How to Hire and Pay Employees in Texas: Employer Factsheet (2026)

Texas is one of the most employer-friendly states in the US. No state income tax. No paid sick leave mandate. No local payroll taxes in any city. The only state-level employer obligation is unemployment insurance, paid to the Texas Workforce Commission quarterly on the first $9,000 of each employee's wages. For global companies and Taiwanese businesses expanding to the US, Texas is often the simplest payroll environment to start with — but simple does not mean no compliance. This factsheet covers every statutory obligation a global employer needs before hiring their first Texas employee, in the same structure as Slasify's internal state compliance factsheets.

Key Takeaways
No state income tax	Texas has no personal state income tax. No employer withholding obligation, no state W-2 filing requirement, no annual reconciliation with a state revenue authority. The Texas Regulatory Consistency Act (HB 2127, 2023) also permanently preempts all local paid sick leave and wage ordinances.
SUI: 2.70% on first $9,000	New employers pay 2.70% — or the industry average, whichever is higher — on a $9,000 annual wage base. Maximum cost: $243 per employee per year. Experience-rated employers: 0.32%–6.32% for 2026. Source: TWC 2026 Tax Rates.
FICA 2026 wage base: $184,500	The Social Security wage base increased from $176,100 (2025) to $184,500 for 2026. Employer FICA share: 6.2% OASDI + 1.45% Medicare = 7.65%. FUTA effective rate: 0.6% on the first $7,000. Form 941 due quarterly; W-2 due 31 January.
At-will; final pay within 6 days	Texas is at-will — no notice period or severance required by law. On employer-initiated termination, final pay is due within 6 calendar days. On resignation, by the next regular payday. Failure to comply can result in a TWC wage claim.
Hire without entity via EOR	A foreign company cannot run compliant US payroll without a registered US employer and EIN. A Slasify Employer of Record onboards your first Texas hire in 3–7 days — no entity required. Explore Slasify EOR →

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1. Overview

1.1 Capital

Austin

1.2 Currency

United States Dollar (USD)

1.3 Time Zone

	Standard Time	Daylight Saving Time	UTC Offset
Central Time (CT) — most of Texas	Central Standard Time (CST)	Central Daylight Time (CDT)	−6 / −5
Mountain Time (MT) — El Paso & Hudspeth County	Mountain Standard Time (MST)	Mountain Daylight Time (MDT)	−7 / −6

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2. Country Highlights

2.1 Termination of Employment

Notice Period

There are no federal or state regulations requiring a notice period in the event of termination.

Severance

There are no federal or state obligations to provide severance pay in the event of termination.

Conditions for Termination

Texas is an at-will employment state, meaning that termination can be carried out for any reason and at any time, provided that it is non-discriminatory and does not violate any existing employment contracts. Mass redundancies are subject to the applicable procedures under the federal Worker Adjustment and Retraining Notification (WARN) Act.

For a comprehensive look at termination, refer to Section 5.

2.2 Payroll Matters

Accepted Currency	USD
Payroll Cycle	Bi-weekly or semi-monthly (standard practice; Texas has no state law mandating pay frequency for private-sector employees)
Minimum Wage	USD 7.25 per hour (federal rate, adopted by Texas Labor Code § 62.051; unchanged since July 24, 2009)
Statutory Bonuses	—

For more information on payroll matters, refer to Section 3.

2.3 Working Hours and Leave Entitlements

2.3.1 Working Hours

Maximum Working Hours	40 hours per week (FLSA threshold for overtime obligation)
Maximum Overtime Hours	No statutory limit on overtime hours in Texas
Overtime Pay	150% of the employee's regular wage for all hours beyond 40 per workweek

For more information on work time rules, refer to Section 6.1.

