What is Unemployment Insurance (UI)?
- Unemployment Insurance provides temporary and partial replacement of lost wages to qualified workers who become jobless through no fault of their own.
- Allows jobless individulas to continue spending for basic necessities.
- Stimulates businesses and helps to stabilize the local economy.
Who Pays for UI?
- Employers fund 100% of the UI program by paying Federal and State payroll taxes.
- NO deduction can be made from any employee’s wages to pay unemployment taxes.
When does a business become liable for UI?
- An individual or organization, which has, or plans to have, one or more workers performing services for it, must register within Twenty (20) days after services are performed.
- Complete a Form BB-1, Basic Business Application
What about Non-Profit Organization?
- Non-profit organizations (NPO) may elect to make reimbursable payments in lieu of quarterly taxes.
- Must file an application and meet certain qualifications. Contact Employer Services Section for more information.
- If approved, reimbursable employers pay 100% of ALLbenefits charged to teh NPO.
How are contribution Rates Determined?
- The balance of the UI Trust fund determines which of 8 tax schedules is in effect for each calendar year.
- The healthier the UI Trust fund, the lower the tax schedule.
- Each employer is assigned a unique tax rate depending on the financial condition of teh UI trust fund, the employer’s reserves and the employer’s payroll.
- Rates can vary from 0.00% to 5.40%
- New or Newly liable employers are assigned a New Employer rate. (5.20% for 2012)
- After about 2 years, new employers are eligible to be experience rated provided ALL reports (Form UC-B6) have been filed.
- Rates are determined in March of the current calendar year and a notice is mailed.
- Click here for more rate information.
Do ALL employers have to file reports?
- ALL active employers are reuqired to submit Form UC-B6, Quarterly Wage Contribution and Employement and Training Assessment Report. Including:
- Contributory Employers with a 0.00% Tax Rate
- Non-Profit Orgnanizations
- Employers with “NO Payroll” or Zero Wages
- Failure to file Form UC-B6 for any quarter will result in the Maximum rate of 5.40% being assessed.
- Substitute forms or photocopies are Prohibited.
When are UC-B6 reports due?
- The Form UC-B6 is due on or before the last day of the month following the end of the calendar quarter:
Calendar Quarter: Due No Later Than:
- Jan, Feb , March (1st Quarter) April 30
- Apr, May, Jun (2nd Quarter) July 31
- Jul, Aug, Sep (3rd Quarter) Oct 31
- Oct, Nov, Dec (4th Quarter) Jan 31
Report wages in the quarter actually paid,rather than for the pay period they represent.
How can reports be filed?
- Online via HUI Express
- Download QWRS (Quarterly Wage Reporting Software) Software
- Computes: Total, Excess, and Taxable Wages
- Computes: Contribution Due
- Fast, Secure, and Easy to Use
- Download QWRS (Quarterly Wage Reporting Software) Software
- Paper Forms UC-B6
- Form UC-B6 is mailed March for the entire year (ALL Four (4) quarters)
- Mail UC-B6 with payment
- Newly Registered employers will receive UC-B6’s in their New Employer Packet
What is Employment and Training Assessment (E&T)?
- Administered by the Workforce Development Division
- Used for training programs to help worker learn new skills or upgrade their skills.
- E&T of .01% of taxable wages is collected by UI (.00% for 2012)
- Employers with a 0.00% and 5.40% Rate are not assessed E&T
- This assessment is not credited to your (Employers) UI reserves and cannot be taken as a credit against FUTA (Federal Unemployment Tax).
What is included as Unemployment Taxable wages?
- Include ALL payments for services from whatever source, cash or in-kind payments:
- Commissions (Includes Advances against commissions)
- Tips reported by the employee to the employer
- Vacation Pay
- Meals and Lodging
- Salaries to corporate officers for their services to the corporation
- Any other payments in addition to or in lieu of money wages
The Following payments are not Unemployment Taxable:
- Notincluded as wages:
- Personal Use of Auto
- Travel or other business expenses, if legitimate and reasonable
- Sick Payments
- Temporary Disability Payments from a Third Party (Temporary Disabiltiy Insurance (TDI) Provider -IE: “Pacific Guardian”)
- Severance Pay
- Premiums for Life Insurances in Excess of $50,000.00
- Sole Proprietor’s or Partner’s Draw or Profit
- 401(k) (Employer’s Matching Portion)
Are there any wage limits?
- Unemployment Insurance Taxes are paid only up to the taxable wage base about for each worker during the calendar year. (The 2012 wage base is $38,800.00 per Employee)
- An Individual employee’s wages in excess of the annual taxable wage base is NOT taxable. (IE: if wage base is $13,000 per employee, any GROSS wages over $13,000 is NOT taxable.)
Are there any exclusions?
- Certain services are Not considered to be employement for UI purposes.
- Wages paid for performing these services areNottaxed.
- Do NOT report wages for excluded services to UI.
- Wages from exlcuded services cannot be used to qualify for a claim to collect UI benefits.
Example of Excluded Services:
- Family Owned Corporations may file for Form UC-336 for Exclusions:
- 2 Family Memebers, Related by blood or Marriage. Each owns 50% of shares and work in the business.
- Family Employment (Parent(s), Spouse, Children under 21 years of age in teh employ of the child’s father or mother.)
- There are many excluded services. Click here to view a comprehensive list.
How are reports amended?
- Online via HUI Express
- Make Changes on QWRS program and then transmit amended reports and make payment, if any, on HUI Express
- Copy of UC-B6;
- Use RED ink to make changes;
- Annotate “Amended” on the top of the form;
- Sign, Date, and Include your Telephone number, and;
- Include reason for amendment
- DO NOT amend prior quarter wages in the current quarter report.
