On February 22, 2021, the Hawaii Legislature passed HB 1278 HD1 and transmitted it to Governor Ige. If Governor Ige signs HB 1278 HD1 into law, employers can expect significant unemployment insurance tax relief this year.

HB 1278 HD1 would offer employers three significant types of relief. First, HB 1278 HD1 would authorize the Director of the Department of Labor and Industrial Relations to modify the annual computation of employers’ experience rating in 2021 and 2022 to omit benefits charged for all employers to address the disruptions caused by the COVID-19 pandemic. This will benefit any employer that has utilized the unemployment compensation system during this period.

Second, HB 1278 HD1 will lower the tax schedule from “H” to “D” for 2021 and 2022. Being in the D tax schedule for 2021 would create the following savings for employers this year:

That is, the average tax impact difference between a schedule H tax rate ($1800/employee) and a schedule D tax rate ($850/employee) would save employers $950/employee this year.

Finally, the relief in this bill also extends to certain layoffs beginning in March 15, 2020 through March 20, 2021. HB 1278 HD1 would give reimbursable employers a 50% credit for non-COVID-related layoffs against the amount owed by the reimbursable employer.

Because the unemployment insurance trust fund will need to be replenished, this relief is temporary. Nonetheless, measures such as these help Hawaii employers deal with the economic challenges caused by COVID-19.

Once Governor Ige takes action on HB 1278 HD1, HEC will send out a further update.

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