2.3.2 Leave Entitlements

Public Holidays	There are 11 federal public holidays in the US for 2026. Private-sector employers in Texas are not obligated to provide paid time off on any holiday.
Annual Leave	There are no state or federal obligations to provide annual leave to private-sector employees.
Sick Leave	There are no federal or state obligations to provide paid sick leave. Texas cities cannot create local paid sick leave mandates (HB 2127, 2023). Unpaid leave may be covered under the FMLA for qualifying employers (50+ employees).
Maternity Leave	There are no federal or state obligations to provide paid maternity leave. Unpaid leave in the event of childbirth or adoption may be covered under the FMLA.
Paternity Leave	There are no federal or state obligations to provide paid paternity leave. Unpaid leave may be covered under the FMLA.
Parental Leave	There are no federal or state obligations to provide paid parental leave. Unpaid leave may be covered under the FMLA.
Other Leave	Refer to Section 6.2.7

For more information on leave entitlements, refer to Section 6.2.

2.4 Personal Income Tax (on Employees)

Individuals in Texas are subject to federal income tax only. Texas has no state personal income tax.

2.4.1 Federal Personal Income Tax

Federal income taxes vary depending on the taxpayer's filing status. Rates below are per IRS Revenue Procedure 2025-32 (tax year 2026).

Single filers

Taxable Income (USD)	Progressive Tax Rate (%)
Up to 11,925	10
11,926 – 48,475	12
48,476 – 103,350	22
103,351 – 197,300	24
197,301 – 250,525	32
250,526 – 626,350	35
Over 626,350	37

Married individuals filing separately

Taxable Income (USD)	Progressive Tax Rate (%)
Up to 11,925	10
11,926 – 48,475	12
48,476 – 103,350	22
103,351 – 197,300	24
197,301 – 250,525	32
250,526 – 375,800	35
Over 375,800	37

Married couples filing jointly

Taxable Income (USD)	Progressive Tax Rate (%)
Up to 23,850	10
23,851 – 96,950	12
96,951 – 206,700	22
206,701 – 394,600	24
394,601 – 501,050	32
501,051 – 751,600	35
Over 751,600	37

Heads of households

Taxable Income (USD)	Progressive Tax Rate (%)
Up to 17,000	10
17,001 – 64,850	12
64,851 – 103,350	22
103,351 – 197,300	24
197,301 – 250,500	32
250,501 – 626,350	35
Over 626,350	37

Source: IRS Revenue Procedure 2025-32 — 2026 Federal Tax Rate Tables.

2.4.2 State Income Tax

Texas has no state personal income tax. Employers have no state income tax withholding obligation, no state withholding registration, and no state W-2 filing requirement.

2.4.3 Local Tax

Texas does not permit cities or counties to levy a local income or payroll tax on employees or employers. The Texas Regulatory Consistency Act (HB 2127, 2023) preempts all such local employment mandates. More information: Texas Comptroller.

2.5 Statutory Social Contribution

At the federal level, both employers and employees are required to make FICA contributions covering Old-Age, Survivors, and Disability Insurance (OASDI) and Medicare's Hospital Insurance (HI). Employers are further liable to pay the Federal Unemployment Tax (FUTA).

Contribution	Annual contribution base limit (USD) — 2026
OASDI (Social Security)	$184,500 (up from $176,100 in 2025)
Medicare's HI	No limit
FUTA	$7,000

2.5.1 Employer Payroll Contribution

Federal

	Contribution Rate	Note
OASDI	6.2%	On wages up to $184,500. Employer matches employee contribution dollar-for-dollar.
Medicare's HI	1.45%	No wage ceiling. Employer does not match the additional 0.9% surtax on employee earnings above $200K.
FUTA	6.0% gross → 0.6% effective	Employers receive a 5.4% credit for timely Texas SUI payments, reducing the effective FUTA rate to 0.6% on the first $7,000. Max cost: $42/employee/year.

Texas State

	Contribution rate	Wage base	Note
State Unemployment Tax (SUI)	2.70% (new employer)	$9,000	Or industry average rate, whichever is higher. Experience-rated range for 2026: 0.32%–6.32%. Max annual cost at new-employer rate: $243/employee. Source: TWC, January 2026.
Workers' Compensation Insurance	Varies by insurer	N/A	Not mandatory — Texas is the only US state where private-sector workers' comp is optional. Non-subscribing employers lose statutory liability protections. Most employers elect coverage.

2.5.2 Employee Payroll Contribution

Federal

	Contribution Rate	Note
OASDI	6.2%	On wages up to $184,500 for 2026.
Medicare's HI	1.45%	No ceiling. Additional 0.9% surtax applies on wages above the threshold below.

