New law cuts unemployment insurance tax rates

  • IGE

HONOLULU — Gov. David Ige on Tuesday signed legislation temporarily reducing the unemployment insurance tax rate employers must pay for their workers.

The surge in the number of jobless since the start of the coronavirus pandemic last year rapidly depleted Hawaii’s unemployment insurance trust fund. That triggered what under the old law would have been a sharp hike in tax rates to replenish the fund.


To prevent employers from having to shoulder that burden at a time when businesses are already struggling with pandemic public health restrictions and a weak economy, state leaders decided to cut the rate employers have to pay for 2021 and 2022.

Without the new law, employers would have had to pay on average $1,800 per employee per year to the trust fund but under the new law, that average drops to $850. This year, the average payment was $620.

“If we did not act and get to this point today, employers would have been hit with very high unemployment contributions, especially when they could least afford it,” Ige said at a news conference before signing the bill.


Hawaii’s unemployment insurance trust fund had a balance of about $500 million before March 2020. In April, the unemployment rate spiked to 23.8% and in just months the trust fund balance sank to near-zero as a flood of workers applied for benefits. The state began borrowing from the federal government to replenish the fund in June. So far, the amount borrowed totals about $700 million.

Ige said the newest round of coronavirus relief legislation being considered in Congress may include some funds that the state could use to pay back a portion of this loan.

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