What Is Hawaii Payroll Tax?
Hawaii payroll tax refers to the state payroll taxes and mandated insurance contributions that employers must withhold from employee wages or pay directly to state agencies. These taxes and contributions fund unemployment benefits, short-term disability benefits, and the state's income tax system.
Hawaii payroll taxes are administered primarily by the Hawaii Department of Labor and Industrial Relations (DLIR) through its Unemployment Insurance Division and its Disability Compensation Division and the Hawaii Department of Taxation for income tax withholding. Hawaii is one of only five states (alongside California, New Jersey, New York, and Rhode Island) that require Temporary Disability Insurance, and it has no local income tax anywhere in the state.
Most Hawaii employers are responsible for the following payroll tax and mandated-benefit requirements:
- Unemployment Insurance (UI), administered by the DLIR
- Hawaii Personal Income Tax withholding, administered by the Department of Taxation, at graduated rates
- Temporary Disability Insurance (TDI), a required disability coverage funded through a small employee-permitted deduction plus employer cost
- Prepaid Health Care (PHC) coverage, a Hawaii-specific mandate requiring employers to provide health insurance, with a capped employee premium contribution
Hawaii Payroll Taxes at a Glance
| Payroll Tax / Requirement | Paid By | Purpose |
|---|---|---|
| Unemployment Insurance (UI) | Employer | Provides temporary income for eligible unemployed workers |
| Personal Income Tax (state) | Employee (withheld by employer) | Graduated state income tax withheld from employee wages |
| Temporary Disability Insurance (TDI) | Employer (majority), Employee (small permitted deduction) | Covers short-term, non-work-related disability benefits |
| Prepaid Health Care (PHC) | Employer (majority), Employee (capped premium share) | Mandates employer-provided health insurance for qualifying employees |
Understanding who pays each requirement and that Hawaii combines standard payroll taxes with two mandated insurance programs most mainland employers don't encounter helps employers set up compliant payroll from day one.
Hawaii Employer Payroll Tax Responsibilities
Every employer with workers in Hawaii has payroll tax responsibilities beyond simply issuing paychecks. Depending on your business, you'll generally need to:
- Register your business with the DLIR for unemployment insurance and complete new hire reporting within 20 days of each hire.
- Register with the Hawaii Department of Taxation for withholding tax.
- Arrange TDI coverage through an approved private insurance carrier (Hawaii has no state-administered TDI plan).
- Arrange Prepaid Health Care coverage for eligible employees.
- Calculate taxable wages up to the annual UI wage base.
- Withhold state income tax, and any permitted TDI and PHC employee contributions, from every paycheck.
- Pay employer UI contributions and the majority share of TDI and PHC premium costs.
- File quarterly UI wage reports and periodic state withholding returns.
- Maintain payroll records for state compliance.
Many businesses automate the payroll tax side of this using payroll software, though TDI and PHC coverage still need to be separately arranged through approved insurance carriers.
Types of Hawaii Payroll Taxes
Unemployment Insurance (UI)
Unemployment Insurance is an employer-funded payroll tax administered by the DLIR that provides temporary financial assistance to eligible workers who lose their jobs through no fault of their own.
Employers pay this tax directly it is never deducted from employee paychecks.
Hawaii's UI system operates under one of several published contribution rate schedules (labeled A through H) each year, chosen based on the health of the state's UI Trust Fund. For 2026, Hawaii is operating under Schedule C, the same schedule used in 2025.
Key Facts
- Paid entirely by employers Hawaii has no employee UI contribution
- Calculated on an annual wage base that has risen steadily in recent years
- New employers pay a flat 2.4% introductory rate
- Experienced employers are assigned a rate from that year's published schedule, based on their individual claims history
- Must be reported quarterly to the DLIR using Form UC-B6
- Employers must also complete new hire reporting within 20 days of each hire, separate from quarterly UI reporting
Hawaii Personal Income Tax (PIT) Withholding
Hawaii uses a graduated personal income tax structure with one of the widest bracket ranges in the country rates run from 1.4% up to 11% at the top end. Under Act 46, Hawaii is widening its tax brackets incrementally through 2031, which will gradually reduce the effective tax burden at most income levels even though the top rate itself isn't changing.
Employers are responsible for:
- Withholding the correct graduated amount from every paycheck, based on current Department of Taxation withholding tables
- Reporting withholding to the Hawaii Department of Taxation
- Depositing withheld taxes according to a schedule based on total withholding liability
- Filing periodic withholding returns and an annual reconciliation, including W-2 filing with the state
Hawaii has no local income tax the same graduated state schedule applies regardless of which Hawaii island, city, or county an employee lives or works in.
Temporary Disability Insurance (TDI)
Hawaii has required Temporary Disability Insurance since 1969, making it one of only five states with a mandatory program of this kind. TDI provides partial wage replacement to employees who are temporarily unable to work due to a non-work-related illness or injury (on-the-job injuries are instead covered by workers' compensation).