Employees earning above the following thresholds are also liable for an additional Medicare tax of 0.9% on wages in excess of the threshold:

Filing status	Annual wage threshold (USD)
Married, filing jointly	250,000
Married, filing separately	125,000
Others (single, head of household)	200,000

Texas State

N/A — employees have no state-level payroll contribution obligation in Texas.

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3. Payroll

3.1 Payment of Wages

Texas has no state laws regulating pay frequency or pay periods for private-sector employees, though it is standard practice to pay employees bi-weekly or semi-monthly. Under the Texas Minimum Wage Act, employers must provide a written earnings statement each pay period containing sufficient detail for the employee to verify correct payment.

3.2 Minimum Wage

The minimum wage in Texas is USD 7.25 per hour for 2026, matching the federal floor under Texas Labor Code § 62.051. Texas adopts the federal rate by reference and does not set a separate state minimum. The rate has been unchanged since July 24, 2009.

• Tipped minimum wage: USD 2.13/hour cash wage, provided tips bring total hourly compensation to at least USD 7.25. Employer must make up any shortfall.
• Youth wage: Federal youth wage of USD 4.25/hour applies for the first 90 calendar days for workers under 20.
• FLSA exempt salary threshold (2026): USD 684/week (USD 35,568/year) — the minimum salary for an employee to qualify as exempt from overtime under the FLSA white-collar exemptions.
• Local preemption: No Texas city may set a higher minimum wage for private-sector employers. HB 2127 (2023) permanently blocks local wage ordinances.

3.3 Bonus

There are no state or federal obligations to provide a 13th-month pay or other statutory bonuses. Any bonus commitments are governed by the employment contract or employer policy.

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4. Statutory Employment Benefits

Employers may offer their employees any benefits — transportation allowances, housing, meals, health insurance, retirement contributions, etc. However, none of these benefits are mandatory under Texas or federal law for private-sector employers (health insurance becomes relevant to the ACA employer mandate for employers with 50+ full-time equivalent employees).

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5. Termination Requirements

5.1 Termination Procedure

Texas is an at-will employment state, meaning that termination can be carried out for any reason and at any time, provided that it is non-discriminatory and does not violate any existing employment contracts or federal anti-discrimination law (Title VII, ADA, ADEA, etc.).

Mass redundancies are subject to the federal Worker Adjustment and Retraining Notification (WARN) Act — 60 days advance written notice is required for employers with 100+ full-time employees where a layoff affects 50+ employees at a single site of employment within any 30-day period. Texas has no state WARN Act.

5.2 Notice Period

There are no federal or Texas state regulations requiring advance notice of termination. Notice may be given voluntarily or as specified in an employment contract, but neither party is legally obligated to provide it.

5.3 Severance Pay

There are no federal or state obligations to provide severance pay. An employee's final wages shall be paid on the following schedule under the Texas Payday Law:

Termination type	Final paycheck deadline
Employer-initiated (discharge / layoff)	Within 6 calendar days of the discharge date
Employee-initiated (resignation)	Next regular scheduled payday following the last day worked

5.4 Probation Period

A probationary period is not regulated by any federal or Texas state provisions. Employers may establish probationary periods contractually. Texas at-will rules still apply during probation unless the contract specifies otherwise — meaning either party can end the relationship during probation without cause, just as at any other time.

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6. Work Time Rules and Leave Entitlements

6.1 Work Time Rules

6.1.1 Working Hours

Under the Fair Labor Standards Act, any hours worked in excess of 40 hours per week must be compensated at 150% of the employee's regular rate of pay. Texas has no separate state overtime statute — the FLSA standard applies directly.

6.1.2 Daily / Weekly Rest

There are no federal or Texas state regulations mandating daily or weekly rest periods for adult employees in private-sector employment. Employers may schedule work at any time, provided that hours beyond 40 per workweek are paid at the overtime rate. There is no mandatory pay premium for work on weekends or regular days off unless the employee's total weekly hours exceed 40.

