When the payout is due
At separation if possible, and no later than the next regularly scheduled payday. Source: ilga.gov↗ (opens in a new tab)
What a written policy must say
A policy cannot forfeit earned vacation at separation. A use-it-or-lose-it rule needs advance notice and a reasonable chance to use the time. Changing the policy cannot take away vacation already earned. Source: labor.illinois.gov↗ (opens in a new tab)
Penalties
Damages of 5% of the unpaid amount for each month it stays unpaid. If an IDOL demand or order is ignored: a 20% penalty to the state and 1% per day to the employee, plus administrative fees. Source: labor.illinois.gov↗ (opens in a new tab)
Recent changes
Public Act 104-0135 (2025) set up Illinois Department of Labor administrative hearings for wage claims and changed administrative fees. The vacation payout rule did not change. Source: ilga.gov↗ (opens in a new tab)
The law and where to check
The agency: Illinois Department of Labor, Fair Labor Standards Division (opens in a new tab)
What federal law says
No federal law requires paid vacation or payout of unused vacation. These are matters of agreement between employer and employee, and state law. Source: U.S. Department of Labor↗ (opens in a new tab)
Vacation and PTO payout checklist for Illinois employers
A simple order of work, based on the rules above. It is not a legal checklist.
- Read your written vacation or PTO policy against the rules above.
- Make any forfeiture or cap rule clear and in writing, where your state allows it.
- Track each employee's accrued, unused balance.
- When someone leaves, pay any vacation owed with the final paycheck on time.
- Keep a record of the balance paid out.
- See our final paycheck guide for your state's deadline.
More Illinois employment law guides
- All Illinois employment laws
- Illinois final paycheck law
- Illinois paid sick leave law
- Illinois meal and rest break laws
- Illinois overtime law
- Illinois pay frequency law
- Illinois new hire reporting
- Illinois at-will exceptions
Vacation and PTO payout laws in other states
See every state on one page, or pick a state:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- District of Columbia
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
Sources
All official government sources, last checked October 19, 2026.
- https://ilga.gov/legislation/ilcs/fulltext.asp?DocName=082001150K5
- https://labor.illinois.gov/faqs/vacation-faq.html
- https://labor.illinois.gov/faqs/paidleavefaq.html
- https://labor.illinois.gov/laws-rules/fls/wpca-penalties.html
- https://ilga.gov/Legislation/PublicActs/PrinterFriendly/104-0135
- https://www.dol.gov/general/topic/workhours/vacation_leave
Disclaimer: This guide provides general information based on publicly available official sources and is for information only. It is not legal, tax, payroll or employment-law advice and does not guarantee compliance with federal, state or local requirements. Rules can depend on your location, industry, contracts and other circumstances, and laws change. Always check the official source, the relevant government agency or a qualified professional before making a decision. MadyHR.ai accepts no responsibility for any action taken based on this page.
Last checked: . Every rule and source link on this page was checked against the official government source on this date. Laws change, so always open the source link before you act.