What Hawaii employers should know about workers' comp coverage and protecting employees

What does workers’ compensation provide?

Worker’s compensation is designed to replace a portion of an employee’s wages should they become sick or injured while on the job. This protects your employees and can also be beneficial for employers. Why? When workers’ compensation is in place, employees typically cannot sue their employers for losses resulting from illnesses or injuries sustained at work.

In Hawaii, workers’ comp coverage generally includes:

• Medical expenses: Payment for doctors, hospitals, and surgery related to the injury
• Wage replacement: A portion of the employee’s average weekly wages if they are unable to work
• Vocational rehabilitation: Help returning to work or learning a new skill if they cannot return to their previous role
• Death benefits: Financial support for dependents if a workplace injury is fatal

What are Hawaii’s workers’ comp requirements for employers?

Any employer with one or more employees, full-time or part-time, permanent or temporary, is required to provide workers’ compensation coverage for their employees, except where excluded by law.

Some exceptions include voluntary or unpaid workers for a church, charity, school, or nonprofit organization; students working for a school, university, or college in exchange for room, board, or tuition; authorized ministers, priests, or rabbis; domestic workers making less than $225 each calendar quarter, people providing domestic services to public welfare recipients, some 25% stockholders, all 50% stockholders, and real estate salespersons and brokers compensated totally on the basis of commissions.

Who is exempt from workers’ comp in Hawaii?

Though most employees in Hawaii are covered under the Workers’ Compensation Law, it may be surprising to know that certain categories are excluded. Exemptions include:

• Volunteer or unpaid services for a religious, charitable, educational, or nonprofit organization 
• Students enrolled and regularly attended classes, working for a school/college in exchange for tuition, room, or board 
• Ministers, priests, or rabbis performing their ministry or religious order members performing non-secular duties 
• Domestic, in-home services for personal, family, or household purposes when cash remuneration is under $225 in the current calendar quarter and each completed prior quarter
• Corporate officers (≥ 25 % stockholders), majority-owners of corporations (≥ 50 %), or LLC members (>50% distributional interest) where they perform services for their own company 
• Licensed real-estate brokers or salespeople who work solely on a commission basis and are not treated as employees

How do Hawaii employers purchase a workers’ compensation policy?

If you’re an employer in Hawaii and need workers’ compensation insurance, there are two options, per Hawaii’s Disability Compensation Division. One option to consider is purchasing a policy from an authorized private insurance carrier, which can provide you with the coverage you need. However, you can’t require your employees to pay any of the premium costs. Your other option is to become self-insured, which means paying out the benefits directly to the employee. To qualify, you need to prove you have the financial ability to pay and meet the director’s requirements. The takeaway is that this requires formal approval from the DCD.

How is workers’ comp calculated in Hawaii?

Hawaii does not publish statutory premium tables. Instead, private insurers determine rates based on your specific industry and risk. The standard calculation used to determine your premium is:

(Payroll ÷ 100) × Classification Rate × Experience Modifier = Premium

• Classification rates: These are based on the risk level of the job performed (e.g., a roofer has a higher rate than an accountant)
• Experience modifier: This is your “safety score” based on your claims history — a clean history can significantly lower your premium
• Payroll: Your total gross wages for the coverage period

Based on 2022 data from the National Academy of Social Insurance, the average employer cost in Hawaii is $0.86 per $100 of covered payroll.

What happens if an employer in Hawaii does not have workers’ comp?

Employers who don’t follow Hawaii workers’ compensation law can face more than a slap on the wrist.

• Stop-work orders: The DLIR can order you to stop all business operations until insurance is secured
• Fines: Penalties can reach up to $100 per employee per day
• Direct liability: If an uninsured employee is injured, the employer is responsible for all medical costs and lost wages out of pocket

In addition, companies that fail to provide workers’ comp protection leave themselves open to employee lawsuits seeking benefits that should have been paid.

What should your employees do if they get sick or injured while on the job?

In the event of a work injury, your employee should immediately report the incident to you (or their supervisor). Employers must fill out the “Employer’s Report of Industrial Injury” (WC-1) form and submit it to the Disability Compensation Division within seven working days of the incident (and also provide a copy to the employee).