HONOLULU Employers in Hawaii are being warned to prepare for significantly higher unemployment insurance tax rates next year as the state’s benefit fund for the unemployed has rapidly depleted on growing joblessness.
Hawaii officials indicated that the problem is likely to occur in other states where unemployment is high and state benefit funds run out. Some states, like Maryland, already had taken large increases to its unemployment insurance tax rates this year and may take more bumps next year.
Starting in April in Hawaii, the annual taxes paid by employers will increase from the current rate of $90 per employee to as much as $2,040 per worker, depending on the company’s unemployment experience rating, said Darwin Ching, director of the state’s Department of Labor and Industrial Relations.
New employers will pay about $1,500 per employee, he noted, and most employers will be paying a rate of more than $1,000 per worker.
Richard Moon, vice president of TS Restaurants based in Lahaina on Maui, said it’s not clear yet how his company, with roughly 1,100 employees in Hawaii, will be impacted.
But, he said, “We don’t like it.”
Over the past two years, he said, the multi-concept operator of restaurants such as Duke’s Kauai and Hula Grill Waikiki has not seen any layoffs and turnover has been low, so the company is likely to experience the low end of the expected increase.
“But if something costs you $90 this year and something like $1,090 next year, you’re going to have to look at how to minimize that effect,” he said.
Labor officials said Hawaii is a state with generous unemployment benefits, where the jobless receive a maximum of $545 per week for 26 weeks, and an additional 33 weeks of federal-approved benefits.
In 2007, when unemployment in Hawaii was below 3.2 percent, the state’s unemployment insurance trust fund reached an all-time high of $552 million, with employers paying an average of $280 per employee. Later that year, a new law lowered that rate to $90 per employee for 2008 and 2009.
The law, however, had a provision that tax rates would increase automatically if the unemployment trust fund balance dipped below what it deemed an adequate level.
The recession has pushed Hawaii’s unemployment rate to 7.2 percent in August, a rate still lower than the national rate at that time of 9.8 percent. Labor department officials said the state has paid out an average of $31.7 million per month since January, and the trust fund will likely run out by the last quarter of 2010.