When running a business in Illinois, overtime pay compliance can be one of the most challenging areas. Illinois overtime law ensures that a company compensates their hourly workers fully and fairly for all the hours they've spent working, including any additional hours. However, not obliging the law by intention or a mistake can lead to lawsuits and be quite costly.
We've performed extensive research on overtime laws in Illinois and gathered all the relevant information. Below is what you need to know about paying overtime in Illinois, ensuring your employees are adequately paid, and your business is covered.
Generally speaking, overtime law in Illinois mostly mirrors the federal law. The federal overtime law grants certain workers who meet overtime criteria to be compensated for any extra hours worked over 40 hours a week.
The Fair Labor Standards Act explicitly protects overtime pay for specific positions while exempting other jobs. It specifically safeguards employees such as all first-responders - paramedics, firefighters, and the police.
Furthermore, for example, the overtime law explicitly protects practical nurses who would otherwise fall under the exempted workers category.
As these professionals often have to work longer hours, they are at a high risk of being overworked and taken advantage of.
And suppose an employee's work is considered non-exempt and involves manual labor (for example, cashier, factory, or construction worker). In that case, their overtime compensation is most likely protected under overtime law.
However, the Illinois overtime law differs from the federal law in a few significant areas. While federal law requires the employer to have a gross income of $500,000 to be under the law, Illinois overtime law covers any employer with one or more employed workers. The overtime law in Illinois also sets a different minimum pay.
Another critical difference is the statute of limitations for the lawsuit. The federal law provides that unpaid overtime salary, in general, can still be collected up to two years from the date it was earned. However, Illinois overtime law provides a three-year limitation for collecting unpaid overtime wages.
Furthermore, under the Illinois overtime law, workers may receive damages equal to 5 % of the underpayment per month and the unpaid overtime compensation, costs, and reasonable attorneys' fees.
To pay the employees fairly and avoid lawsuits and penalties, the employer must keep accurate records of hours worked and wages paid.
Every hour worked over the 40 hours in a workweek is considered overtime in Illinois. The Illinois overtime law grants employees a special overtime pay rate for working additional hours. Unlike laws in some other US states, overtime law in Illinois doesn't specify a daily overtime limit as a basis for overtime pay.
There is no upper limit of overtime hours in a week defined by Illinois overtime law. The employer grants employees a continual minimum of 24 hours of rest per week.
Overtime salary across the US is also widely known as "time and a half pay." But, again, the reason is very straightforward. Under both the federal and the Illinois overtime law, overtime pay is calculated as one and a half times a worker's standard hourly wage.
As the current regular Illinois minimum wage is $12.00 per hour, Illinois' overtime salary is $18.00 per hour for those working for minimum pay.
The minimum wage amount may differ for tipped employees, employees under 18 years of age, and the employees over 18, during their first 90 days with the employer.
Employees who earn more than the Illinois minimum salary are granted at least 1.5 times their regular hourly compensation for any overtime hours worked more than 40 hours of a standard workweek.
The common exemption applied to highly compensated employees annually earning over $100,000.00 is not included in the Illinois overtime law. Even highly paid employees can be entitled to overtime compensation.
Unfortunately, not everyone is eligible to collect overtime pay. Both the federal and the Illinois overtime law distinguish "exempt" (to whom the law does not apply) and "non-exempt" employees (to whom the law does apply to). Any employee who is paid by the hour is automatically considered non-exempt.
There are four main exempt categories of employees - professionals, executives, administrative employees, and those working in outside sales. Employees whose jobs fit into one of these categories are not granted overtime pay by either Illinois overtime law or federal overtime regulations.
So, who is exempt from overtime pay in Illinois?
Suppose a position falls under above mentioned exempt categories. In that case, the employer is not obliged to pay overtime compensation under the Illinois overtime law and the federal law.
Besides these categories, the following employees are also exempt from overtime pay in Illinois:
Some employers try to sidestep overtime pay by paying their employees a salary instead of hourly wages. However, if the salaried employees are non-exempt, they are still entitled to overtime pay under the Illinois overtime law.
When non-exempt salaried employees work for more than 40 hours a week, the employer first needs to determine the employee's regular hourly rate. The standard hourly rate is calculated by dividing the weekly salary by 40. The overtime rate is then calculated by multiplying the hourly rate by 1.5x.
Both employees and employers sometimes wonder whether overtime pay can be compensated with the paid time off. In certain situations, such a solution could be beneficial to both parties. However, the Illinois Department of Labor states that offering compensatory time off instead of overtime pay is not legal in the private sector.
The state follows federal legislation that does not permit employers to substitute employees' overtime pay with paid hours off. The Fair Labor Standards Act mandates employers to promptly reimburse employees for overtime hours in the form of cash or another "negotiable instrument."
But, such practice is legal when it comes to the public sector. For each hour of overtime work, public sector employees must get at least 1.5 hours of the compensatory time.
While most employees in the public sector may bank up to 240 hours of comp time, staff such as police, firefighters, or emergency response personnel, and employees who work in some seasonal activities may collect up to 480 hours.
Once you've distinguished the exempt and non-exempt workers and determined which one of your employees is eligible for overtime under Illinois overtime law, calculating the compensation seems as straightforward as 1, 2, 3.
But in practice, problems do arise. Some of them may lead to negative consequences, such as employee dissatisfaction, disengagement, and lawsuits, causing an additional financial burden to the employer. These problems often arise from the inaccurate recording of the employees' hours and the payroll.
Under the law, employers must use time tracking methods to fully and accurately record employees' working hours. Time tracking is crucial so that all the employees are paid adequately, complying with minimum wage and overtime laws.
Employers can use a method of their choice to track the employees' hours. For example, they can opt for paper-based timesheet templates, timesheet software, or a time tracking app. When it comes to legal requirements, each of these models is accepted as long as the records are compliant.
Besides ensuring law compliance and adequate payroll, time tracking is vital for other reasons too. As they can offer you insight into how much time your employees spend on specific tasks, timesheets can help you manage your business resources more efficiently.
Using time tracking software, your company can save money and improve overall efficiency.
So, in the eyes of the law, it is irrelevant which method you will choose to track employees' hours. But, on the other hand, such a decision can be pivotal for you as an employer.
Not all of them equally suffice to ensure that your records are based on relevant data, accurate and complete, thus compliant with the Illinois overtime law and other legal requirements.
Using Timeero, a GPS-based time tracking app, you can rest assured about your payroll and records' legal compliance. Based on relevant and verifiable data, your timesheets will be entirely exact - free of human error or exploitation.
Thanks to Timeero's numerous integrations, you can create a seamless workflow, and even automate your payroll.
And if you manage mobile employees, you can rely on the software's timeclock geofence feature to know about your employees' job attendance at different locations and any extra hours worked.
To ensure Illinois overtime law compliance, you need to compensate your employees for any additional hours over 40 hours a week. The overtime salary is calculated as one and a half times an employee's standard hourly rate. This stands for all your non-exempt employees, both hourly and salaried ones.
You need a reliable and precise time-tracking solution to accurately distinguish between regular and extra hours and pay your employees properly.
With Timeero, you can forget about faulty data and inaccurate records, and put your mind at ease knowing your business is compliant with all the relevant laws.