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Education, Illinois

Chicago Minimum Wage Increase Takes Effect July 1, 2023

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Chicago Office Of Labor Standards Minimum Wage Chart

The City of Chicago and Cook County both saw increases to their minimum wage requirements as of July 1, 2023 (they have fiscal years that end June 30, which is why we see their updates at this time each year, rather than January 1, which is when the State of Illinois changes usually go into effect). Since reaching $15 per hour in 2021, the minimum wage for Chicago increases annually per ordinance according to the Consumer Price Index, or 2.5%, whichever is lower.

In Chicago, minimum wage will increase to $15.80/hr for “large” employers (21 or more employees) and domestic workers. The minimum will be $15/hr for “small” employers (4-20 employees). For tipped workers, who tend to earn a large portion of their pay from gratuities, the minimum wage is going up to $9.48/hr for large employers, and $9/hr for small. (Efforts to eliminate this practice are yet again gaining momentum under the new mayor.) As has always been the case, if tips do not bring the worker up to the non-tipped employee minimums, the employer must make up the difference. Most payroll software (including Gusto) will address this discrepancy automatically, but it’s worth checking your system to make sure.

The overtime minimum wage for non-tipped employees is calculated at 1.5 times the minimum wage. The overtime wage for tipped Employees is calculated at 1.5 times the tipped minimum wage, minus no more than the current maximum tip allowance. The maximum tip allowance is calculated by subtracting the tipped minimum wage from the regular minimum wage. Therefore, in Chicago, overtime minimum wages will increase to $23.70 and $22.50, respectively.

Rates for “youth” workers in Chicago — those under age 18, in a subsidized temporary youth employment program, or transitional employment program — are now $13.50/hr for regular pay, $20.25 for overtime, and $8.10 for tipped workers.

In addition, the minimum wage to be paid under City of Chicago contracts or concessionaire agreements is increasing from $16.00 to $16.80 per hour for non-tipped employees and from $8.20 to $8.80 per hour for tipped employees.

Chicago’s Minimum Wage and Paid Sick Leave Ordinance guarantees a minimum wage for employees working more than 2 hours in any 2-week period in Chicago for an employer with four or more workers. Domestic workers are guaranteed Chicago’s “large” employer minimum wage irrespective of the number of workers.

Employers must provide the Minimum Wage and Paid Sick Leave notice to all covered employees with their first paycheck, as well as in communal areas at a workplace. Notices must be provided in English and any language spoken by employees that do not speak English proficiently, if a notice in that language has been provided by the Department of Business Affairs and Consumer Protection on the Office of Labor Standards website. Notices can be provided electronically.

The Chicago Department of Business Affairs and Consumer Protection offers a free webinar with Q&A on the topic of the recent changes on its YouTube channel. They also have a great PDF download of their FAQ. For more information on Chicago Labor laws to pay attention to this year, see our recent summary of reminders for local business owners.

Parts of Cook County that are not in Chicago, and for which the municipality did not “opt out”, allow lower rates than Chicago ($13.70/hr regular pay and $8/hr for tipped workers), but require higher hourly pay than the State of Illinois ($13/hr regular pay and $7.80 tipped workers).

The federal minimum wage, which was last raised in 2009, stands at $7.25 an hour, which when adjusted for inflation is the lowest in 66 years.

Reactions to increased minimum wages by small business owners are understandably mixed. On the one hand, higher wages often help the local economy and boost consumer spending power. On the other, many small businesses owners operate on slim margins and make far less per hour than their employees. An increase in the minimum wage often means that some staff hours are reduced or eliminated in order to stay in the black.

Note when speaking with your employees that phrases like “poverty wage,” “minimum wage,” and “living wage,” while all related, are not the same thing. That said, Chicago consistently ranks as one of the most affordable places to live, when evaluating the relatively low cost of living compared to other big cities, and the relatively high minimum wage.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Education, Illinois, IRS, Tips

Year-End Reminders For Chicago Small Business Owners

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Chicago businesses should take a moment to review upcoming changes before year-end.

