Texas payroll taxes for employers (2026)

How Texas payroll differs from other states

A Texas paycheck has fewer state lines than almost anywhere else. There is no income tax, no state disability or paid leave deduction, and no city wage tax. The only state payroll tax most employers pay is TWC unemployment tax. That does not mean nothing can go wrong. These are the Texas rules that catch people:

• Final pay in 6 days. A worker you fire or lay off must be paid in full within 6 calendar days of discharge (Texas Labor Code 61.014). Someone who quits is paid by the next regular payday.
• Twice-monthly paydays for hourly staff. Employees who are not FLSA-exempt must be paid at least twice a month. Exempt staff may be paid monthly.
• Workers comp is elective. If you opt out, you become a non-subscriber and must tell the Division of Workers' Compensation through its Employer E-File system and report qualifying injuries.
• PEOs need a state license. The Texas Department of Licensing and Regulation (TDLR) licenses PEOs under Labor Code chapter 91, and it publishes the full list as a downloadable file.

The minimum wage follows the federal $7.25, with a $2.13 cash wage for tipped staff; see the minimum wage in every state. TWC rates run from 0.32% to 6.32% once you have history, and 2027 rates are computed on October 1 and mailed in December. We could not confirm whether the published rates already include the Employment and Training Investment Assessment, so check your TWC rate notice for the breakdown.

Texas employer payroll facts at a glance

Registering a Texas business as an employer

1. Get your federal EIN from the IRS.
2. Open a TWC unemployment tax account through TWC's Unemployment Tax Registration (UTR) system, linked from the TWC unemployment tax page. Texas has no income tax, so this is the only state tax account most employers need.
3. Decide on workers comp. Buy a policy, or file the non-subscriber notice with the Division of Workers' Compensation.
4. Report each new hire within 20 days of the first day on the job through the TWC new hire reporting site.
5. Pay non-exempt staff at least twice a month, and file and pay TWC tax on the schedule TWC gives you.

If you use a PEO, check that it appears on the TDLR license file before you sign. Texas requires the license even when a PEO has only one covered employee in the state.

Employer cost of one Texas worker earning $50,000

With no income tax and a $9,000 unemployment wage base, the Texas math is short. Federal FICA does almost all the work.

TWC tax stops once a worker has earned $9,000 in the year, so most of the $243 lands in your first quarter. A worker earning $25,000 costs the same $243 in state tax as one earning $250,000. Workers comp, if you buy it, comes on top; see workers comp premiums by industry.

Going without workers comp in Texas: the trade-off

Skipping coverage saves the premium, but it moves the cost of a workplace injury from an insurer to you. You still owe the state your non-subscriber notice and injury reports. Many small employers compare a pay-as-you-go policy before deciding; our page on pay-as-you-go workers comp explains how those premiums are billed with each payroll. Payroll alone will not settle this question for you: get a quote and talk to an insurance agent.

Texas payroll services and PEOs

Because Texas payroll has so few state filings, low-cost software covers most small employers. Gusto starts at $49 a month plus $6 per person on its single-state Simple plan (checked October 16, 2026). Patriot's full-service plan is $37 plus $5 per worker paid, and charges $12 a month for each added state if you hire outside Texas. See how payroll providers score for the rest.

A PEO makes more sense when you want group health insurance and a workers comp policy bundled in. Read Texas PEOs and their TDLR license status, then compare fees in our PEO rankings and PEO pricing per employee.