Hawaii TDI: Employer Requirements for Temporary Disability Insurance

Most employers in the continental U.S. have never dealt with a mandatory short-term disability program. Hawaii is different. Along with California, New Jersey, New York, and Rhode Island, Hawaii requires employers to provide Temporary Disability Insurance to workers who can't work due to a non-work-related illness, injury, or pregnancy. If you're setting up payroll in Hawaii for the first time, TDI is one of the obligations that catches out-of-state businesses off guard.

Here's a plain-English breakdown of what it is, what you owe, and how to set it up correctly.

What Is Hawaii TDI?

Temporary Disability Insurance is a state-mandated program that provides partial wage replacement when an employee is unable to work because of a non-work-related illness, injury, or pregnancy. The "non-work-related" distinction is important: work injuries are covered by workers' compensation. TDI covers everything else — a broken leg from hiking, a surgery, maternity leave, a serious illness that keeps someone out for weeks.

TDI was established under HRS Chapter 392, originally enacted in 1969 along with Hawaii's other pioneering employer mandates. It predates the federal Family and Medical Leave Act by more than two decades.

Which Employees Are Covered?

TDI coverage applies to employees who meet Hawaii's eligibility criteria. To be eligible for TDI benefits, an employee must have:

• At least 14 weeks, in the 52 weeks preceding the disability, in each of which they were paid for 20 or more hours (the weeks need not be consecutive or with the same employer)
• Earned at least $400 in wages during those 52 weeks
• Been employed in Hawaii at the time the disability began

The following categories are generally excluded from TDI coverage:

• Independent contractors (but verify classification carefully — see Hawaii employee vs. contractor)
• Domestic workers employed in private homes, with some exceptions
• Certain agricultural workers covered under other provisions
• Federal government employees

The Employer's Obligation

Every Hawaii employer, regardless of size, must provide TDI coverage for eligible employees. There is no minimum employee count exemption. A sole proprietor with one part-time employee owes TDI coverage if that employee meets the eligibility threshold.

The employer's obligations under HRS Chapter 392 include:

• Securing an approved TDI plan (state or private)
• Withholding the employee TDI contribution from wages
• Paying the employer's share of TDI plan costs
• Posting the TDI notice in the workplace
• Reporting new employees to the plan and processing claims when filed

Contribution Rates and Deductions

TDI is funded by a combination of employer and employee contributions. The rules on how much each party pays:

Employee Contribution

Employees may be required to contribute up to 0.5% of their weekly wages toward TDI, subject to a maximum weekly deduction that the Hawaii DLIR updates annually. For 2026, the maximum employee contribution is $7.50 per week (0.5% of the $1,500.21 maximum weekly wage base).

This deduction appears on the employee's pay stub and is withheld from gross wages before calculating net pay (similar to how FICA is handled). It is not a pre-tax deduction for federal income tax purposes in most cases.

Employer Contribution

The employer must cover any cost of the TDI plan that exceeds the employee contribution. Some employers absorb the entire premium cost and take no employee deduction at all — this is permitted and common at larger employers who self-fund their TDI plans.

What TDI Benefits Pay

When an eligible employee files a TDI claim, benefits are calculated based on their wages:

• Weekly benefit: 58% of the employee's average weekly wage, calculated over the highest-earning quarter in the base period
• Maximum weekly benefit: Updated annually by the DLIR; for 2026, the maximum weekly TDI benefit is $871 per week
• Waiting period: Benefits begin after a 7-day waiting period from the first day of disability. The waiting period is not paid.
• Maximum duration: Up to 26 weeks per benefit year for a single disability episode

For a nurse earning $1,200 per week, TDI would replace approximately $696 per week (58%), subject to the maximum cap. For a retail worker earning $600 per week, TDI replaces approximately $348. The benefit is meaningful but not a full wage replacement — which is why employees often use PTO during the waiting period.

How to Provide Coverage

Hawaii has no state-run TDI plan for employers to join, and the State does not assess a disability tax — do not send TDI payments to the State. Employers satisfy HRS Chapter 392 in one of these ways:

Insured Plan

Buy a TDI policy from an insurance carrier authorized to write TDI in Hawaii. This is how most small and mid-size employers comply. Premiums go to the carrier, and the carrier pays claims.

Self-Insured Plan or Collective Bargaining Agreement

Larger employers can self-insure with approval from the DLIR Disability Compensation Division (Form TDI-15), and coverage can also be provided under a qualifying collective bargaining agreement. Self-insured plans must provide benefits at least equal to those required by law.

