Hawaii Workers’ Compensation: Complete Employer Guide (2026)

Workers’ compensation is one of those insurance requirements that many small business owners in Hawaii don’t think about until it’s too late. Unlike some states where only businesses above a certain size need coverage, Hawaii requires workers’ comp for virtually every employer with employees, even if you only have one part-time worker. The law is broad, the penalties for non-compliance are severe, and the financial exposure of operating without coverage can be devastating.

This guide covers everything Hawaii employers need to know: who must be covered, what benefits workers’ comp provides, how to get a policy, what it costs, what to do when an injury occurs, and what happens if you don’t have coverage.

1. Who Must Be Covered

Hawaii’s workers’ compensation law (Hawaii Revised Statutes Chapter 386) is stricter than most states. Every employer must provide workers’ comp coverage for all employees, regardless of how many hours they work or how long they’ve been on the job. This includes:

• Full-time employees: the obvious ones
• Part-time employees: even someone working just a few hours per week
• Seasonal workers: summer staff, holiday hires, harvest crews
• Temporary employees: short-term project workers, fill-ins
• Minors: if they are employed, they must be covered
• Non-citizen workers: as long as they are employees (not independent contractors)

There is no minimum number of employees required to trigger the law. One employee is enough. There is no waiting period, no probationary exclusion, and no exemption for small businesses. If someone works for you as an employee in Hawaii, they must be covered from day one.

Notable Exemptions

A narrow set of workers are exempt from mandatory workers’ comp coverage:

• Domestic workers in a private home 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 under the Federal Employees’ Compensation Act, not state law
• Business owners: sole proprietors, partners, and corporate officers may opt out of coverage for themselves (but not for their employees)

2. What Workers’ Comp Covers

Workers’ compensation provides benefits to employees who are injured or become ill as a result of their work. The system is designed to cover the full cost of recovery and provide wage replacement while the employee heals. Here is what it includes:

Medical Benefits (No Cap)

All necessary and reasonable medical treatment related to the work injury: doctor visits, emergency care, surgery, hospitalization, physical therapy, prescription medications, and medical equipment. Hawaii does not impose a cap on medical benefits. Treatment continues as long as it is medically necessary and related to the work injury.

Temporary Total Disability (TTD)

If an employee cannot work at all while recovering, they receive TTD benefits equal to two-thirds (66.67%) of their average weekly wage, subject to a maximum weekly benefit set by the state. TTD benefits continue until the employee is able to return to work or reaches maximum medical improvement (MMI).

Temporary Partial Disability (TPD)

If an employee can work in a limited capacity (lighter duties, reduced hours) but earns less than their pre-injury wages, they may receive partial wage replacement for the difference in earnings. This encourages return-to-work programs where the employee takes on modified duties during recovery.

Permanent Disability Benefits

If a work injury results in permanent impairment (the employee does not fully recover), they may receive either a lump-sum payment or ongoing benefits based on the degree and nature of the disability. Permanent disability can be partial (the employee can still work, but with lasting limitations) or total (the employee can no longer work at all).

Death Benefits

If a work-related injury or illness results in death, the surviving spouse and dependent children receive ongoing wage-replacement benefits. Funeral and burial expenses are also covered, subject to statutory limits.

Vocational Rehabilitation

Hawaii law provides for vocational rehabilitation services if the injured employee cannot return to their prior occupation. This can include job retraining, education, resume assistance, and job placement services, all aimed at helping the employee return to gainful employment in a different role.

3. How to Get Coverage

Hawaii employers have three options for obtaining workers’ compensation coverage:

Option 1: Private Insurance Carrier (Most Common)

The majority of Hawaii businesses purchase workers’ comp through a licensed private insurance company. Multiple carriers are authorized to write workers’ comp policies in Hawaii, and rates vary by carrier, industry, and your claims history. Your business insurance agent or broker can typically quote workers’ comp alongside your general liability and property coverage. Shopping around is recommended. Premiums can differ significantly between carriers for the same risk.

Option 2: HEMIC (Hawaii Employers’ Mutual Insurance Company)

HEMIC is a Hawaii-based mutual insurance company specifically created to serve Hawaii employers. It is particularly important for businesses in high-risk industries or those that have had difficulty obtaining coverage through the standard market. If your business has had claims, is in a hazardous industry, or has been declined by other carriers, HEMIC may be your best option. As a mutual insurer, HEMIC is owned by its policyholders and exists to serve the Hawaii employer community.

