If your small business has employees working in Hawaii, you’ll need to pay Hawaii unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Hawaii, state UI tax is just one of several taxes that employers must pay. Other important employer taxes, not covered here, include federal UI tax, and state and federal withholding taxes.
Different states have different rules and rates for UI taxes. Here are the basic rules for Hawaii’s UI tax.
As a Hawaii employer subject to UI tax, your small business must establish a Hawaii UI tax account with the Hawaii Department of Labor and Industrial Relations (DLIR; also sometimes called the Department of Labor or DOL). You must register within 20 days after hiring an employee. When you register, DLIR will determine whether you are liable for UI taxes. (Most employers are liable.) If so, it will issue you an identification number.
Register by completing a Basic Business Application either online or on paper. If you have not previously registered your business with any state agency, such as the Department of Taxation (DOT) or Department of Commerce and Consumer Affairs (DCCA), then you can use the application to register for multiple purposes at one time. If you have already registered with the DOT or DCCA, complete a paper application (see below) and mail it to your nearest Unemployment Insurance office.
To register online, use the Hawaii Business Express website. To register on paper, use Form BB-1, Basic Business Application. Blank forms are available for download from the UI Forms section of the DLIR website. Keep in mind that the form covers registration for multiple purposes other than UI tax. There is no fee to register your business with DLIR for UI tax purposes.
Note: To establish your Hawaii UI tax account, you’ll need a federal employer identification number (EIN). You can apply for an EIN at IRS.gov. Generally, if you apply online, you will receive your EIN immediately.
Unlike most other states, Hawaii’s employment security law does not have a minimum amount of wages that must be paid before an employer is liable for UI tax. Instead, it is assumed that typical employers will be liable simply if they have an employee. By contrast, under the Federal Unemployment Tax Act (FUTA), typical for-profit employers are liable for FUTA taxes if, during the current or preceding calendar year, they either:
Different rules, not covered here, apply to agricultural workers, domestic (in-home) workers, and employees of some (but not all) non-profit organizations. One piece of good news is that state UI tax payments generally can be credited against your FUTA taxes.
UI tax is paid on each employee’s wages up to a maximum annual amount. That amount, known as the taxable wage base, usually increases slightly every year in Hawaii. For information on wage bases and tax rates, check the Tax Rates and Weekly Benefit Amount section of the DLIR website.
The state UI tax rate for new employers changes from one year to the next. Over the last ten years, it has fluctuated up and down. Most recently, it generally has been somewhere between 3.0% and 4.6%. Established employers are subject to a lower or higher rate than new employers depending on an “experience rating.” This means, among other things, whether your business has ever had any employees who made claims for state unemployment benefits.
In Hawaii, UI tax reports and payments are due by end of the month after the end of the calendar quarter. In other words:
Employers with nine or more employees should file online. More generally, DLIR encourages all employers to file online. However, smaller employers can file reports and payments online or on paper. (There is also an option to file reports via CD or diskette, not covered here.)
To file online, use Hawaii Unemployment Insurance (HUI) Express. To file on paper, use Form UC-B6, Employer’s Quarterly Wage, Contribution and Employment and Training Assessment Report. DLIR mails four of these forms, one for each quarter, at the beginning of each year to employers who file on paper. Blank forms are not available for download. If you need forms, call DLIR.
You will be subject to a penalty if you fail to file.
You are required to post a notice (poster) regarding state unemployment claims in a conspicuous place for all employees. The poster provides basic information on when an employee is eligible for unemployment benefits and how to file an unemployment claim. You can download a notice that meets all legal requirements from the Labor Law Poster section of the DLIR website.
Employers who use independent contractors rather than hiring employees are not subject to the UI tax. However, it’s important that you do not misclassify an employee as an independent contractor. If you do misclassify an employee, you could be subject to penalties or fines.
You may decide that it’s easiest to hand over responsibility for payroll, including UI taxes, to an outside payroll service. If so, keep in mind that your business, or even you personally, may still be held directly responsible for mistakes made by an outside payroll company.
This article touches on only the most basic elements of Hawaii UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DLIR websites for the latest information. DLIR also publishes a Handbook for Employers on Unemployment Insurance that you can download from the DLIR website. In addition to state UI tax, employers have other responsibilities not covered in this article such as federal UI tax, state and federal withholding taxes, required reporting of new hires, and required retention of employee records. You can get more information about other small business tax issues in other articles here on Nolo.