Comprehensive Guide to Payroll Taxes in Hawaii

Employers have to navigate a variety of regulations and requirements to ensure proper payroll withholding in each US state. This guide provides a detailed and structured overview of the payroll taxes applicable in Hawaii and outlines what employers need to pay and withhold from payroll in Hawaii, including unemployment insurance, personal income tax, and workers’ compensation. 

Overview of Payroll Taxes in Hawaii

Hawaii operates under a progressive tax rate system, where higher wages result in higher taxes. Employers are responsible for managing federal income tax, FICA taxes (Medicare and Social Security), and state payroll taxes. There are no local taxes.

Unemployment insurance (UI)

As an employer in Hawaii, you are required to pay unemployment insurance (UI) taxes on behalf of your employees. This tax supports the national unemployment insurance program, which offers temporary financial aid to individuals who have lost their jobs due to circumstances beyond their control.

The Hawaii Department of Labor and Industrial Relations administers the state's Unemployment Insurance in collaboration with the US Department of Labor.

Hawaii employers must contribute UI at a tax rate of 0.2% to 5.8% up to a taxable wage limit of $59,100 per employee per year. New employers pay 3.0% until they are assigned an experience rate. Payments are due quarterly on April 30, July 31, October 31, and January 31.

In Hawaii, you can manage your UI taxes through the state's online portal. For detailed information and guidelines on paying your unemployment insurance taxes, you can refer to the Hawaii Department of Labor and Industrial Relations’ official website.

Withholding personal income tax (PIT)

Employers in Hawaii are required to deduct personal income tax (PIT) from their employees’ wages, in addition to withholding federal income tax.

PIT is withheld directly from the employee’s pay. The employer remits the deduction to the Hawaii Department of Taxation, who may audit state income tax returns and other tax returns.

Hawaii residents pay PIT on their full salary at a tax rate of 1.4% to 11%. The amount an employer must deduct depends on the employee’s income level and tax filing status.

As a Hawaii employer, your annual withholding liability affects how often you must remit PIT:

• Quarterly: Under $5,000
• Monthly: $5,000 to $40,000
• Semi-monthly: Over $40,000

Employers can manage payroll taxes and make ACH debit payments using the convenient Hawaii Tax Online portal.

IRS Section 501(c)(3) nonprofits are not granted automatic exemption from income tax in Hawaii, and must apply for it with Form N-70NP.

For further guidance on handling personal income tax withholding, see the Hawaii Department of Taxation's official website.

Withholding state disability insurance (TDI)

Temporary disability insurance (TDI) is designed to provide financial support to employees who suffer non-work-related injuries or illnesses that prevent them from working. As an employer, you have the option to purchase coverage from an authorized private carrier in Hawaii.

While you can withhold wages from your employees to contribute towards TDI, the withholdings should not exceed 0.5% of an employee’s weekly wages. 

Paying workers’ compensation (WC)

Workers’ compensation insurance is a crucial aspect of protecting your employees and your business in case of workplace injuries. In Hawaii, employers are required to carry workers’ compensation insurance, even if they have just one employee.

Unlike temporary disability insurance, which covers non-work-related injuries, workers' compensation focuses on providing benefits to employees injured while performing their job duties. As an employer, you can purchase workers’ compensation insurance from qualified commercial carriers in the state. To ensure compliance, confirm your insurance coverage meets the state’s regulations for workers’ compensation.

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Hawaii payroll taxes, payroll compliance and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel. 

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.