Easily manage employment in Texas

Payroll management in Texas

Texas has a thriving economy supported by industries such as energy, technology, healthcare, and manufacturing. With state-specific payroll regulations, including no state minimum wage, no personal income tax, and right-to-work laws, employers in Texas must ensure compliance with both state and federal payroll laws. Understanding these regulations is crucial for smooth payroll operations and compliance.

Payroll breakdown in Texas

Employers in Texas must adhere to both federal and state payroll regulations regarding wages, taxes, and benefits. Below is an overview of key payroll components:

Minimum wage and overtime

• Minimum wage: Texas does not have a state minimum wage, so employers must comply with the federal minimum wage of $7.25 per hour.
• Overtime rules:
• Texas follows federal overtime laws, requiring employers to pay 1.5 times an employee’s regular rate for hours worked beyond 40 hours in a workweek.
• Some exemptions apply based on job classification and industry.

State income tax

• Texas does not impose a state income tax on wages, meaning employers are only responsible for federal income tax withholding.
• However, businesses may be subject to the Texas Franchise Tax, depending on revenue and business structure.

Unemployment insurance (UI) tax

• Employers must contribute to Texas’ Unemployment Insurance (UI) program, managed by the Texas Workforce Commission (TWC).
• The UI wage base in Texas is $9,000.
• UI tax rates vary based on an employer’s experience rating and range from 0.23% to 6.23%.
• New employers typically pay a 2.7% UI tax rate.

Workers’ compensation

• Texas is unique in that it does not require most private employers to carry workers’ compensation insurance.
• However, businesses that choose not to provide coverage must notify employees and file a notice with the Texas Department of Insurance (TDI).
• Employers who do provide coverage can obtain it through private insurance carriers or self-insurance programs.

Payroll tax filing and payment deadlines

• Employers must register for a Texas Employer Tax Account with the Texas Workforce Commission (TWC).
• UI tax reports must be submitted quarterly to the Texas Workforce Commission.
• Payroll tax payments can be made electronically through the Texas Unemployment Tax System (TAX).

Quick facts: Important considerations for employers

• State minimum wage compliance: Texas follows the federal minimum wage of $7.25 per hour as there is no state-specific requirement.
• Final paycheck rules:
• If an employee is terminated, employers must provide the final paycheck within six calendar days.
• If an employee resigns, the final paycheck must be provided by the next scheduled payday.
• New hire reporting: Employers must report new hires to the Texas New Hire Reporting Program within 20 days.
• Paid sick leave: Texas does not require employers to provide paid sick leave, but some cities (such as Austin, Dallas, and San Antonio) have local ordinances requiring it for certain employers.
• Payroll recordkeeping: Employers must maintain payroll records for at least three years to comply with state and federal laws.
• Right-to-work state: Texas is a right-to-work state, meaning employees cannot be required to join a union as a condition of employment.

Run payroll in Texas with Remote

Managing payroll in Texas requires careful attention to state-specific regulations, including minimum wage compliance, UI tax requirements, and workers’ compensation laws. Employers must stay informed about tax rates, wage laws, and reporting deadlines to ensure smooth payroll processing and avoid penalties.

The good news is, you can pay anyone, anywhere — from your team in the office to your team abroad, all with Remote Payroll. To see just how easy global payroll can be, book a demo with Remote today.