Employer of Record for Texas

In Texas, workers’ rights are protected by numerous employment and labor laws, at both the state and federal level.  As a result, employees enjoy protection from discrimination based on age, religion, sexual orientation, gender, and race.Here are the key things you need to know about hiring in Texas.

Do I need an EIN or Payroll Tax Number to Employ in Texas

Employers must obtain an Employer Identification Number (EIN) from the IRS for federal tax purposes and register with the Texas Workforce Commission for state unemployment tax. Employees do not need an EIN but must have a Social Security Number or an Individual Taxpayer Identification Number for tax reporting.

Working Hours in Texas

The standard workweek in Texas is 40 working hours, with overtime pay required for hours worked beyond 40 in a week, paid at 1.5 times the regular rate. There are no specific restrictions on daily hours for adult employees, but there are stricter limits and time-of-day restrictions for minors.

What is considered full-time employment in Texas?

Texas does not legally define “full-time” employment. However, under the Affordable Care Act (ACA), employees working 30 hours per week or more are considered full-time for health insurance purposes.

In practice, many Texas employers use 40 hours per week as the threshold for benefits. To avoid confusion, employers should define “full-time” clearly in contracts and employee handbooks.

Probation Period in Texas

There is no state requirement for probationary periods in Texas. Many employers use a 60–90 day probation period to evaluate new hires before granting full benefits. Probation terms should be documented in employment contracts to ensure transparency. However, probation does not override Texas’ at-will employment standard.

Minimum wage in Texas

As of January 1, 2025, Texas’ minimum wage is:

• $7.25 per hour, the same as the federal minimum wage.
• $2.13 per hour for tipped employees, provided tips bring total pay to at least $7.25.
• $4.25 per hour for youth employees under 20 during their first 90 days, under the federal training wage.

Additionally:

• Some cities mandate higher contractor wages for public contracts. For example,Austin requires ~$21.63 per hour, Dallas requires ~$22.05, and San Antonio mandates ~$18 for long-tenure city employees.

Read our Texas average salary guide for more.

Texas Anti-Discrimination Laws

Employees in Texas may not be discriminated against based on:

• Race, color, or national origin
• Religion
• Sex, including pregnancy, sexual orientation, and gender identity
• Age (40 and older)
• Disability (mental or physical)
• Genetic information

These protections are enforced under both federal law and the Texas Labor Code. They apply to employers with 15 or more employees and are monitored by the Texas Workforce Commission Civil Rights Division.

Overtime in Texas

Texas follows the federal FLSA for overtime pay. Non-exempt employees must receive 1.5 times their regular rate for hours worked beyond 40 in a workweek. Texas does not require overtime for working more than 8 hours in a day.

Employees are exempt from overtime if they:

• Earn more than $43,888 per year.
• Perform duties classified as executive, administrative, or professional.
• Work in licensed professions such as law, accounting, engineering, or architecture.

Payroll taxes in Texas are simpler than in many states because there is no state income tax. However, global employers must still manage federal tax withholdings and state unemployment contributions.

Payroll Cycle in Texas

Employers must pay employees at least twice per month unless they are exempt. Most companies adopt biweekly or semi-monthly pay schedules to align with industry practices.

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Types of Payroll Taxes in Texas

Texas employers must comply with federal payroll tax requirements and contribute to state unemployment insurance. Since Texas has no state income tax, payroll is simpler than in many states, but accuracy is still critical.

Here’s a quick look at the key payroll taxes you’ll need to manage:

Texas Unemployment Insurance (SUTA)

• Employers contribute on the first $9,000 of employee wages in 2025.
• Tax rates range from 0.23% to 6.23%, depending on the employer’s experience rating.
• Contributions fund unemployment benefits for eligible Texas workers.

Federal Income Tax

• Withheld from employee wages based on IRS tax tables and the employee’s Form W-4.
• Amounts vary by income, marital status, and withholding allowances.

Social Security Tax

• Withheld at 6.2% of wages up to $176,100 in 2025.
• Employers match this contribution with an equal 6.2%.

Medicare Tax

• Withheld at 1.45% of all wages, with no cap.
• An additional 0.9% surtax applies to wages over $200,000.

Federal Unemployment Tax (FUTA)

• Employers pay 0.6% on the first $7,000 of wages, after credits for state contributions.
• Paid annually via IRS Form 940.

How to Comply with Texas Payroll Taxes

Complying with Texas payroll taxes is essential for businesses operating in the state, as failure to do so can result in significant penalties. Employers are responsible for accurately calculating, withholding, and remitting several payroll taxes.

Here’s a breakdown of the key steps and requirements for payroll tax compliance in Texas:

• Withhold Federal Income Tax, Social Security, And Medicare: Employers must calculate the correct withholdings for each employee based on their Form W-4 and IRS tax tables. Social Security is withheld at 6.2% of wages up to $176,100, while Medicare is withheld at 1.45% of all wages, plus an additional 0.9% surtax for employees earning above $200,000.
• Pay Texas Unemployment Insurance (SUTA): Employers contribute at a rate between 0.23% and 6.23% on the first $9,000 of each employee’s wages. New employers are assigned a standard entry rate until they establish an experience rating.
• File Quarterly and Annual Payroll Reports: At the state level, employers must submit quarterly wage reports (Form C-3) to the Texas Workforce Commission. At the federal level, IRS Form 941 is filed quarterly to report federal withholdings, while FUTA contributions are reported annually on Form 940.
• Deposit Payroll Taxes On Time: Employers must remit withheld federal taxes to the IRS and state unemployment contributions to the Texas Workforce Commission according to prescribed deposit schedules, which vary depending on the size of payroll.
• Maintain Compliant Payroll Records: Employers must retain payroll records, including hours worked, wages paid, withholdings, and contributions, for at least four years. This ensures readiness in the event of an IRS or TWC audit.
• Stay Updated On Regulatory Changes: Federal wage bases, Medicare surtax thresholds, and Texas unemployment tax rates are adjusted periodically. Employers should review IRS and TWC updates annually to ensure compliance.

