What Is Hawaii’s SDI Tax and How Does It Work?

Hawaii’s Temporary Disability Insurance (TDI) tax is a mandatory payroll contribution designed to provide financial support to eligible employees. It operates as a state-mandated program, ensuring a safety net for workers facing unforeseen circumstances. This article will provide an overview of Hawaii’s TDI system, explaining its purpose, contribution responsibilities, calculation methods, and benefits.

Understanding Hawaii’s Temporary Disability Insurance Tax

Hawaii’s Temporary Disability Insurance (TDI) program offers partial wage replacement to employees unable to perform their duties due to a non-work-related disability. This includes various conditions, such as an off-the-job injury, illness, or even pregnancy. The program is distinct from workers’ compensation, which addresses work-related incidents, focusing solely on disabilities arising outside of the workplace.

This system is funded through contributions, classifying it as a payroll tax. Unlike some other states, Hawaii does not directly administer the benefits; instead, employers are required to provide coverage through approved private insurance plans or by establishing self-insured programs. The Disability Compensation Division (DCD) within the State of Hawaii Department of Labor and Industrial Relations oversees compliance and support for this program.

Employer and Employee Contribution Responsibilities

Both employers and employees share the responsibility for contributing to Hawaii’s TDI fund. Employers are obligated to ensure coverage is in place for their eligible employees.

Employers have the flexibility to cover the entire cost of providing TDI coverage themselves. Alternatively, they may choose to share the cost with their employees. If costs are shared, the employee’s contribution is capped by law. Any costs exceeding the maximum allowable employee contribution must be absorbed by the employer.

Calculating TDI Contributions

For 2025, the maximum weekly employee contribution to Hawaii’s TDI program is set at $7.21. This limit is based on a contribution rate of 0.5% of an employee’s weekly wages, applied up to a maximum weekly wage base of $1,441.72. Wages earned above this weekly base amount are not subject to the employee contribution.

To illustrate, an employee earning $1,000 per week would contribute 0.5% of $1,000, equaling $5.00. If an employee earns $1,500 per week, their contribution would be capped at the maximum weekly deduction of $7.21, as their wages exceed the $1,441.72 weekly wage base. Employers are responsible for deducting these amounts from employee paychecks.

Overview of TDI Benefits

Hawaii’s TDI program funds temporary financial assistance for eligible individuals, providing wage replacement benefits for employees unable to work due to a non-work-related illness or injury.

For 2025, eligible individuals may receive 58% of their average weekly wages as a benefit. The maximum weekly benefit amount is capped at $837. Benefits generally begin after a seven-consecutive-day waiting period, meaning payments start on the eighth day of disability. These benefits can be paid for a maximum duration of 26 weeks within a benefit year.