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, and no local payroll taxes in any city. The only state-level employer obligation is unemployment insurance paid to the Texas Workforce Commission. This factsheet follows the same structure as Slasify's internal state compliance factsheets, covering every statutory obligation a global employer needs before hiring their first Texas employee.
| 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% on a $9,000 wage base — max $243/employee/year. Experience-rated range: 0.32%–6.32% for 2026. Source: TWC 2026 Tax Rates. |
| Federal FICA + FUTA apply in full | FICA employer share: 7.65% (6.2% OASDI + 1.45% Medicare). 2026 Social Security wage base: $184,500. FUTA: 0.6% effective on first $7,000. Form 941 quarterly; W-2 by January 31. |
| At-will employment; final pay in 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. |
| Hire without entity via EOR | Foreign companies cannot run compliant US payroll without a US entity and EIN. A Slasify Employer of Record onboards your first Texas hire in 3–7 days, no entity required. Explore Slasify EOR → |
- 1. Overview
- 2. Country Highlights
- 3. Payroll
- 4. Statutory Employment Benefits
- 5. Termination Requirements
- 6. Work Time Rules and Leave Entitlements
- Appendix 1 — Definitions
- Frequently Asked Questions
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) | Central Standard Time (CST) | Central Daylight Time (CDT) | −6 / −5 |
Note: El Paso and Hudspeth County observe Mountain Time (UTC −7 / −6).
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. Texas is an at-will employment state.
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; no Texas state law mandates pay frequency for private-sector employees) |
| Minimum Wage | USD 7.25 per hour |
| 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) |
| Maximum Overtime Hours | — |
| Overtime Pay | 150% of the employee's regular wage |
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. Texas does not mandate private-sector employers to provide paid holiday time off. |
| Annual Leave | There are no state or federal obligations to provide annual leave. |
| Sick Leave | There are no federal or state obligations to provide paid sick leave. Unpaid leave may be covered under the FMLA for employers with at least 50 employees (12 weeks unpaid per year to eligible employees). Texas cities cannot create local paid sick leave mandates (HB 2127, 2023). |
| 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:
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 |
2.4.2 State Income Tax
Texas has no state personal income tax. Employers have no state withholding obligation and no state income tax 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 local employment mandates above state law.
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) |
|---|---|
| OASDI | 184,500 |
| Medicare's HI | No limit |
| FUTA | 7,000 |
In addition to the above, Texas levies State Unemployment Tax (SUI) on employers. Employees have no state-level payroll contribution in Texas. Refer to Sections 2.5.1 and 2.5.2 below.
2.5.1 Employer Payroll Contribution
Federal
| Contribution Rate | |
|---|---|
| OASDI | 6.2% |
| Medicare's HI | 1.45% |
| FUTA | 6% (reduced to 0.6% effective rate with full FUTA credit for timely SUI payments) |
Note: Employers that pay federal and state unemployment taxes in full may receive a tax credit of up to 5.4%, reducing their FUTA tax rate down to 0.6%.
Texas State
| Contribution rate | Note | |
|---|---|---|
| State Unemployment Tax (SUI) | 0.32%–6.32% | Annual contribution base limit: USD 9,000. New employers pay a fixed rate of 2.70% (or the industry average, whichever is higher). Source: TWC 2026. |
| Workers' Compensation Insurance | Varies by provider | Not mandatory in Texas (the only US opt-out state). Most employers elect coverage. Non-subscribers lose statutory liability protections. |
2.5.2 Employee Payroll Contribution
Federal
| Contribution Rate | |
|---|---|
| OASDI | 6.2% |
| Medicare's HI | 1.45% |
Employees earning above the following thresholds also pay an additional Medicare tax of 0.9% on wages in excess of the threshold:
| Employee's filing status | Annual wage threshold (USD) |
|---|---|
| Married, filing jointly | 250,000 |
| Married, filing separately | 125,000 |
| Others | 200,000 |
Texas State
N/A — employees have no state-level payroll contribution in Texas.
Need to hire in Texas before your entity is ready?
Slasify acts as the legal employer from day one — handling FICA deposits, Form 941, TWC SUI registration, and W-2 issuance while you focus on your business.
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. The Texas Minimum Wage Act requires employers to provide employees with a written earnings statement each pay period with sufficient detail to verify correct payment.
3.2 Minimum Wage
Effective January 1, 2026, the minimum wage in Texas is USD 7.25 per hour — matching the federal floor. Texas adopts the federal minimum wage under Texas Labor Code § 62.051. No city or county in Texas may set a higher rate for private-sector employers.