6.1.3 Break Time

There are no federal or Texas state regulations requiring mandatory rest or meal breaks for adult employees. However, per the US Department of Labor: any rest break of less than 20 minutes granted by the employer must be treated as compensable work time (i.e., it must be paid). Bona fide meal periods of 30 minutes or more during which the employee is completely relieved of duties are not compensable.

6.1.4 Overtime

Per the Fair Labor Standards Act, all hours worked beyond 40 in a workweek must be paid at 150% of the employee's regular rate. There is no statutory limit on how many overtime hours an employee can work in Texas. Texas has no daily overtime threshold — unlike California, where overtime applies after 8 hours in a single day.

6.2 Leave Entitlements

6.2.1 Public Holidays

Private-sector employers in Texas are not obligated to provide paid or unpaid time off on public holidays. Employees required to work on holidays are paid at their normal rate — there is no mandatory holiday premium for private-sector employees.

Holiday	2026 Date	Federal / State
New Year's Day	January 1	Federal
Martin Luther King Jr. Day	January 19	Federal
Washington's Birthday (Presidents' Day)	February 16	Federal
Memorial Day	May 25	Federal
Juneteenth National Independence Day	June 19	Federal
Independence Day	July 4	Federal
Labor Day	September 7	Federal
Columbus Day	October 12	Federal
Veterans Day	November 11	Federal
Thanksgiving Day	November 27	Federal
Christmas Day	December 25	Federal

Texas observes all 11 federal public holidays. No additional state holidays are mandated for private-sector employers.

6.2.2 Annual Leave

There are no state or federal obligations to provide annual leave (paid vacation) to private-sector employees. If an employer offers vacation or PTO, the policy must be clearly documented and consistently applied. Accrued vacation is treated as wages once earned under a written policy — any commitment to pay out accrued vacation on termination is enforceable under the Texas Payday Law.

6.2.3 Sick Leave

There are no federal or Texas state obligations to provide paid sick leave to private-sector employees. No Texas city may create a local paid sick leave mandate — Austin, Dallas, and San Antonio ordinances are permanently preempted by HB 2127 (2023). Unpaid leave may be available under the FMLA.

6.2.4 Maternity Leave

There are no federal or Texas state obligations to provide paid maternity leave. Unpaid, job-protected leave in the event of childbirth or adoption may be available under the FMLA (see Section 6.2.3 for eligibility). The Pregnant Workers Fairness Act (PWFA, effective June 2023) also requires covered employers (15+ employees) to provide reasonable accommodations for pregnancy-related conditions.

6.2.5 Paternity Leave

There are no federal or Texas state obligations to provide paid paternity leave. Unpaid leave in the event of childbirth or adoption may be available under the FMLA. Refer to Section 6.2.3 for FMLA eligibility details.

6.2.6 Parental Leave

There are no federal or state obligations to provide paid parental leave. Unpaid leave to bond with or care for a child may be available under the FMLA. Refer to Section 6.2.3 for FMLA eligibility details.

6.2.7 Other Leave

Type of leave	Paid / Unpaid	Duration	Note
Jury Duty Leave	Unpaid (no state pay mandate)	Duration of service	Employers must excuse employees for jury service. Retaliation is prohibited under Texas law. Pay during jury duty is at the employer's discretion — no Texas statute requires compensation. Many employers pay as a matter of policy.
Voting Leave	Paid	Sufficient time to vote	Texas Labor Code § 276.004: employees must be allowed sufficient time to vote. No leave required if the employee has two or more hours between polls opening and their shift start, or between shift end and polls closing.
Military Leave	Unpaid, job-protected	Duration of service	Federal USERRA protects employees called to uniformed service. Reemployment rights apply on return. Texas also provides additional protections for Texas National Guard members under Texas Government Code § 431.001.
Crime Victim Leave	Unpaid	As needed	Texas Labor Code § 52.051: employers with 25+ employees must allow employees who are victims of a crime or close family members of victims to take leave to attend criminal proceedings.

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Appendix 1 — Definitions

Juvenile / Children / Minor

A person under the age of 18 is considered a minor under US federal law. The FLSA imposes additional restrictions on the hours and types of work that minors may perform, with stricter rules for those under 16.

