Hawaii Small Business Payroll Checklist

Hawaii is one of the most compliance-intensive payroll states in the country. You're not just dealing with the IRS and a state income tax. You're managing five separate employer obligations with their own registration processes, forms, and deadlines. Getting them all right from the start is far easier than cleaning up compliance gaps after the fact.

This checklist is organized the way payroll actually works: what you do once before you hire anyone, what you do every time someone new starts, what runs every pay period, and what's due monthly, quarterly, and annually.

Pre-Payroll Setup Checklist

All of this should be done before your first employee's first payday. The registrations take time, so start at least two to three weeks before hiring.

Federal

• Get your EIN: Apply free at irs.gov. Takes 15 minutes online, and you receive the number immediately. Everything downstream requires this number.
• Set up an EFTPS account: The Electronic Federal Tax Payment System at eftps.gov is how you'll deposit federal payroll taxes. Enrollment takes a few days for the PIN to arrive by mail, so do this early.

Hawaii Department of Taxation

• File Form BB-1 (Basic Business Application): This registers your business with Hawaii DOTAX and opens accounts for multiple tax types. File through Hawaii Tax Online. A General Excise Tax license costs a one-time $20.
• Register for withholding on the same BB-1: Check withholding as one of the tax types to register you as a withholding employer. You'll receive a Hawaii Withholding Tax ID number used on every HW-14 return and employee W-2. Note: if you already have a GET (General Excise Tax) account, the withholding account is still a separate registration.
• Determine your withholding payment schedule: Quarterly if your annual withholding is $5,000 or less, monthly if it is more than $5,000 but not more than $40,000, and semi-weekly with electronic filing if it exceeds $40,000.

Hawaii Department of Labor and Industrial Relations (DLIR)

• Register for Unemployment Insurance online: Use the DLIR employer system at uiclaims.hawaii.gov within 20 days after hiring your first employee (the paper Form UC-1 is no longer accepted). You'll receive a Hawaii UI account number and your initial tax rate. New employer rate for 2026 is 2.4% on wages up to $64,500 per employee per year.
• Get TDI insurance coverage: Purchase a Temporary Disability Insurance policy from an authorized Hawaii carrier, or apply to self-insure by submitting your plan on Form TDI-15 for DLIR approval. Coverage is required for your employees from the start. To collect benefits, an employee needs 14 weeks of Hawaii employment in the prior 52 weeks, each with 20+ hours and $400+ in wages.
• Get workers' compensation insurance: Required for all employees from day one, regardless of employer size. No Hawaii exemption for small employers. Purchase from a private carrier or HEMIC. Operating without workers' comp carries a penalty of the greater of $500 or $100 per employee per day, and after 14 days a court can bar you from doing business in Hawaii.

Health Coverage (PHCA)

• Select a DLIR-approved health plan: Hawaii's Prepaid Health Care Act requires health coverage for employees who work 20+ hours per week and earn at least $1,387 a month (2026), once they have worked four consecutive weeks. Work with an insurance broker who knows PHCA-compliant plans. The employer must pay at least half the premium; employee contribution is capped at 1.5% of gross monthly wages.
• Set up hours tracking: You need a system that monitors weekly hours for every employee so you can identify when the 20/4 week eligibility threshold is crossed.

New Hire Checklist

Every time a new employee starts, these steps apply. Do them in this order, and note the deadlines.

• Form I-9: Employee completes Section 1 on or before their first day. You complete Section 2 (verifying original identity documents) within 3 business days of the start date. Missing the 3-day deadline triggers federal penalties per form.
• Federal Form W-4: Collect before the first paycheck. If not submitted, withhold at the Single/zero-adjustments rate.
• Hawaii Form HW-4: Collect separately. Hawaii still uses the allowance system (2026 standard allowance: $1,144 per allowance). The federal W-4 and Hawaii HW-4 are separate documents: you need both on file. Without an HW-4, withhold at zero allowances.
• Report to Hawaii New Hire Reporting Program within 20 days: Mail or fax a completed W-4 with your employer information to CSEA, or send an electronic file by SFTP (see the CSEA employer information page). CSEA does not take reports over the internet. Required information: employee name, address, SSN, start date, your EIN and address. Late reporting is a violation ($25 per failure).
• Assess PHCA eligibility from day one of tracking: Start counting hours from the first week. If the employee is expected to work 20+ hours and earn at least $1,387 a month, prepare for coverage to begin on the plan's first enrollment date after the 4th consecutive week.
• Assess TDI eligibility: An employee becomes eligible for benefits after 14 weeks of Hawaii employment in the prior 52 weeks, each with 20+ hours and $400+ in wages. Set up payroll to withhold the TDI employee contribution (up to 0.5% of weekly wages, maximum $7.50 a week in 2026) once eligibility is established.
• Set up direct deposit or payment method: Hawaii requires wages to be paid at least semi-monthly (twice per month). Monthly payroll is allowed under HRS §388-2 only if a majority of employees elect it by secret ballot or the DLIR director approves it.