- Tipped minimum wage: USD 2.13/hour, provided tips bring total compensation to at least USD 7.25/hour. 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.
3.3 Bonus
There are no state or federal obligations to provide a 13th-month pay or other statutory bonuses.
4. Statutory Employment Benefits
Employers may offer their employees any benefits such as allowances for transportation, housing, and meals. However, none of these benefits are mandatory under Texas or federal law for private-sector employers.
Because Texas mandates almost nothing beyond federal minimums, the benefits a company offers are entirely discretionary and a genuine competitive differentiator. Health insurance, 401(k) matching, and paid time off are the tools Texas employers use to compete with coastal companies — often at lower total cost than mandated packages in California or New York.
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.
Mass redundancies are subject to the applicable procedures under the federal Worker Adjustment and Retraining Notification (WARN) Act — 60 days advance written notice required for employers with 100+ full-time employees where 50+ employees at a single site are affected.
5.2 Notice Period
There are no federal or state regulations surrounding notice periods in the event of termination. Notice may be given voluntarily or as specified in the employment contract.
5.3 Severance Pay
There are no federal or state obligations to provide severance pay in the event of termination. An employee's final salary shall be paid as follows:
| Termination type | Final paycheck deadline |
|---|---|
| Employer-initiated (discharge / layoff) | Within 6 calendar days of the discharge date (Texas Payday Law) |
| Employee-initiated (resignation) | Next regular scheduled payday following the last day worked |
Failure to issue the final paycheck within 6 calendar days of a discharge can result in a wage claim filed with the Texas Workforce Commission's Labor Law section. Employees have up to 180 days from the date wages were due to file a claim.
5.4 Probation Period
A probationary period is not regulated by any federal or Texas state provisions. Employers may establish probationary periods by contract; during this period Texas at-will rules still apply unless the contract specifies otherwise.
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 are paid at 150% of the employee's regular wage. Texas has no state overtime statute adding to or diverging from the FLSA standard.
6.1.2 Daily / Weekly Rest
There are no federal or Texas state regulations surrounding daily or weekly rest periods. Employers may require as much work as they like, provided that the employee is paid at 150% of their regular wage for any work performed in excess of 40 hours per week. There is no federal obligation to provide any pay premium for work performed on the employee's regular days off or weekends.
6.1.3 Break Time
There are no federal or Texas state regulations concerning mandatory rest or meal breaks for adult employees. According to the US Department of Labor, any break period granted by the employer for less than 20 minutes must be paid.
Under the PUMP Act (2022), employers are obligated to provide reasonable break time and a suitable private space (not a bathroom) for nursing employees to express breast milk for one year following the child's birth. The time taken for expressing breast milk does not need to be paid. Employers with fewer than 50 employees are exempt if compliance would cause undue hardship.
6.1.4 Overtime
According to the Fair Labor Standards Act, any hours worked beyond 40 hours in a workweek shall be paid at 150% of the employee's regular wage. There are no limits to the amount of overtime an employee can work in Texas, and no daily overtime threshold (unlike California).
6.2 Leave Entitlements
6.2.1 Public Holidays
Employers are not obligated to provide any paid or unpaid time off during public holidays. Employees who are required to work on holidays are paid at their normal rate (no mandatory premium).
| Holiday | Date (2026) |
|---|---|
| New Year's Day | January 1 |
| Martin Luther King Jr. Day | January 19 |
| Washington's Birthday (Presidents' Day) | February 16 |
| Memorial Day | May 25 |
| Juneteenth National Independence Day | June 19 |
| Independence Day | July 4 |
| Labor Day | September 7 |
| Columbus Day | October 12 |
| Veterans Day | November 11 |
| Thanksgiving Day | November 27 |
| Christmas Day | December 25 |
Texas observes 11 federal holidays. No additional mandatory state public holidays apply to private-sector employers.
6.2.2 Annual Leave
There are no state or federal obligations to provide annual leave. If an employer offers vacation or PTO, the policy must be consistently applied and honored per its written terms.
6.2.3 Sick Leave
There are no federal or Texas state obligations to provide paid sick leave. However, unpaid leave may be covered under the FMLA.