Unlike California's state-run SDI, Hawaii has no state-administered TDI plan employers must arrange coverage through an approved private insurance carrier.
Key Facts
- Employers may pay the full cost of TDI coverage, or share the cost equally with eligible employees
- If an employer chooses to withhold an employee contribution, it cannot exceed 0.5% of the employee's weekly wages, capped at a maximum weekly deduction $7.50 per week for 2026, based on a maximum weekly wage base of $1,500.21
- Employers may not deduct any TDI premium cost from employees who don't meet the program's eligibility requirements (generally, employees who work 20 or more hours per week and earn at least 86.67 times the prevailing minimum wage)
- Coverage must be obtained through an authorized Hawaii TDI insurance carrier
- Claims are filed through the Hawaii Disability Compensation Division
Prepaid Health Care (PHC)
Hawaii's Prepaid Health Care Act is a state-specific mandate requiring employers to provide health insurance coverage to qualifying employees a requirement that doesn't exist at the state level anywhere else in the country. While it's a health insurance mandate rather than a traditional payroll tax, it directly affects payroll because employers are permitted to withhold a capped employee contribution toward the premium.
Key Facts
- Employers may withhold up to one-half of the PHC premium cost from an employee's wages, but never more than 1.5% of the employee's wages
- If the employee's allowable share (1.5% of wages) is less than half of the actual premium cost, the employer is responsible for covering the remaining difference
- Coverage requirements and eligibility are administered alongside TDI and workers' compensation guidance by Hawaii's Disability Compensation Division
Which Payroll Taxes Are Paid by Employers vs Employees?
| Tax / Requirement | Employer Pays | Employee Pays |
|---|---|---|
| Unemployment Insurance (UI) | YES | NO |
| Personal Income Tax (state) | NO | Withheld from wages (graduated) |
| Temporary Disability Insurance (TDI) | Majority or all of premium cost | Up to 0.5% of weekly wages, capped at $7.50/week (2026), if employer chooses to withhold |
| Prepaid Health Care (PHC) | Majority or all of premium cost | Up to 1.5% of wages, capped at half the premium, if employer chooses to withhold |
Hawaii places the entire UI tax burden on the employer, while TDI and PHC allow employers to share a capped portion of the cost with employees but the employer remains responsible for covering whatever the employee's capped contribution doesn't fully fund.
Hawaii Payroll Tax Rates for Employers
Understanding current Hawaii payroll tax rates is essential for calculating payroll accurately. The UI wage base and rate schedule are both republished annually, and TDI's wage base recalculates every year based on the state's average annual wage always verify the latest figures before processing payroll.
Hawaii Payroll Tax Rates at a Glance
| Payroll Tax | Who Pays | General Rate | Taxable Wage Base |
|---|---|---|---|
| Unemployment Insurance (UI) | Employer | New employers: 2.4%. Experienced employers: rate assigned from the year's published contribution schedule (Schedule C for 2026) | $64,500 for 2026, up from $62,000 in 2025 |
| Personal Income Tax (state) | Employee | Graduated, 1.4% to 11%, with brackets widening incrementally through 2031 under Act 46 | Applies to taxable wages under current Department of Taxation withholding tables |
| Temporary Disability Insurance (TDI) | Employer / Employee (capped) | Employee share capped at 0.5% of weekly wages ($7.50/week maximum for 2026) | Maximum weekly wage base of $1,500.21 for 2026, up from $1,441.72 in 2025 |
According to the Hawaii DLIR's official 2026 UI tax rate schedule, the 2026 taxable wage base is $64,500, and Hawaii remains under Rate Schedule C for 2026, unchanged from 2025 new employers continue to pay 2.4%. The Disability Compensation Division's official 2026 wage base notice confirms the TDI maximum weekly wage base rose to $1,500.21, keeping the maximum weekly employee deduction at $7.50 (the 0.5% contribution rate itself is unchanged).
Instead of memorizing a specific rate, employers should focus on reviewing their annual DLIR UI rate notice, checking the current TDI and PHC wage base figures from the Disability Compensation Division, and filing returns on time.
Understanding Taxable Wages
Not every Hawaii payroll tax applies to wages the same way. Depending on the tax involved, taxable wages may include:
- Hourly wages
- Salaries
- Bonuses
- Overtime pay
- Commissions
- Certain taxable fringe benefits
UI tax applies only up to the annual wage base, TDI's employee deduction is capped weekly rather than annually, and state income tax withholding applies more broadly with no separate wage base cap. Understanding which wage rules apply to which requirement helps reduce calculation errors.
Hawaii Payroll Tax Filing Deadlines
Meeting payroll tax deadlines is just as important as calculating taxes correctly. Late filings or payments can lead to penalties and interest charges.
Unemployment Insurance (Form UC-B6)
| Reporting Quarter | Filing Deadline |
|---|---|
| January – March | April 30 |
| April – June | July 31 |
| July – September | October 31 |
| October – December | January 31 |
State Income Tax Withholding
Hawaii income tax withholding deposit frequency depends on the amount withheld, ranging from quarterly for smaller withholders to more frequent schedules for larger ones, with an annual reconciliation required regardless of deposit frequency.