Tax Due Dates in Texas

Employers must meet the following deadlines:

• Quarterly Reports: April 30, July 31, October 31, January 31.
• Annual FUTA Return (Form 940): January 31.
• Federal Deposits: Monthly or semi-weekly, depending on employer size.

Employment taxes and statutory fees affect both your payroll and your employees’ paychecks in Texas . Understanding the tax obligations for both employers and employees is crucial when operating in Texas's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Texas. Note that employees may be liable for additional local taxes in certain cities and jurisdictions.

Employer Tax Contributions

Employee Payroll Tax Contributions

Texas does not impose a state income tax on employees, so the primary contributions are federal payroll taxes. These deductions fund Social Security, Medicare, and federal revenue, ensuring compliance with federal law and supporting employee benefits.

Tax Due Dates in Texas

While Texas doesn't have a state income tax, residents are still subject to federal income tax obligations. The federal deadline for filing is typically on April 15. If April 15 falls on a weekend or federal holiday, the deadline is extended to the next business day.

Pension in Texas

Texas does not require private-sector employers to offer pensions. Many businesses voluntarily provide 401(k) or retirement plans to attract and retain employees.

Check out our in-depth guide to payroll taxes in Texas.

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It should be noted that in the US, typical benefits such as vacation time, maternity leave, health insurance, etc. aren't usually legally required. However, it’s standard practice to offer them. As part of our global employment services, Playroll can create a globally compliant and competitive compensation package that can help you attract and retain top talent in the US.

Employee Benefits For Texas

Competitive benefits are essential for attracting and retaining top talent in Texas. Offering the right package helps employees feel valued and motivated. Our benefits experts understand the local labor market's trends, requirements, and expectations, ensuring your employees feel valued and supported. Common benefits in our Texas packages include:

• Pension or 401(K)
• Vision Insurance
• Life Insurance
• Medical Insurance
• Dental Insurance
• Health Savings Plan (HSA)
• Flexible Spending Account (FSA)

Are Employers Required To Provide Health Insurance in Texas?

Employers are not legally required by Texas law to provide health insurance. However, under the Affordable Care Act, employers with 50 or more full-time equivalent employees must offer health insurance or face penalties.

Do Part-Time Employees Get Benefits in Texas?

There is no law requiring benefits for part-time employees. Eligibility for benefits, such as health insurance or paid time off, depends on the employer’s policies. Employers can choose to extend benefits to part-time employees but are not obligated to do so.

Are Employers Required To Offer 401k in Texas?

Employers are not required to offer a 401(k) or other retirement plans in Texas. The decision to provide such benefits is at the employer’s discretion. If offered, they must comply with federal regulations under the Employee Retirement Income Security Act (ERISA).

Is Vacation Leave Mandatory in Texas?

In Texas, private-sector employers are not legally required to provide vacation leave, whether paid or unpaid. The decision to offer vacation benefits is at the employer's discretion. If an employer chooses to provide such benefits, they must comply with their established policies or employment contracts regarding accrual, usage, and payment of vacation leave.

Mandatory Leave Policies in Texas

Below are the mandatory leave entitlements for full-time employees in Texas.

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Paid Time Off in Texas

Texas does not require employers to provide paid time off. Employers may offer PTO based on their policies, and if they do, they must follow the terms established in those policies.

Maternity Leave In Texas

The leave is a federal requirement. Under the Family and Medical Leave Act (FMLA), employers with 50 or more employees must provide unpaid, job-protected leave for eligible employees. This leave can be taken for:

• The birth or adoption of a child
• Serious health conditions of the employee or a close family member
• Certain military family needs

Paternity Leave In Texas

In Texas, there is no state-mandated paternity leave. Eligible employees may qualify for unpaid, job-protected leave under the federal Family and Medical Leave Act (FMLA) to care for a newborn, adopted child, or newly placed foster child. If FMLA doesn’t apply, any paternity leave would depend on the employer’s specific policies, as Texan law does not provide additional leave requirements for paternity.

Sick Leave In Texas

Texas does not mandate paid or unpaid sick leave. Employers may choose to provide sick leave, but it is not required by law.

Military Leave in Texas

Under the federal Uniformed Services Employment and Reemployment Rights Act (USERRA), employers must grant unpaid leave and protect the job status of employees serving in the military. USERRA ensures reemployment rights upon completion of military service.

Jury Duty in Texas

Employers must provide unpaid leave for employees called to jury duty. Employers cannot penalise employees for taking leave to fulfil jury service obligations.

Voting Leave in Texas

Texas law requires employers to provide paid time off for voting if polls are not open for at least two consecutive hours outside of the employee's work hours.

When it comes to terminating employment in Texas, understanding the legal obligations regarding severance pay and contributions is essential. Below is a detailed overview of the key considerations for both employers and employees.

Termination Process in Texas

Texas follows an "at-will" employment policy, meaning employers can terminate employees for any lawful reason, at any time, without prior notice. However, terminations cannot be based on discrimination (race, colour, sex, religion, national origin, age, disability) or retaliation (for reporting legal violations or participating in investigations).

Notice Period in Texas

There is no requirement for a notice period before termination. Employers and employees can end the employment relationship immediately unless specified otherwise in a contract.

Severance in Texas

Texas law does not require employers to provide severance pay. If offered, severance pay is based on company policy or employment contracts.