Hawaii Minimum Wage Laws: What Employers Must Know

Hawaii’s minimum wage laws have seen important updates in recent years, directly affecting both employers and employees. Knowing the current wage requirements is key for businesses to stay compliant with state regulations and avoid fines. For companies operating in Hawaii, staying on top of these changes also impacts payroll planning and overall budgeting.

The state has gradually increased its minimum wage in response to the high cost of living and legislative efforts to support fair pay for workers. These adjustments aim to balance fair compensation with the unique economic challenges faced by the islands. For business owners, being aware of the exact rates and when they take effect is critical for ensuring accurate payroll and avoiding errors.

Let's take a closer look at Hawaii's current minimum wage, who it applies to, and what employers need to know to stay compliant.

Current Minimum Wage in Hawaii

• Starting January 1, 2024, the minimum wage in Hawaii is $14 per hour.

• This rate applies to all employers across the state, regardless of industry or company size.

• Employers must ensure that tipped employees' combined tips and wages total at least $14 per hour.

The $14 per hour rate marks an increase from the previous $12 per hour minimum, which took effect on October 1, 2022. Hawaii law strictly prohibits paying workers less than this amount, including part-time and temporary staff. Additionally, any employee who works more than 40 hours in a week must receive overtime pay.

For tipped employees, businesses can apply a $1.25 tip credit as long as the total of tips and hourly wages equals or exceeds $14 per hour. This policy provides some flexibility for employers in industries like hospitality, while still ensuring employees receive the legally required compensation. Companies that fail to follow these rules face fines, back pay obligations, and potential legal issues.

Scheduled Minimum Wage Increases

Hawaii's minimum wage will continue to rise steadily in the coming years, providing workers with higher guaranteed earnings. The scheduled increases aim to address the state's high cost of living and ensure fair pay for employees across all sectors. Employers must prepare for these changes to maintain compliance and adjust payroll budgets accordingly.

Key upcoming minimum wage increases in Hawaii include:
- $16 per hour: Effective January 1, 2026, the hourly minimum wage will increase from $14 to $16.
- $18 per hour: Beginning January 1, 2028, the hourly rate will rise again to $18.

These incremental hikes are designed to help workers achieve a living wage, particularly in a state where housing, food, and transportation costs remain among the highest in the nation. For employers, this phased approach allows time to implement necessary payroll adjustments and evaluate labor costs.

Businesses should proactively plan for these increases by reviewing budgets, evaluating staffing needs, and updating payroll systems. It's also essential to communicate these changes with employees to ensure transparency and avoid potential misunderstandings during implementation.

Employers who utilize tip credits should note that the tip credit amount will also adjust with these increases. By 2028, tipped employees must still earn a total of at least $18 per hour when wages and tips are combined.

Staying informed and preparing for these scheduled changes is critical for managing payroll accuracy and fostering a positive workplace environment. Hawaii's minimum wage laws are evolving, and businesses must adapt to remain compliant and support their workforce effectively.

Tip Credit Provisions

Employers in Hawaii are allowed to apply a tip credit, which permits paying tipped employees a lower base wage under specific conditions. This provision is particularly relevant for industries like hospitality and food service, where tipping is common.

• As of January 1, 2024: Employers may pay tipped employees $1.25 below the standard minimum wage, which now stands at $14 per hour. This means tipped employees can receive a base wage of $12.75 per hour if the tip credit is applied.

• Future increase: Starting January 1, 2028, the tip credit will rise to $1.50 below the applicable minimum wage. At that point, employers could pay tipped workers $16.50 per hour, provided specific requirements are met.

To legally apply the tip credit, an employee's total compensation (wages plus tips) must meet or exceed $7.00 above the minimum wage. For example, in 2024, an employee must earn at least $21.00 per hour when combining wages and tips to justify the use of the $1.25 tip credit. Employers are responsible for calculating and ensuring this threshold is met.

Employers must also maintain accurate records of tips earned and verify that the total compensation aligns with the law. Failure to meet these requirements could result in legal and financial penalties. Proper documentation and adherence to the rules safeguard both employers and employees in tip-based roles.

Understanding the tip credit provisions is essential for businesses that rely on tipping as a significant part of employee compensation.

Overtime Requirements

Employers in Hawaii must compensate employees for overtime hours worked beyond 40 in a single workweek. Overtime pay is calculated at 1.5 times the employee's regular hourly rate. This rule applies to all eligible employees in the state, regardless of industry or business size.

For employees working on public construction projects governed by Chapter 104, HRS, additional overtime rules apply. Employers must pay overtime for any hours worked beyond eight in a single day. Overtime is also mandatory for all hours worked on Saturdays, Sundays, and state-recognized holidays. These specific rules ensure fair compensation for workers engaged in public works projects, which often require extended or irregular schedules.

