It appears likely that Hawaii unemployment taxes will increase by an unprecedented amount next year, due to a combination of a higher taxable wage base and a higher tax rate schedule. Unfortunately, the Hawaii unemployment tax rate notices are normally not issued until March, so it is difficult for an employer to know what amounts to accrue until that time. If you accrue at your 2009 rates until you receive your tax rate notice, you will be in for an unpleasant surprise.
Legislation which limited UI taxes in Hawaii was passed in 2007. This legislation is set to expire at the end of 2009 because the state unemployment trust fund has fallen below a threshold level specified in the law. As a result, the state unemployment taxable wage base for Hawaii employers will increase from $13,000 to a projected $37,500.
In addition to the higher taxable wage base, there will be a significant increase in tax rates. Currently tax rate schedule A is in effect. This tax rate schedule contains the lowest possible tax rates, ranging from 0.00% to 5.40%, depending on the employer’s experience. However, the Hawaii Department of Labor and Industry projects that tax rate schedule G or H (which contains the highest possible tax rates, ranging from 2.40% to 5.40%) will take effect for next year.
In short, the calculation of tax payments for Hawaii employers is expected to suddenly change from a taxable wage base of $13,000 to a taxable wage base of $37,500 and from the lowest possible tax rate schedule to one of the two highest rate schedules. The combined effect will possibly be the highest one-year unemployment tax increase on record.
I took a look at one company’s tax rate calculation, which is in the mid-range of the tax rate brackets. This company’s 2009 tax rate is 1.30%, so they will pay $169 per full-time worker for 2009, assuming the worker is paid wages of at least $13,000. For 2010, assuming this company remains in the same rate bracket (their experience is unchanged) their tax rate on Schedule H would be 4.80%, so they will pay $1,800 per full-time worker, assuming the worker is paid wages of at least $37,500. This would be more than a ten-fold increase.
Click here for a news release from the Hawaii Department of Labor and Industrial Relations, which we recommend reading. If there are any questions please do not hesitate to contact us.