Hawaii Workers' Compensation: What Employers Are Required to Do

Workers' compensation in Hawaii is not optional, and it's not only for big companies. It's required for virtually every employer with one or more employees, including part-timers. Many small business owners in Hawaii are surprised to learn this. If an employee gets injured on the job and you don't have coverage, the consequences can be severe. Here's what you need to know.

Who Must Be Covered

Hawaii's workers' compensation law (Hawaii Revised Statutes Chapter 386) requires every employer to provide workers' compensation coverage for all employees. This is broader than many employers expect:

• Full-time employees (obvious, but worth stating)
• Part-time employees: yes, even someone working 10 hours a week
• Seasonal and temporary workers
• Minors
• Non-citizen workers, if they are employees (not independent contractors)

Notable Exemptions

A small number of categories are exempt from mandatory workers' comp coverage:

• Domestic workers employed in a private home who are paid less than $225 in cash during the current calendar quarter and during each completed quarter of the preceding 12 months
• Real estate salespersons paid solely by commission
• Federal government employees (covered by federal law)
• Certain business owners (sole proprietors, partners, corporate officers may opt out of coverage for themselves)

What Workers' Comp Covers

Workers' comp covers two things: medical bills and lost wages. When an employee gets hurt on the job, your policy pays their medical treatment. If they can't work while recovering, it replaces most of their paycheck. Here's how each piece works:

Medical Benefits

All necessary and reasonable medical treatment for work-related injuries and illnesses: doctor visits, surgery, hospital stays, physical therapy, prescription drugs. There is no cap on medical benefits in Hawaii.

Temporary Total Disability (TTD)

If an employee cannot work at all while recovering, they receive TTD benefits equal to two-thirds of their average weekly wage (subject to a maximum weekly benefit set by the state). Benefits continue until the employee can return to work or reaches maximum medical improvement.

Temporary Partial Disability (TPD)

If an employee can work but only in a limited capacity (lighter duties, fewer hours), they may receive partial wage replacement for the difference in earnings.

Permanent Disability Benefits

If the injury results in permanent impairment, the employee may receive a lump-sum or ongoing payment based on the degree of disability.

Death Benefits

If a work-related injury or illness results in death, the surviving spouse and dependents receive ongoing benefits.

Vocational Rehabilitation

Hawaii law provides for vocational rehabilitation services if the employee cannot return to their prior occupation.

How to Get Coverage

Hawaii employers have three options for workers' compensation coverage:

Option 1: Purchase Insurance from a Private Carrier

Most Hawaii small businesses go this route. Your business insurance agent can usually quote workers' comp alongside your general liability. In our experience, it's worth getting a few quotes because rates vary more than you'd expect between carriers, even for the same classification code.

Option 2: Hawaii Employer's Mutual Insurance Company (HEMIC)

HEMIC is a Hawaii-based mutual insurance company in particular created to serve Hawaii employers, particularly those who have difficulty getting coverage through standard markets. If you're in a high-risk industry or have had losses, HEMIC may be an option.

Option 3: Self-Insurance

Large employers with sufficient financial resources can apply to self-insure their workers' compensation obligations. This requires approval from the Hawaii DLIR and posting of a security deposit. Not practical for most small businesses.

What It Costs

Workers' comp premiums are based on your industry classification (the type of work your employees do) and your total payroll. Each job classification has a base rate (expressed as a dollar amount per $100 of payroll), which varies sharply by risk level:

• A desk worker (office clerical) might have a rate around $0.20—$0.50 per $100 of payroll
• A restaurant worker might be $2—$4 per $100
• A construction laborer could be $8—$15 per $100 or more

Your rate is also adjusted by your experience modification factor (e-mod). Clean claims history means a discount: your e-mod drops below 1.0. Significant past claims push it above 1.0 and you pay more. A good safety record is the right thing to have, and it literally costs less.

