How the Illinois Paid Leave for All Workers Act Impacts S Corps

The Illinois Paid Leave for All Workers Act (PLAWA) went into effect on January 1, 2024 and mandates paid leave for all employees (full-time, part-time, or seasonal) in the state. Here’s an overview of the policy and how the Illinois Paid Leave for All Workers Act impacts S corps:

Key Provisions of the Illinois Paid Leave for All Workers Act

  • Eligibility: All employees are eligible for paid leave, regardless of the size of the employer. This applies to any business with at least 1 W-2 employee.
  • Accrual: Employees accrue one hour of paid leave for every 40 hours worked, up to a minimum of 40 hours per year.
  • Usage: Employees can use paid leave for any reason, and employers cannot require them to provide a reason for the leave.
  • Carry Over: Unused leave can be carried over to the next year, but employers are not required to provide more than 40 hours of leave per year. Leave banks can be capped at 80 hours.
  • Unlimited PTO Policy: An unlimited PTO policy may be compliant if the employee did or had the ability to take 40 hours of paid leave in a year.
  • City and County Ordinances: The city of Chicago and Cook County have their own paid leave regulations. Employers located within Chicago or Cook County would be subject to those rules (not the Illinois Paid Leave for All Workers Act).

How the Illinois Paid Leave for All Workers Act Impacts S Corps


According to the state of Illinois, “All employers with employees in Illinois are subject to the Illinois Paid Leave for All Workers Act, whether they have part-time, full-time, or seasonal employees. Businesses subject to a local ordinance providing any type of paid leave that was in effect prior to the passing of PLAWA, or that provides for equal or greater benefits to employees, must comply with those requirements.” 

This begs the question, “does this new regulation apply to S corps where the only W-2 employee is the business owner?” According to a representative from the state of Illinois, it does! However, before you start changing everything with your business, there are a few simple steps that can be taken to stay compliant with the regulation.

3 Simple Steps for S Corps to Stay Compliant with the Illinois Paid Leave for All Workers Act

 
  1. Have an Unlimited PTO Policy – The state allows your business to have an unlimited Paid Time Off (PTO) policy and be compliant with the PLAWA. If you are the owner and only employee of your business, it’s likely you are taking time off whenever you need it. It’s also likely you are taking off the 5 required days (40 hours) per year. You can obtain an example S corp unlimited PTO policy at the following link – Click Here.
  2. Track Time – This doesn’t need to be extremely formalized. In case of inquiry or audit, you need to show you had 5 days in a year. It can be as simple as marking your days off an an Outlook or Google Calendar.
  3. Pay Yourself a Reasonable Salary – As an S corp, you are already required to pay yourself a reasonable salary for the year. To stay compliant with the Illinois PLAWA, pay yourself your annual reasonable salary and don’t reduce your pay for time off.
From a practical standpoint, it’s likely the only way an employer would be found non-compliant with the Illinois PLAWA would be a “tip” from a disgruntled employee. As the sole owner and employee of an S corp, you would never report yourself to the state of Illinois, but it’s always best to be prepared in case the state performs random inquiries or audits. 
 

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About the Author

Brett Rosenstein

Brett Rosenstein

Founder of S Corp Advantages
Certified Public Accountant

Brett is the founder and president of S Corp Advantages where he specializes in S corporations. He helps business owners understand if an S corporation election is right for their business. He also keeps current S corps in compliance with IRS regulations.

Brett received a Bachelor of Science in Business Administration from The Ohio State University. He is also a Certified Public Accountant.

When Brett is not working, he is running, biking, spending time with his wife and daughter, or trying new pizza places around Chicago.

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