Illinois law requiring unemployment insurance taxes for contractors takes effect

Illinois House Bill 3301 took effect on January 1, 2024, amending Illinois’ Unemployment Insurance Act to update the definition of a newly hired employee to include independent contractors. The updated definition requires employers to pay state unemployment insurance taxes for contractors.

House Bill 3301 passed the Illinois House on March 22, 2023, and the Senate on May 10, 2023. Both votes were unanimous. Governor J. B. Pritzker (D) signed the bill on July 28, 2023.

State unemployment taxes are state employment taxes employers pay to support the unemployment insurance program. State unemployment taxes are also known as SUTA taxes, state unemployment insurance (SUI) taxes, or reemployment taxes. Each state sets its own tax rate range, wage base (the amount of pay an employer needs to pay taxes on for each employee), and experience rating system.

Unemployment insurance is a joint federal and state program that provides temporary monetary benefits to eligible laid-off workers who are actively seeking new employment. Qualifying individuals receive unemployment compensation as a percentage of their lost wages in the form of weekly cash benefits while they search for new employment.

The federal government oversees the general administration of state unemployment insurance programs. The states control the specific features of their unemployment insurance programs, such as eligibility requirements and length of benefits.

For information about unemployment insurance programs across the country, click here.

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