Every Pay Period Checklist

For each payroll run, work through these calculations in sequence.

• Calculate gross pay: Hours × rate for hourly employees, or salary divided by pay periods for salaried. Include overtime at 1.5× for hours over 40 in a workweek.
• Withhold federal income tax: Use IRS Publication 15-T withholding tables based on the employee's W-4 and pay frequency.
• Withhold Hawaii state income tax: Use the 2026 Hawaii Booklet A tables based on the employee's HW-4 allowances and filing status. Hawaii has 12 brackets ranging from 1.4% to 11.0%.
• Withhold employee FICA: Social Security: 6.2% on wages up to $184,500 (2026 cap). Medicare: 1.45% on all wages, plus 0.9% Additional Medicare Tax on wages over $200,000.
• Withhold employee TDI contribution: Up to 0.5% of weekly wages (maximum $7.50 a week in 2026) per your TDI plan terms, for eligible employees.
• Withhold employee PHCA (health insurance) premium: Up to 1.5% of gross monthly wages, per employee. Calculate per-employee based on their actual wage rate.
• Calculate employer FICA match: Match the 6.2% Social Security and 1.45% Medicare dollar for dollar.
• Calculate employer FUTA: 6.0% on first $7,000 per employee per year, reduced to 0.6% net after the Hawaii UI credit (assuming no credit reduction).
• Calculate employer Hawaii UI tax: Your assigned rate on wages up to $64,500 per employee per year.
• Issue net pay: Gross minus all withholdings. Via direct deposit or check on the scheduled payday.
• Deposit federal payroll taxes: Follow your IRS deposit schedule (semi-weekly or monthly based on prior-year lookback).

Withholding Payments and Form HW-14

HW-14 due: 15th day of the month after each quarter. Monthly payments due: 15th of the following month.

Form HW-14 is Hawaii's state withholding return, filed quarterly by every employer. Even quarters with no payroll activity require a zero-balance return. Skip it and DOTAX sends a penalty notice.

• Report total Hawaii income tax withheld from all employees during the period
• Include payment for the taxes due
• File through Hawaii Tax Online if your annual withholding exceeds $40,000 (electronic filing is mandatory above that threshold)
• Verify you're on the correct deposit schedule: growing businesses often cross the $5,000 or $40,000 threshold and don't realize they need to pay more often

Quarterly Checklist

Four times per year: deadlines are January 31, April 30, July 31, and October 31 for the prior quarter.

IRS Form 941

• Report total federal wages paid, federal income tax withheld, and FICA (employee and employer share)
• Reconcile against your EFTPS deposit records for the quarter
• File even if you had no payroll activity in the quarter (or file Form 944 if you're an annual filer by IRS designation)

Hawaii Form UC-B6

• Report total wages paid to each employee and pay Hawaii UI contributions
• Include corporate officers: Officers who receive wages are subject to Hawaii UI and must appear on UC-B6. This is a common omission for businesses that were previously in other states where officers can opt out.
• Report wages up to the $64,500 taxable wage base per employee (2026)
• File through the Hawaii Unemployment Insurance online system at huiclaims.hawaii.gov

Annual Checklist

January and February are the busiest months for payroll compliance. Plan accordingly.

Additional Annual Tasks

• Verify minimum wage compliance: Hawaii minimum wage is $16.00/hr for 2026. Increases to $18.00/hr on January 1, 2028. Confirm all employees are paid at least the current minimum, including tipped employees after tip credit adjustments.
• Get updated Hawaii tax tables for the new year: Hawaii Booklet A is updated annually. The 2026 lump-sum withholding allowance changed significantly ($1,650 to $4,350). Always pull the current-year Booklet A before running the first payroll of the year.
• Reconcile W-2s before filing: The total Hawaii withholding on your W-2s must match the sum of all four HW-14 quarterly filings. Discrepancies trigger DOTAX flags and can require amended returns.
• Review worker classification: Any 1099 contractors who may have crossed into employee territory need to be reclassified before the new year. Hawaii applies its own tests (unemployment insurance uses the three-part ABC test in HRS §383-6), and DLIR enforcement is active.
• Review PHCA eligibility for new and current employees: As of year end, verify all employees who crossed the 20/4 threshold during the year are enrolled in a compliant health plan.

Frequently Asked Questions