The Chicago Department of Business Affairs & Consumer Protection (BACP) was designed to “license businesses and public vehicles, provide business education and access to resources, enforce the Municipal Code, and protect consumers from fraud,” which means that sometimes they have to create and enforce ordinances and regulations that are a bit arduous or challenging for small businesses. But in the public interest, we need to take a moment to review the annual changes and requirements to make sure we have everything in order. (Besides, the penalties for willful ignorance are no fun.)

With that in mind, here are some things you’ll need to make sure to take care of before ringing in the new year.

  1. Illinois Department of Human Rights Sexual Harassment Training
    For the record, this one is state-mandated, not just city-wide. The Illinois Workplace Transparency Act requires all employers to comply with the sexual harassment prevention training by December 31, 2020, and thereafter must provide annual training to all employees.
    As of July 1, 2020, the Illinois Human Rights Act defines “employers” as those having one or more employees (replacing the prior threshold of 15 or more employees in Illinois for most types of discrimination). This means that every employer in Illinois must comply with this sexual harassment training requirement, for all employees working in Illinois, regardless of their status as part-time, intern, or temporary. There is no requirement to train independent contractors, though it is recommended.

    The Illinois Department of Human Rights provides the training for free (registration ends 24-hours before each class), or there are numerous commercial training options (as low as $25). They have an FAQ here, as well as details on minimum training for all employers, versus more comprehensive training for bars and restaurants.
  2. Chicago Minimum Wage
    Back in 2014, the city implemented a gradual increase of the minimum wage. It applies to any employee who works at least two hours in any two-week period. As of July 1, 2022 the minimum wage in Chicago is $14.50 per hour for employers with 4 to 20 workers, and $15.40 per hour for employers with 21 or more workers. Tipped workers have a minimum wage of $8.70 for employers with 4 to 20 workers, and $9.24 for employers with 21 or more workers. If a tipped worker’s wages plus tips do not equal at least the full minimum wage, the employer must make up the difference. BACP offers a one-hour-long free webinar on the ordinance.
  3. Chicago Paid Sick Leave
    This ordinance went into effect on July 1, 2017, and was so poorly-written that folks are still confused. It applies to any business or individual that employs at least one “employee” and has a facility within Chicago’s city limits (though Cook County followed suit a few months later and has a similar requirement). The term “employee” covers anyone who works at least 80 hours within a 120-day period (20 hours a month).
    – For hourly employees, paid sick leave accrues at one-hour for every 40 hours worked. Salaried-exempt employees are presumed to have worked 40 hours/week.
    – Employees are capped at accruing a total of 40 hours of sick leave each year, unless the employer opts to set a higher limit.
    – Employers must permit employees to carry over half of their accrued leave, to a maximum of 20 hours of unused sick leave each year (40 for employers with 50 or more employees).
    – Employers are not required to pay out any accrued but unused sick leave upon employment termination.

    What we’ve generally seen — given the stringent requirements and the way hours accrue — is that many employers with existing PTO policies have to get substantive revisions, as they often do not follow the same rules (even though they are often more generous). Failure to comply is costly, so we recommend having an HR professional experienced with the Chicago rules review your policy.

    BACP offers a one-hour-long free webinar on the ordinance.
  4. Illinois Secure Choice Retirement Savings Plan
    State law now requires every Illinois employer with 16 or more employees to either offer their own retirement program, or to sign up to help staff contribute to personal IRAs via Secure Choice. As of November 1, 2023, this obligation will extend to employers with 5 or more employees.

    Aside from the administrative burden, there are no costs to small businesses owners. The program facilitates saving for retirement — but is still limited to the IRS’s annual $6000 cap ($1k higher for those 50 and up), increasing to $6,500 in 2023. (For those interested in a higher limit, I strongly recommend Guideline 401k plans for small businesses, which use low-cost Vanguard Admiral Shares — my own clients have the first five months of plan fees waived.)