Is there penalty and interest for non-compliance?
- Penalty is $10 or Ten percent (10%) of delinquent contributions due, whichever is greater.
- Interest is assessed on delinquent contributionsandpenalty remaining unpaid 15 days after the due date.
- Interest is calculated at teh rate of two-thirds of one percent (0.00667) per month or fraction of month until paid.
How are business changes reported?
- Report Changes of Form UC-25 “Notification of Changes”
- No employees; business is ongoing
- Termination of Business
- Name Change
- Address or Telephone number change
- Cashiering Address update
How are changes in business entity reported?
- Contact UI immediately to determine if a Form BB-1 should be completed for a NEW UI account number.
- IE: Sole Proprietor to Corporation, Corporation to LLC.
What is a Successor Employer?
- Employers who acquire substantially ALL or a trade, organization, or business may apply for transfer of the predecessor’s experience record provided:
- Form UC-86 “Waiver of Employer’s Experience Records” must be filed and signed by a predecessor and successor employer;
- The successor employer must continue to employ ALL or nearly all of the predecessor’s employees, and;
- The predecessor has cleared ALL contributions and reports due to the UI Division.
How are Limited Liability Companies treated?
- Single member LLC’s are treated like Sole Proprietors adn Multiple members LLC’s are treated like partners of a partnership, and therefore wages NOT reportable for UI.
- If an LLC elects to be treated as a corporation by filing IRS Form 8832, Entitiy Classification Election, the UI division will treat it as a corporation. Wages are reportable for UI purposes.
What are Employees vs. Independent Contractors?
- Employers is defined as any service performed for wages or under any contract of hire, written or oral, express or implied. “Wages” included ALL remuneration for services from whatever souce. Therefore, services perfored for wage are considered to employment for UI purpose UNLESS ALL 3 conditions of the ABC test are met.
- ABC Test:
- Individual must be FREE from control or direction;
- Service is outside the usual course of business or performed outstide of ALL the places of business, and;
- Individula must be customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in teh contract of service.
- AContract, written or oral, expressed or implied, doesnotnecessarily establish “Independent Contractor” status. And, while the written contract provisions may be considered in a determination, the conditions outlined in the “ABC Test” must also be met in fact.
- The possession of Hawaii State General Licesense does not, by itself, make the possessor an independently established business or businessperson.
- Any agreement by an individual, which waives his rights to benefits is void (Section 383-161).
- Before exlcuding workers as Independent Contractors, contact the UI Division Employer Services Section.
What are Record Keeping requirements?
- Employers are required by law to keep accurate work records of their employee’s.
- The following records must be kept for a least Five (5) years:
- Name and Social Security Account Number;
- Type of Work performed;
- Hire Date, Date Separated and Reason for Seperation;
- Rate of Pay, Amount of Wages paid for each pay period and date paid, and;
- Beginning and Ending dates of each pay period.
Inspection of Records:
- Audit Program
- Randomly selected or selected based on discrepencies in reporting or liability under the law needs to be determined.
Benefit Information for Employers
- Employers are required by law to file quarterly wage reports and these reports are used to determine whether and in what amount a worker is eligible for UI benefits.
- Notices will be mailed from UI claims offices when an individula who worked for you in the past 18 months files a claim for UI benefits
- It is critical to respond to these notices on a timely basis and provide accurate and wage and separation information.
- Eligibility for UI benefits will be determined based on available information.
- Failure to respond to notices regarding an employee separation could affect your experience record, which determines your future tax rates.
- Without ALL the facts, benefits could be paid when they shouldn’t be.
- This reduces the UI Trust fund and will result in a higher cost and overall tax increases to ALL Hawaii Employers.
- Therefore, accurate employer records and active employer participation are essential to render correct determinations and in maintaing stable reserves in the employer’s account.
Important Benefit Forms and Notices
- UC-BP-35 Request for Separation Information
- Notice of Unemployment Insurance Decision
- When a determination is made on a separation issue, employers are notified of the “Notice of Unemployment Decision”
- If you disagree with the decision, you have TEN (10) calendar days from the date of mailing to file an appeal.
- The Employment Security Appeals Referee’s Office may extend the period to Thirty (30) calendar days for good cause.
- Employer Notice of Unemployment Insurance Benefits
- Notices shows the claimant’s name, beginning date of benefit year, weekly benefit amount, maximum benefits payable, the percentage of benefits that will be charged or not charged to the employer’s reserve account and the reason for charging or non-charging.
- Lists charge vs. non-charge codes
- If you disagree with the decision, you have Ten (10) calendar days from teh date of mailing to file an appeal.
- This may be the ONLY notice that you are being charged for benefits.
- Form UC-BP-52(a) of Weekly report of Low Earnings
- Employers need to verify weekly earnings from part-time employees and report if ALL available work was accepted.
- Necessary to prevent improper paid and overpaid weeks.
- Complete weekly, immediately after week ends os that claimant can receive their benefits.
- Mail to claims office or return to claimant to file themselves.
- If not submitted in a timely manner, payment of benefits will be made based on available information.
- Review All notices carefully. An appeal may be filed if there is a disagreement on a notice of determination.
- Submit Form UC-AP-1, Notice of Appleal or a letter within the appeal filing deadline of the notice.
- The appeal must be filed in a timely manner.
- The Employment Security Appeals Referees Office will conduct the hearing.
For more information contact Employer Services Section
- Oahu & Out-of-State: 808-586-8913
- Hawai 808-974-4095
- Maui: 808-984-8410
- Kauai: 808-274-3025