Hawaii Labor Laws: Termination Pay & Final Paychecks

Here’s what businesses need to know about Hawaii's final pay laws before terminating a worker’s employment.

When you or your employee decide to part ways, following Hawaii's final pay laws when issuing their final paycheck is essential. Many local businesses may not realize that the regulations surrounding final paychecks after termination are more intricate than they initially appear.  

Not only do the laws surrounding final paychecks for terminated employees vary by state, but in Hawaii, the time frame to give employees their last paycheck varies based on whether the reason for separation is voluntary (e.g., the employee resigns) or involuntary (e.g., the employee is fired or laid off), and if voluntary, how much notice they provide. In some cases of Hawaii's final paycheck law, Hawaii employers must give final paychecks on a worker's last day. But in other cases, it's okay to provide earned wages on the next regularly scheduled payday. 

Not sure what to do? Fear not. In this blog, we're breaking down final pay rules and making it simple for employers in Hawaii.

When separation is voluntary…

Voluntary separation, sometimes called voluntary termination, is initiated by an employee. Usually, it looks like an employee resigning or quitting in favor of a new job opportunity. Or taking a break from work entirely. Whatever the reason, here's how to handle final paychecks when separation is employee-driven.

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  • When the employee gives more than 1 pay period notice…According to Hawaii law, if an employee quits or resigns and provides at least one pay period's notice, local employers must give them their final paycheck on their last day of work.
• • When the employee gives less than 1 pay period notice…However, suppose an employee quits or resigns and doesn't give at least one pay period of notice. In that case, Hawaii's final pay laws stipulate that local employers must provide their final paycheck no later than the next regular payday. This requires a business to have effective administrative policies that will enable them to quickly take action and process the payment on short notice.
• • When the employer decides to release the employee prior to their notice date…Suppose an employee gives advance notice that they are resigning but you do not want them working during this notice period. In this case, you can let the employee know that their presence is no longer required and pay regular wages for the entire notice period the employee agreed to work. If you decide to terminate the employee before their notice date, for example, because keeping the employee in the workplace would harm the company, you may terminate the employee immediately. If terminating the employee, the separation reason changes from voluntary to involuntary, and the employee must be paid their final paycheck according to involuntary separation laws. As you can see, according to Hawaii's labor laws, termination pay circumstances of the separation require careful analysis to determine the steps an employer must take in the days after the notice.

When separation is involuntary…

Involuntary separation, sometimes called involuntary termination, is driven by the employer. For example, it can include firing an employee who is a poor performer or laying off workers due to downsizing the business. Whatever the reason, when separation is involuntary, local businesses must pay employees all earned wages in full on their effective date of termination. If conditions prevent you from paying the employee on their effective date of termination, final paychecks must be given no later than the next working day.  

Often, firing an employee is planned. Suppose an employee has been written up multiple times and isn't improving. As their manager, you notified your internal HR department (or payroll service provider) about your intent to fire this worker on a specific date. You've asked them to prepare the worker's final paycheck too. Sometimes, however, firing an employee is a spur-of-the-moment decision. They've done something so drastic that you must fire them immediately. If this is the case, an employer must promptly comply with Hawaii's final pay laws and provide the terminated employee with their last paycheck by the next business day.

When you have employees outside of Hawaii…

We've described final pay rules specific to Hawaii in this article. However, final pay laws vary widely from state to state. Additionally, while Hawaii has no law requiring employers to pay employees for unused PTO, some states do – including California and others! If you have employees who live and work outside of Hawaii, it's essential to keep this in mind, as you'll have to prepare final paychecks according to each state's specific laws.

For this reason, getting guidance from an experienced HR services provider can be an invaluable resource to help navigate the complexities of the various state final pay laws concerning when and how employees should receive their last paycheck after termination.

Make sure involuntary separation is lawful

Involuntary separation can quickly become complicated – it can be tricky to navigate the emotional, operational, and even legal factors. One thing to keep in mind when terminating employment is to make sure you're doing so according to Hawaii's termination laws. In the U.S., employees cannot be discriminated against based on factors. These factors include race, color, religion or creed, national origin or ancestry, sex (including gender, pregnancy, sexual orientation, and gender identity), age, physical or mental disability, veteran status, genetic information, and citizenship status. In Hawaii, protected classes include marital status, arrest/court records, and HIV infection. While someone who falls into these protected classes may be terminated, employers must ensure these factors aren't the reason.