    Our State Representative, Will Guzzardi, co-presented an excellent informational session recently, and his team graciously invited us to share the link and passcode with anyone interested in learning more:
    https://us02web.zoom.us/rec/share/GbU0vqXStnOYNsgxPg-1sUWGWWhWy_G_Wo6dbjjDOUhCdaK8FyNfyv7ySjH3Ggb7.L9WjeYo8OmJ6cQIg
    Passcode: Vd*Uqgn2
    The session is about 40 minutes long — feel free to skip the 5-min introduction if you’re pressed for time.

    (I’ll be providing a breakdown and analysis of the plan and the info-session in an upcoming blog post. Spoiler alert: I’m mostly pretty happy with this legislation! –This doesn’t happen often.– However, most sole proprietors will want to make sure to implement their own savings plan simultaneously, since they won’t be eligible to participate; and many others will prefer the 401k approach due to higher limits.)
  5. State Unemployment Insurance Contribution Determination Rate
    If you have employees, you should normally have received a letter from IDES with your 2023 unemployment rate determination by now, but they are running behind and the letters won’t be posted on mytax.illinois.gov until January 5th, 2023. As soon as they do, you will need to update your payroll company’s records with the new unemployment tax rate, or it can cause expensive problems with reporting and reconciliations in the future. I wrote a blog on how to do this if you’re using Gusto for payroll.


    HAPPY NEW YEAR, CHICAGO SMALL BUSINESSES:
    WE WOULDN’T BE A WORLD-CLASS CITY WITHOUT YOU!

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Education, Illinois, Tips

Important Changes for Chicago Businesses As Of July 1, 2022

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Chicago’s Minimum Wage Increase, Fair Workweek Changes, and Sexual Harassment Laws Enhancements — and a Chicago Sick Pay Reminder

The City of Chicago’s fiscal year runs from July 1-June 30, so most changes tend to take effect at the beginning of the “new year”. This year is no exception — and there’s a lot that has changed. The Chicago Department of Business Affairs and Consumer Protection (BACP) released this information recently, much of which affects small business owners in the city.

Minimum Wage Increase

The annual scheduled increase in Chicago’s minimum wage goes into effect on Friday, July 1, 2022. The Chicago minimum wage is tiered for large businesses with 21 or more employees, and small businesses with 4-20 employees. Since reaching $15 per hour in 2021, the minimum wage for larger employees increases annually according to the Consumer Price Index or 2.5%, whichever is lower. The minimum wage for small businesses continues to increase towards $15 per hour by 2023.

As of July 1, 2022, the Chicago minimum wage will be:

  •  $15.40 for employers with 21 or more employees (including all domestic workers, regardless of the number employed)
  • $14.50 for employers with 4-20 employees
  • The minimum wage for tipped employees will be $9.24 for employers with 21 or more employees, and $8.70 for employers with 4-20 employees (employers must make up the difference between any tips received and the applicable minimum wage for non-tipped workers.)
  • Anyone age 24 or younger employed by, or engaged in employment coordinated by, a nonprofit organization or government agency will see a minimum wage increase to $12.00.

Employers that maintain a business facility within the City of Chicago or are required to obtain a business license to operate in the City are required to pay their employees at least the Chicago minimum wage. Additionally, any employee that works two hours or more in the City within a two-week period must also receive at least the Chicago minimum wage.

Chicago BACP recently presented a free hour-long webinar called “Employer Responsibilities Under Chicago’s Minimum Wage Ordinance”, available here.

Fair Workweek Ordinance Changes

 As of July 1, 2022, scheduled enhancements to the Fair Workweek Ordinance will require:

  • Employers in “covered industries ” (see below) to post work schedules with at least 14 days’ notice, an increase from the previous 10 days’ notice.
  • Employees will need to earn less than $29.35 per hour or $56,381.85 per year to gain protection under the Fair Workweek Ordinance.
  • Covered industries include building services, healthcare, hotel, manufacturing, restaurant, retail, or warehouse services.

Chicago businesses are required to post the Minimum Wage Notice and Fair Workweek Notice at their business. The notices will be available to workers and business owners in English, Spanish, Polish, Simplified Chinese, Tagalog, and Korean by July 1, 2022. Employers that violate the minimum wage ordinance can be fined $500 to $1,000 per day for each offense. 