Employers with at least 50 employees are obligated to provide 12 weeks of unpaid FMLA leave per year to eligible employees. To be eligible, the employee must have been employed for at least 12 months, worked at least 1,250 hours in the last 12 months, and work at a location where the employer has at least 50 employees within a 75-mile radius. FMLA leave may be taken to care for a family member with a serious health condition, recover from personal health issues, bond with a newborn or adopted child (within one year), or handle issues from a family member's military duty. Employees providing military caregiver support may be entitled to up to 26 weeks of leave per year. Employers must maintain health benefits during FMLA leave.
6.2.4 Maternity Leave
There are no federal or Texas state obligations to provide paid maternity leave. Unpaid leave in the event of childbirth or adoption may be covered under the FMLA. Refer to the Sick Leave section for FMLA eligibility details.
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 covered under the FMLA. Refer to the Sick Leave section for FMLA eligibility details.
6.2.6 Parental Leave
There are no federal or state obligations to provide paid parental leave. Unpaid leave to care for the employee's family members may be covered under the FMLA. Refer to the Sick Leave section for FMLA eligibility details.
6.2.7 Other Leave
| Type of leave | Paid / Unpaid | Duration | Note |
|---|---|---|---|
| Jury Duty Leave | Unpaid (no state mandate to pay) | Duration of service | Employers must excuse employees for jury duty. Retaliation is prohibited. Texas does not require employers to pay wages during jury service. Employer policy governs pay. |
| Voting Leave | Paid | Sufficient time to vote | Employees are entitled to leave unless their shift begins at least 2 hours after polls open or ends at least 1 hour before polls close. |
| Military Leave | Unpaid, job-protected | Duration of service | Federal USERRA protects employees called to military service. Reinstatement rights on return. |
Hire in Texas without opening a local entity
Slasify acts as the legal employer in Texas — FICA, Form 941, TWC SUI, and W-2 handled from day one. Your first hire can be on payroll in under a week.
Appendix 1 — Definitions
Juvenile / Children / Minor
A person under the age of 18 is considered a minor under US federal law.
Retirement Age
The federal retirement age in the US for those born in 1960 and later is 67 years old.
| Year of birth | 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 an employee's salary, a workweek refers to a period of 168 hours during 7 consecutive 24-hour periods. It may begin on any day of the week and at any hour of the day established by the employer. Generally, for purposes of minimum wage and overtime payment, each workweek stands alone — there can be no averaging of 2 or more workweeks.
Employee coverage, compliance with wage payment requirements, and the application of most exemptions are determined on a workweek basis.
Tax Resident
An individual is considered a US resident for tax purposes if they meet the green card test or the substantial presence test.
For Texas state tax purposes: since Texas has no state income tax, there is no separate Texas tax residency definition or filing obligation for individuals.
Frequently Asked Questions
Does Texas have a state income tax that employers need to withhold?
No. Texas has no personal state income tax. Employers have no state income tax withholding obligation, no state withholding account to register, and no state W-2 filing requirement. The only state-level employer payroll obligation in Texas is unemployment insurance (SUI), filed quarterly with the Texas Workforce Commission on the first $9,000 of each employee's wages.
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, whichever is higher — on a taxable wage base of $9,000 per employee per year (fixed by statute, unchanged year to year). Maximum annual cost: $243 per employee at the standard rate. Experience-rated employers are assigned a rate between 0.32% and 6.32% based on claims history. Source: Texas Workforce Commission, 2026 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 blocked. Federal FMLA provides unpaid, job-protected leave of up to 12 weeks per year, but only for employers with 50 or more employees within 75 miles and only for qualifying serious health conditions.
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 comply can result in a wage claim with the TWC — employees have 180 days from the wages' due date to file.
Is workers' compensation insurance mandatory in Texas?
No — Texas is the only US state where private-sector workers' compensation insurance is not mandatory. However, non-subscribing employers lose statutory liability protections and can be sued under common law for workplace injuries with limited defenses. Most employers elect coverage. Federal contractors and government-contract employers may be contractually required to carry coverage regardless of the state opt-out provision.
Can a foreign company hire employees in Texas without setting up a US entity?
Yes — through an Employer of Record. A foreign company cannot legally run compliant US payroll without a registered US employer with an EIN and state SUI account. Slasify's EOR acts as the legal employer: holding the EIN, processing payroll, filing Form 941 and the TWC quarterly wage report, and issuing W-2s — while you direct the employee's work. EOR onboarding in Texas typically takes 3–7 days, versus 3–6 weeks for new entity setup by a foreign company. Contact Slasify's US team for a timeline assessment.