50 per hour for employers with 4 to 20 workers. If you are an employer with 21 or more workers, you are required to pay $14.00 per hour. For tipped workers (such as restaurant servers) the Chicago minimum wage is $8.10 for employers with 4 to 20 workers and $8.40 for employers with 21 or more workers.
The Cook County minimum wage has been $13.00 per hour since July 1, 2020. The base wage for tipped employees in Cook County increased from $ $5.25 to $5.30 per hour.
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Is the Illinois minimum wage increasing beyond 2020?
In the past, the Illinois minimum wage was re-evaluated each year and based on the values of the Consumer Price Index (CPI), which is intended to raise the rate along with inflation.
In early 2019, the Illinois House and Senate approved a proposal that would increase the state’s minimum wage to $15.00 by 2025. This bill was later vetoed by Governor Bruce Rauner, who cited a University of Washington study that found that low-wage workers saw a decrease in hours worked and income earned when wages increased to $13 per hour in 2016.
However, that has changed, yet again. Governor J.B. Pritzker signed a bill in February of 2019 that would pave the way for an Illinois minimum wage increase to $15 per hour by 2025, making Illinois among the first states to approve a $15 minimum wage.
In Chicago, some workers will see that increase a bit sooner. Chicago’s City Council approved a plan proposed by Mayor Lori Lightfoot that brings the Chicago minimum wage to $14 an hour as of July 1, 2020 , and $15 on July 1, 2021—four years ahead of when the Illinois minimum wage reaches that threshold. Smaller businesses with fewer than 20 workers will have until 2023 to get to $1, and businesses with fewer than four employees are exempt.
The Chicago minimum wage increase also affects tipped employees. The plan raises the wage for tipped workers to $8.40 an hour.
How should small business owners prepare for changes that are being made?
Every business is different, so there isn’t one right way to prepare. Here are a few options you may want to consider:
- Audit your expenses: Check your cash flow in detail and create a hiring plan that you can afford. In some cases, you may find that hiring temporary workers as needed is less expensive than taking on full-time regular staff.
- Make sure you hire and keep the right employees: Replacing an employee costs a lot. You decrease the total cost associated with recruiting and training when you hire (and then retain) the right people. Look for candidates who have good track records, come recommended, and fit in with the company culture. Once employees are onboarded, make sure you build a relationship and provide paths for employee growth; it makes it more likely that they will stay in their role.
- Increase prices: This is a great way to increase cash flow. Customers are rarely happy with a price hike, but keep in mind that your competitors will be forced to do the same. Just make sure you keep track of trends, and don’t raise prices too high.
- Update tech: Consider automating certain aspects of the work (like payroll), and find ways to reduce production costs.
As always, to make sure your business is prepared and stays in compliance (get your EIN for starters), we recommend that you discuss these upcoming changes to the Illinois minimum wage laws with your accountant and lawyer.