Chicago BACP recently presented a free hour-long webinar called “Employer Responsibilities Under Chicago’s Fair Workweek Ordinance”, available here.

Sexual Harassment Law Updates

As of July 1, 2022, all employers in the city of Chicago must have a written policy on sexual harassment. Additionally, employers are required to display a public notice advising of the prohibition on sexual harassment where employees can see it, and there are increased training requirements. A model policy, written notice, and training templates are available by visiting Chicago.gov/SexualHarassment.

Recent updates to the law include:

  • Adding sexual misconduct to the definition. Sexual misconduct is defined as any behavior of a sexual nature which also involves coercion, abuse of authority, or misuse of an individual’s employment position.
  • Requiring all employers to have a written policy on sexual harassment. The written policy must be available in the employee’s primary language within the first calendar week of starting employment.
  • Requiring all employers to post a written notice on sexual harassment.
  • Increasing the statute of limitations from 300 to 365 days.
  • Create flexibility to notify a respondent up to 30 days from the time of complaint (compared to 10 days currently), to mitigate any retaliation such as denial of a reasonable accommodation request.
  • Requiring additional annual training for all employees including the one hour of prevention training aligned with State requirements and one hour of bystander intervention. Supervisors and managers are required to have an additional one hour of training.
  • Increasing the penalty for individuals or businesses that participate in discriminatory practices in the workplace including sexual harassment. The penalty is increasing from $500 – $1,000 per violation to $5,000 – $10,000.

The Chicago Commission on Human Relations (CCHR) recently presented a 20-minute video update in collaboration with BACP, available here.

Reminder: Sick Pay Responsibilities

It seems not all small business owners are aware of the responsibility to provide Chicago workers paid sick leave. It applies to any business or individual that employs at least one “employee” and has a facility within Chicago’s city limits (though Cook County now has a similar requirement). The term “employee” covers anyone who works at least 80 hours within a 120-day period (20 hours a month).
– For hourly employees, paid sick leave accrues at one-hour for every 40 hours worked. Salaried-exempt employees are presumed to have worked 40 hours/week.
– Employees are capped at accruing a total of 40 hours of sick leave each year, unless the employer opts to set a higher limit.
– Employers must permit employees to carry over half of their accrued leave, to a maximum of 20 hours of unused sick leave each year (40 for employers with 50 or more employees).
– Employers are not required to pay out any accrued but unused sick leave upon employment termination.

In an attempt to drive this point home, I recently revisited my previous blog posts on the topic, and these were the three resources that seemed most helpful, which I encourage all employers to watch/read:
1) BACP Webinar: Paid Sick Leave Overview – YouTube
2) Think Your PTO Policy Complies With the Chicago or Cook County Paid Sick Leave Ordinances? Think Again. | Bryan Cave Leighton Paisner – JDSupra
3) Paid Sick Leave Enhancements: Chicago workers are guaranteed one hour of paid sick leave for every 40 hours worked. Starting August 1, 2021, the possible uses for that paid sick leave will be expanded to include caring for a family member with a closed school or place of care, compliance with public health orders, and mental and behavioral health.

In case it’s helpful, those resources were highlighted in these blog posts:
– Year-End Reminders For Chicago Businesses | The Dancing Accountant
– April 2021 FREE Small Business Webinars – City of Chicago | The Dancing Accountant
– BACP Updates | Chi Biz Strong Initiative | The Dancing Accountant

Even the least expensive version of Gusto Payroll allows for a sick pay plan, and it’s not hard to set up and track (see instructions here).

Reminder that if you sign up and run Gusto using my link, you’ll get a free trial period… and after running your first payroll you’ll receive a $100 Visa gift card! My clients instead will receive a 15% discount for the life of the plan.

And a final point: all Chicago worker protections are enforced by the BACP Office of Labor Standards (OLS). The OLS is dedicated to promoting and enforcing Chicago’s labor laws, including Minimum Wage, Paid Sick Leave, Fair Workweek, and Wage Theft Ordinance. The BACP OLS webpage offers informational materials on Chicago’s Labor Standards Laws.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.