How TDI Claims Work

When an employee becomes disabled, the claim goes to your TDI carrier (or your self-insured plan):

1. The employee asks the employer for Form TDI-45, Claim for TDI Benefits (the DLIR does not post it online; employers supply it)
2. The employee completes Part A, the physician certifies the disability on Part C, and the employer completes Part B
3. The form is mailed to the employer's TDI insurance carrier (or handled by the self-insured employer) within 90 days of the start of the disability
4. The carrier (or self-insured plan) decides the claim and pays benefits

As the employer, your role in claims is primarily administrative — you don't decide whether a claim is valid. But you do need to respond promptly to carrier requests for information, and you cannot retaliate against an employee for filing a TDI claim.

TDI and the Prepaid Health Care Act

Hawaii employers face an overlapping set of benefit mandates. TDI and the Prepaid Health Care Act (PHCA) are two separate requirements that both apply to most employers:

• TDI — Provides wage replacement during a non-work disability. Governed by HRS Chapter 392.
• Prepaid Health Care Act (PHCA) — Requires employers to provide health insurance coverage to employees working 20+ hours per week. Governed by HRS Chapter 393.

These interact in one important way: during a TDI leave, the employer's obligation to continue health insurance coverage under the PHCA may continue, depending on the circumstances. An employee on TDI is generally still an employee — which means the PHCA coverage obligation doesn't automatically end when they stop showing up to work.

The intersection of TDI, PHCA, FMLA, and workers' comp creates some of the most complicated HR situations Hawaii employers face. When an employee is out for more than a few days, it's worth a call to your payroll provider or HR counsel to verify what you owe on each front.

Penalties for Non-Compliance

Failing to provide TDI coverage in Hawaii is a violation of HRS Chapter 392 and carries real consequences:

• Employer liability for benefits: If an employee becomes disabled and you have no approved TDI plan in place, you may be required to pay the benefits yourself — directly, out of pocket
• Civil penalties: Under HRS §392-47, a penalty of not less than $500 or $100 per employee for every day without coverage, whichever is greater

The practical risk is greatest for employers who have employees but haven't set up a TDI plan at all — often because they didn't know it was required. This is common with businesses that relocate to Hawaii from states with no mandatory disability program, and with fast-growing startups that hit the TDI threshold before their HR infrastructure catches up.

Managing TDI With a Hawaii Payroll Service

TDI has three moving parts that need to work together: the deduction from employee paychecks, the employer contribution to the plan, and the reporting to your TDI carrier or the state. Getting any one of those wrong creates compliance exposure.

A local Hawaii payroll expert handles TDI as part of standard payroll processing. Pacific Data Services has managed TDI withholding, plan contributions, and compliance for Hawaii businesses since 1969. PDS works with employers on insured and self-insured plan arrangements — including tracking the annual DLIR rate updates, adjusting employee deductions when contribution caps change, and flagging TDI interactions with PHCA and workers' comp when employees go out on leave.

If you're a new Hawaii employer who isn't sure whether your current TDI setup is compliant, or a growing business that's never set up a private TDI plan, talking to a local Hawaii payroll and HR specialist is the fastest way to get clarity.

Frequently Asked Questions

What is Hawaii TDI and who must provide it?

Hawaii Temporary Disability Insurance (TDI) is a state-mandated wage replacement benefit governed by HRS Chapter 392. Every Hawaii employer must provide TDI coverage for eligible employees who cannot work due to a non-work-related illness, injury, or pregnancy. Hawaii is one of only five states in the country that mandates this coverage.

How much do employees contribute to Hawaii TDI?

Employees can be required to contribute up to half the cost, but no more than 0.5% of their weekly wages — a maximum of $7.50 per week for 2026 (0.5% of the $1,500.21 maximum weekly wage base). Employers must cover any remaining cost of the TDI plan. An employer may choose to pay the entire premium with no employee contribution.

How long can an employee receive Hawaii TDI benefits?

Under HRS Chapter 392, TDI benefits are payable for up to 26 weeks per benefit year for a single disability. There is a one-week waiting period before benefits begin. The weekly benefit amount is 58% of the employee's average weekly wage, up to a maximum set annually by the Hawaii Department of Labor ($871 per week for 2026).

How does a Hawaii employer provide TDI coverage?

There is no state-run TDI plan for employers to join, and the State does not collect a disability tax. Employers provide coverage by buying a policy from an authorized insurance carrier, by self-insuring with approval from the DLIR Disability Compensation Division (Form TDI-15), or through a qualifying collective bargaining agreement. Premiums are paid to the carrier, not to the State.