To comply with Hawaii's overtime requirements, employers should:
- Track Hours Accurately: Ensure all hours worked, including overtime, are recorded precisely.
- Calculate Overtime Correctly: Verify that overtime pay is calculated at 1.5 times the employee's standard hourly rate.
- Follow Public Project Rules: For employees on state or county public construction projects, apply daily and weekend/holiday overtime rates as required.

Proper record-keeping and adherence to overtime regulations are critical. Failure to pay overtime accurately can lead to penalties, back pay obligations, and potential legal disputes. Employers must remain diligent in applying these rules to avoid compliance issues.

Minimum Wage Exemptions

Hawaii's minimum wage law applies broadly and does not include exemptions based on the size of a business or the industry in which it operates. All employers, regardless of these factors, are required to pay at least the state minimum wage to their employees.

However, certain workers may be exempt from minimum wage requirements under federal guidelines. These exemptions are specific to particular roles or employment arrangements and are not determined by Hawaii's state regulations.

• Agricultural workers: Some agricultural employees are exempt under federal rules, particularly if they work on small farms that do not meet certain thresholds for hiring or annual revenue.

• Student employees: Full-time students working in certain jobs may be paid below the minimum wage if their employer has obtained the appropriate certificate from the Department of Labor. This often applies to work-study positions or jobs within educational institutions.

Employers must carefully review federal labor laws to determine if an exemption applies to a specific worker. Even when exemptions are allowed, there are often strict conditions, such as limits on weekly work hours or requirements for special documentation.

It's essential for employers to document any exemptions thoroughly and ensure compliance with both federal and state wage laws. Misclassifying employees or failing to meet the conditions for an exemption could lead to penalties or back pay obligations.

Comparison to Other States

Hawaii's minimum wage stands out as one of the highest in the United States, reflecting the state's efforts to address its significant cost of living. The scheduled increases ensure that Hawaii remains a leader in minimum wage standards nationwide.

• 2024 Minimum Wage: At $14 per hour, Hawaii already surpasses the federal minimum wage and the rates in most states, including those without local minimum wage laws.

• 2026 Minimum Wage: Hawaii's rate will rise to $16 per hour, putting it well above the minimum wage in states like Florida and Arizona, which are projected to remain below that threshold.

• 2028 Minimum Wage: At $18 per hour, Hawaii's scheduled rate is expected to be the highest state-mandated minimum wage in the nation.

California and Washington, often known for leading minimum wage increases, currently adjust their rates annually based on cost-of-living formulas. While their future rates may rise, Hawaii's $18 per hour minimum wage is projected to outpace them by 2028. This positions Hawaii as a benchmark for minimum wage standards across the country.

For employers operating in multiple states, this increase highlights the importance of state-specific compliance. The higher minimum wage in Hawaii underscores the need to carefully manage payroll across jurisdictions. Employers should prepare for both wage adjustments and the potential ripple effect on overtime calculations, benefits, and salary bands.

Compliance and Enforcement

The Hawaii Department of Labor and Industrial Relations (DLIR) oversees the enforcement of minimum wage laws across the state. DLIR ensures that employers comply with the established wage rates and that employees receive the compensation they are legally entitled to.

Employers who violate minimum wage laws face serious consequences. Penalties include fines and mandatory payment of back wages to employees who were underpaid. DLIR also investigates complaints from workers and conducts audits to identify non-compliance. Repeat violations or deliberate underpayment can result in increased penalties or legal action.

To stay compliant, businesses must take proactive steps to align their pay practices with the law:
- Conduct Regular Payroll Audits: Review employee pay rates and hours worked to ensure accurate calculations of wages and overtime.
- Update Payroll Systems: Adjust pay rates in payroll software immediately when minimum wage increases take effect.
- Train HR and Payroll Teams: Educate staff about Hawaii's wage laws, including tip credits and overtime requirements, to avoid errors.
- Maintain Accurate Records: Keep detailed documentation of hours worked, wages paid, and any tip credits applied. DLIR requires employers to retain payroll records for at least six years.

Employers should also monitor legislative updates to Hawaii's minimum wage laws. Changes can occur at both state and federal levels, and staying informed helps prevent costly compliance mistakes. Regularly checking DLIR announcements and guidance ensures that your business remains up to date.

Taking compliance seriously not only avoids penalties but also fosters trust with employees. Ensuring fair pay demonstrates a commitment to meeting legal obligations and supporting the workforce.

Navigating Hawaii's evolving minimum wage landscape can be challenging, but proactive planning and attention to detail can help your business thrive while maintaining compliance. We're here to support you in managing these changes effectively, so you can focus on growing your company and taking care of your employees. Book a demo with us today to learn how our powerful HR solutions can simplify your payroll processes and keep you ahead of the curve.