Retirement Age

The federal full retirement age (FRA) in the US for Social Security purposes is 67 years for individuals born in 1960 or later.

Year of birth	Full retirement age
1943 – 1954	66 years
1955	66 years and 2 months
1956	66 years and 4 months
1957	66 years and 6 months
1958	66 years and 8 months
1959	66 years and 10 months
1960 and later	67 years

Salary, Wage and Remuneration

For the purpose of calculating overtime, a workweek is defined as a fixed, regularly recurring period of 168 hours — seven consecutive 24-hour periods. It may begin on any day of the week at any hour established by the employer and must be applied consistently. There can be no averaging of 2 or more workweeks for overtime purposes — each workweek stands alone.

Tax Resident

An individual is considered a US resident for federal tax purposes if they meet the green card test or the substantial presence test. More information: IRS — Determining Tax Residency Status.

For Texas state tax purposes: Texas has no state income tax and therefore no separate Texas tax residency definition or state filing obligation for individuals.

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Frequently Asked Questions

Does Texas have a state income tax that employers need to withhold?

No. Texas has no personal state income tax — it is one of nine US states with none. Employers have no state income tax withholding obligation, no state withholding account to register, and no state equivalent of the W-2 filing requirement. The only state-level employer payroll obligation is unemployment insurance (SUI), filed quarterly with the Texas Workforce Commission on the first $9,000 of each employee's wages per year.

What is the Texas SUI rate for a new employer in 2026?

The standard new employer rate is 2.70% — or the average rate for your NAICS industry classification, whichever is higher. The taxable wage base is $9,000 per employee per year, fixed by Texas statute and unchanged year to year. Maximum annual SUI cost at the standard rate: $243 per employee. Experience-rated employers are assigned a rate between 0.32% and 6.32% for 2026, built from five components published by the TWC each year. Source: Texas Workforce Commission — 2026 UI Tax Rates.

Is there a paid sick leave requirement for employers in Texas?

No. Texas has no statewide paid sick leave mandate for private employers. The Texas Regulatory Consistency Act (HB 2127, 2023) permanently preempts all local ordinances on the subject — the Austin, Dallas, and San Antonio paid sick leave ordinances are permanently blocked. No Texas city or county can create a local paid sick leave requirement. Federal FMLA provides up to 12 weeks of unpaid, job-protected leave per year, but only for employers with 50+ employees within 75 miles of the worksite and only for qualifying health conditions or family events.

When must a final paycheck be issued after termination in Texas?

Under the Texas Payday Law: when an employer discharges an employee, the final paycheck is due within 6 calendar days of the discharge date. When an employee resigns, the final paycheck is due on the next regular payday following the last day worked. Failure to pay on time can result in a wage claim with the TWC's Labor Law section — employees have up to 180 days from the date wages were due to file. Accrued vacation must be paid out only if the employer's written policy commits to doing so.

Is workers' compensation insurance mandatory in Texas?

No — Texas is the only US state where private-sector workers' compensation insurance is not mandatory. Employers can opt out of the state system. However, non-subscribing employers lose the statutory liability protections that covered employers enjoy and can be sued under common law for workplace injuries, with limited defenses (they cannot use the employee's contributory negligence, assumed risk, or co-worker negligence as a defense). Most employers elect coverage. Federal contractors and some state government contractors may be contractually required to carry coverage regardless of the opt-out provision.

Can a foreign company hire employees in Texas without setting up a US entity?

Yes — through an Employer of Record (EOR). A foreign company cannot legally employ Texas workers and run compliant US payroll without a registered US legal employer with an EIN, a TWC SUI account, and federal payroll tax accounts. A Slasify EOR acts as the legal employer on paper: it holds the EIN, processes payroll, files Form 941 quarterly and Form 940 annually, registers with the TWC, files quarterly SUI wage reports, issues W-2s on 31 January, and handles new hire reporting — while your company directs the employee's day-to-day work. EOR onboarding in Texas typically takes 3–7 business days from completed employee information, versus 3–6 weeks for new entity setup by a foreign company. Contact Slasify's US team to get a timeline and cost estimate for your first Texas hire.