How to Reduce Your Premium

• Implement a strong workplace safety program
• Return injured employees to modified-duty work as soon as medically appropriate
• Accurately classify employees (don't use clerical codes for employees doing physical work)
• Report payroll accurately (over-reporting inflates premiums)

Employer Responsibilities When an Injury Occurs

If an employee is injured on the job, here's what you must do:

1. Get immediate medical care. In an emergency, call 911. For non-emergencies, help the employee get care. Under HRS §386-21, the injured employee may choose any physician practicing on the island where the injury occurred and must notify you of the choice.
2. Report the injury. You must report any work-related injury that causes absence from work for one day or more, or needs medical treatment beyond ordinary first aid, to the Hawaii DLIR within 7 working days. File Form WC-1 (Employer's Report of Industrial Injury) through the DLIR Disability Compensation Division's online portal.
3. Notify your insurance carrier immediately. Don't wait for the DLIR report deadline.
4. Don't discourage employees from filing. Pressuring an employee not to report an injury is illegal retaliation. If it surfaces later, you're looking at a much bigger problem than the original claim.
5. Cooperate with the insurer's investigation. Provide records, witness statements, and access as needed.

What Happens If You Don't Have Coverage

Operating without workers' compensation coverage is a serious violation in Hawaii. The consequences include:

• Civil penalties of at least $500 or $100 per employee for every day without coverage, whichever is greater (HRS §386-123)
• Personal liability: if an employee is injured and you have no insurance, you personally pay all medical costs and disability benefits out of pocket
• Injunction: after 14 days without coverage, a circuit court can bar you from operating your business anywhere in Hawaii until you comply
• Loss of legal defenses: normally, workers' comp is the exclusive remedy (employees can't sue you personally). Without coverage, that protection disappears.

Workers' Comp vs. TDI: Key Differences

Many Hawaii employers confuse workers' comp and TDI (Temporary Disability Insurance) because they both provide wage replacement when an employee can't work. Here's the key difference:

• Workers' comp covers injuries and illnesses that are work-related
• TDI covers illness and non-work injuries, meaning anything that didn't happen on the job

An employee who breaks their leg at home? TDI. An employee who falls off a ladder at work? Workers' comp. The two programs are complementary, and you need both. For TDI details, see our Hawaii payroll taxes guide.

Workers' comp payroll recordkeeping, premium audits, and DLIR coordination are part of what a professional Hawaii payroll service manages alongside your tax filings, keeping everything consistent and audit-ready.

Frequently Asked Questions

Is workers' compensation insurance required for all Hawaii employers?

Yes. Almost every Hawaii employer with one or more employees must carry workers' compensation insurance. Coverage can be obtained through a licensed private carrier or through the Hawaii Employers' Mutual Insurance Company (HEMIC). Operating without coverage carries a penalty under HRS §386-123 of at least $500 or $100 per employee for every day without coverage, whichever is greater, a possible court injunction against operating after 14 days, and personal liability for injuries during the uninsured period.

What does Hawaii workers' compensation insurance cover?

Workers' compensation covers medical treatment for work-related injuries and illnesses, temporary disability benefits at two-thirds of the employee's average weekly wage (up to state maximums), permanent disability benefits, vocational rehabilitation, and death benefits for surviving dependents. Coverage applies to injuries and illnesses that arise out of and in the course of employment.

What are the most common exemptions from Hawaii workers' compensation?

Common exemptions include: sole proprietors and business partners with no employees, certain domestic workers in private homes paid less than $225 in cash per calendar quarter, real estate salespersons paid solely by commission, and some agricultural workers. Employers should verify any claimed exemption carefully, because misclassifying an employee as exempt creates significant liability.

What should a Hawaii employer do immediately after a workplace injury?

Immediately provide first aid and emergency medical care. Report the injury to your workers' compensation carrier right away. File Form WC-1 (Employer's Report of Industrial Injury) with the DLIR Disability Compensation Division through its online portal within 7 working days of learning of an injury that causes absence from work for one day or more or needs medical treatment beyond ordinary first aid. Failure to report timely can result in penalties.