Option 3: Self-Insurance (Large Employers Only)

Employers with substantial financial resources can apply to the Hawaii Department of Labor and Industrial Relations (DLIR) for approval to self-insure their workers’ comp obligations. Self-insurance requires demonstrating financial capacity, posting a security deposit, and meeting ongoing reporting requirements. This option is only practical for large employers with the resources to fund claims directly. It is not a realistic option for small or mid-sized businesses.

4. What It Costs

Workers’ comp premiums are calculated as a rate per $100 of payroll. The rate depends primarily on your industry classification (the type of work your employees do) and your payroll volume. Each job classification has a base rate that reflects the historical risk of injury for that type of work:

These are approximate ranges. Your actual premium depends on the specific NCCI classification codes assigned to your employees, your payroll amounts, and your experience modification factor.

Experience Modification Factor (EMR)

Your experience modification factor (also called “e-mod” or EMR) is a multiplier based on your company’s claims history compared to the industry average. An EMR of 1.0 means your claims experience is average for your industry. If you’ve had fewer claims than average, your EMR drops below 1.0, and you get a discount on your premium. If you’ve had more claims, your EMR rises above 1.0, and you pay more.

A good EMR can save you thousands of dollars per year. A bad one can significantly increase your costs. EMR is one of the most important factors in your workers’ comp cost, and it’s one you can directly influence through workplace safety.

5. Employer Responsibilities When an Injury Occurs

When an employee is injured on the job, how you respond matters, both for the employee’s well-being and for your legal compliance. Here is exactly what you must do:

1. Provide 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. Have your carrier’s claim contact information ready before an injury happens.
2. Report the injury to the Hawaii DLIR within 7 working days. Any work-related injury that causes absence from work for one day or more, or needs medical treatment beyond ordinary first aid, must be reported to the Department of Labor and Industrial Relations. File Form WC-1 (Employer’s Report of Industrial Injury) through the DLIR Disability Compensation Division’s online portal within seven working days of learning about the injury (HRS §386-95).
3. Notify your insurance carrier immediately. Do not wait for the DLIR reporting deadline. Contact your workers’ comp carrier as soon as you learn of the injury. Early notification helps the carrier manage the claim efficiently and reduces overall costs.
4. Cooperate with the investigation. Your insurance carrier will investigate the claim. Provide all requested documentation, including employee records, witness statements, incident reports, and access to the workplace.
5. Do not retaliate. Terminating, demoting, reducing hours, or otherwise punishing an employee for filing a workers’ comp claim is illegal in Hawaii. Retaliation can result in significant additional liability, including reinstatement orders, back pay, and punitive damages.

6. What Happens Without Coverage

Operating a business in Hawaii without workers’ compensation coverage is a serious violation with consequences that can threaten the survival of your business. The penalties include:

Civil Penalties

Under HRS §386-123, an uninsured employer is liable for a penalty of at least $500 or $100 for each employee for every day without coverage, whichever is greater. With one employee, six months without a policy is roughly $18,000 in penalties alone; with five employees, about $90,000. That is before any injury even occurs. The director may reduce the amount above $500 if you come into compliance.

Personal Liability for All Costs

If an employee is injured while you have no coverage, you personally pay for everything: all medical bills (which have no cap in Hawaii), all wage replacement benefits, all rehabilitation costs, and all permanent disability benefits. A single serious injury can easily generate six-figure costs. A catastrophic injury can cost millions.

Court Injunction

If you remain uninsured for 14 days, the State can ask the circuit court to bar you from carrying on your business anywhere in Hawaii until you obtain proper coverage (HRS §386-123).

Loss of Exclusive Remedy Defense

This is perhaps the most dangerous consequence. Normally, workers’ comp is the exclusive remedy, meaning employees who receive workers’ comp benefits cannot also sue you for the injury. This protection is a major benefit to employers. However, if you do not have workers’ comp coverage, you lose this protection. The injured employee can sue you directly in civil court, where damages (including pain and suffering, emotional distress, and punitive damages) can far exceed what workers’ comp would have paid.

7. Workers’ Comp vs. TDI

Many Hawaii employers confuse workers’ compensation with TDI (Temporary Disability Insurance) because both programs provide wage replacement when an employee cannot work. The critical difference is the cause of the disability:

An employee who slips on a wet floor in your kitchen at work? Workers’ comp. An employee who catches the flu and is home for two weeks? TDI. The two programs are complementary. They cover different situations, and Hawaii law requires you to carry both.