If a deadline falls on a weekend or state holiday, the due date generally moves to the next business day. New hire reporting is due within 20 days of each hire, separate from the quarterly UI filing cadence.
How to Register for Hawaii Payroll Taxes
Before paying employees, businesses typically need to register with the DLIR and the Department of Taxation, and arrange TDI and PHC coverage separately.
State registration: Employers register with the DLIR for a UI account number and assigned rate, and with the Department of Taxation for withholding tax.
TDI and PHC coverage: Since Hawaii has no state-administered TDI plan, employers must independently obtain coverage through an authorized private insurance carrier for both TDI and PHC.
During registration, you'll generally need information such as:
- Legal business name
- Federal Employer Identification Number (EIN)
- Business entity type
- Business address
- Owner or responsible party information
- Date employees first performed services in Hawaii
- Estimated payroll information
How to File Hawaii Payroll Taxes
Filing payroll taxes in Hawaii involves standard state tax filings plus separately administered TDI and PHC coverage. A typical process includes:
Step 1: Calculate Employee Wages
Determine each employee's gross wages, including regular pay, overtime, bonuses, commissions, and other taxable compensation.
Step 2: Calculate Payroll Taxes and Premium Contributions
Determine your employer UI contribution based on your current DLIR rate notice, calculate employee income tax withholding, and determine any TDI and PHC employee contributions within the capped limits.
Step 3: Withhold Employee Amounts
Deduct state income tax and any applicable TDI/PHC employee contributions from each paycheck.
Step 4: Pay Employer Contributions
Remit UI contributions to the DLIR, and pay the employer's share of TDI and PHC premium costs to the applicable insurance carrier.
Step 5: File Payroll Tax Returns
Submit Form UC-B6 quarterly to the DLIR, and file periodic state withholding returns with the Department of Taxation.
Step 6: Maintain Payroll Records
Keep detailed payroll records, wage reports, TDI/PHC coverage documentation, and payment confirmations in case of future audits or compliance reviews.
Following a consistent payroll process helps reduce mistakes and makes year-end reporting significantly easier.
Frequently Asked Questions
Who is required to pay Hawaii payroll taxes?
Most businesses that hire employees in Hawaii are required to register with the DLIR and the Department of Taxation, and to arrange TDI and PHC coverage for eligible employees. Your responsibilities may include paying employer UI contributions, withholding state income tax and any permitted TDI/PHC employee contributions, filing returns, and maintaining payroll records.
What payroll taxes are employers responsible for in Hawaii?
Hawaii employers are generally responsible for unemployment insurance (employer-paid), state personal income tax withholding at graduated rates, Temporary Disability Insurance (mostly employer-funded, with a small capped employee deduction option), and Prepaid Health Care coverage (also mostly employer-funded, with a capped employee premium share option). Hawaii has no local income tax.
How often do employers file Hawaii payroll tax returns?
Unemployment insurance wage reports (Form UC-B6) are filed quarterly with the DLIR. Income tax withholding returns are filed with the Department of Taxation according to a schedule based on the amount withheld.
How do I register for Hawaii payroll taxes?
Employers register with the DLIR (unemployment insurance) and the Department of Taxation (withholding tax) once they hire their first Hawaii employee, and separately arrange TDI and PHC coverage through an authorized private insurance carrier, since Hawaii has no state-run plan for either program.
What happens if payroll taxes are filed late?
Late filings or payments may result in penalties, interest charges, or other compliance issues. Filing accurately and on time with both the DLIR and the Department of Taxation helps reduce the risk of unnecessary costs.
Does Hawaii payroll tax apply to remote employees?
If an employee performs work that is subject to Hawaii payroll tax rules, employers may have Hawaii payroll tax obligations even if the company is based elsewhere. TDI and PHC eligibility also depend on hours worked and wage thresholds, so employers with part-time or remote Hawaii-based employees should confirm eligibility carefully.
Are Hawaii payroll tax rates the same every year?
Not always. Hawaii's UI wage base rises most years, and the applicable contribution rate schedule (A through H) is reviewed and can change annually based on the state's UI Trust Fund health Hawaii remained on Schedule C for 2026. The TDI maximum weekly wage base also recalculates every year based on the state's average annual wage. Employers should review current DLIR and Disability Compensation Division guidance each year before processing payroll.
Can payroll software calculate Hawaii payroll taxes automatically?
Many payroll platforms automatically calculate Hawaii UI contributions and graduated state income tax withholding, and can help track TDI and PHC contribution caps. However, TDI and PHC coverage itself must still be arranged through an approved private insurance carrier, since Hawaii has no state-administered plan for either program employers are still responsible for ensuring that coverage and payroll deductions are properly coordinated.
Disclaimer
This article is for general informational purposes only and doesn't constitute legal, tax, or accounting advice. Payroll tax rates and rules change frequently consult a qualified CPA or tax professional for guidance specific to your business.
