Here is a simple guide covering Hawaii Unemployment Insurance and associated employer requirements when running payroll.
Note: This guide is only a general introduction and is not meant to replace the Hawaii Department of Labor guidance available here. Please consult with the Hawaii DOL or a professional payroll accountant before hiring employee.
Payroll and Hawaii Unemployment Insurance
Unemployment insurance, formerly known as “state unemployment tax” or “SUTA”, is a Hawaii State-run program that collects a tax from employers to provide unemployment benefits to residents when appropriate.
Many new employers first assume that perhaps this is something that you get from an insurance broker, such as Workers Compensation, but it’s not really insurance. Nearly all states adapted this title to make it not sound like a tax, but employers do not receive any type of insurance policy.
The idea behind the concept is pretty much in use in all states nation wide, and it provides compensation to former employees (in most cases) when they can’t find a new job.
When Employers Start Running Payroll, They Must Get an Unemployment Insurance Account
Hawaii employers running payroll obtain an unemployment insurance “account” from the Hawaii Department of Labor. This is done by contacting the Hawaii Department of Labor and creating an account. Go here to apply online.
There are a lot of employers applying for this account that do not actually follow through with hiring employees and running payroll.
This frustrates the Hawaii Department of Labor (understandably) as they have to track all delinquent quarterly tax returns.
Typically the Hawaii DOL might send a quick note asking new employers if they are REALLY running payroll. Employers can respond by mail or with a quick fax to confirm that they really hired employees.
The Unemployment Payroll Tax Rate Varies
The unemployment payroll tax commences at a specified rate, and that rate continues as each employer builds an amount in “reserve”. If an employer does not have former employees claiming unemployment benefits, the rate will decrease significantly. On the other hand, if an employer has several employees claiming the benefits, the rate will rise. The rate will vary form less than 1% of total gross payroll to over 5% of total gross payroll.
There is a cap on benefits, so the rate only applies to a “base pay” rate – which is adjusted every year for inflation. The Hawaii DOL will mail a letter to each employee their updated tax rate and base pay amounts every year. There is also another tiny tax included in the process called the “Employment and Training” tax, which is usually only 0.01%.
Quarterly Unemployment Payroll Tax Return (Form UCB6)
Every quarter, employers must compute and pay the tax with form UCB6. The Hawaii Department of Labor will mail these forms to employers in advance, who can manually fill out the form which computes the tax. They can then mail back the completed form UCB6 with a check.
The state is currently working on and improving the online filing system and you can now file these online.
Alternatively, accountants can electronically prepare and file the quarterly unemployment payroll form using state-supplied software. Payment can be initiated electronically on behalf of the client.
This form is due whether the employer runs any payroll in the applicable quarter or not, and if the employer does not expect to continue running payroll, they must cancel their account.
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