Texas Payroll Compliance
Every rate, wage base, and rule Texas employers need for 2026 — sourced from the Texas Workforce Commission, the Comptroller, and the Texas Legislature — including the state preemption law that overrides city ordinances statewide.
Minimum Wage & Hours
Texas does not set its own minimum wage — the Texas Minimum Wage Act (Labor Code § 62.051) adopts the federal rate by reference. At $7.25/hour, it has not changed since July 24, 2009, and no increase is scheduled. Overtime, exempt-salary thresholds, and tipped-wage rules all default to federal FLSA standards, with one Texas-specific wrinkle on the tipped-employee definition.
| Item | 2026 Value | Notes |
|---|---|---|
| State minimum wage | $7.25/hr | Adopts federal FLSA rate; unchanged since 2009 |
| Tipped cash wage | $2.13/hr | + up to $5.12 tip credit; total must reach $7.25 |
| Tipped-employee definition | > $20/month | Texas threshold is lower than the federal $30/month test |
| Youth (training) wage | $4.25/hr | Under age 20, first 90 consecutive calendar days (federal) |
| Overtime rule | 1.5× after 40 hrs/wk | Federal FLSA; no daily OT trigger in Texas |
| Overtime minimum rate | $10.88/hr | 1.5× the $7.25 floor |
| Exempt salary threshold | $684/wk ($35,568/yr) | 2019 level restored after 2024 DOL rule vacated (E.D. Tex.) |
| Pay frequency | Semi-monthly minimum | Twice/month for most; exempt employees may be paid monthly |
| Final paycheck | Next scheduled payday | Applies whether separation is voluntary or involuntary |
Local & Preemption Rules
Texas is the mirror image of states like California and New York: instead of cities layering higher standards on top of the state floor, House Bill 2127 (the “Texas Regulatory Consistency Act,” nicknamed the “Death Star” bill) affirmatively bars cities and counties from enacting labor ordinances stricter than state or federal law. Effective September 1, 2023, it nullified local paid-sick-leave mandates, living-wage ordinances, and construction water-break rules in Austin, Dallas, San Antonio, and other cities.
| Item | Status | Notes |
|---|---|---|
| Local minimum wage ordinances | Preempted | No Texas city or county may set a rate above $7.25/hr |
| Local paid sick leave ordinances | Preempted | Austin, Dallas, San Antonio ordinances nullified by HB 2127 |
| Local heat/water-break rules | Preempted | Austin & Dallas construction water-break ordinances voided; federal OSHA still applies |
| Statute | HB 2127 (2023) | Covers 9 broad Labor Code & Occupations Code areas |
| Private right of action | Yes | Individuals/entities may sue a city or county for enforcing a preempted ordinance |
State Income Tax Withholding
Texas is one of nine states with no state income tax on wages — and one of the few where that status is protected in the state constitution. Article 8, § 24 of the Texas Constitution requires voter approval (a statewide referendum) before the legislature could ever create a personal income tax, making Texas’s no-tax status considerably more durable than a simple statute.
| Item | 2026 Value | Notes |
|---|---|---|
| State income tax | None | No wage withholding required or possible |
| Constitutional protection | Tex. Const. Art. 8 § 24 | Voter referendum required to ever introduce one |
| State withholding certificate | None | Employees only complete federal Form W-4 |
| Franchise tax | Business-level only | Not a payroll withholding; applies to entity revenue, not wages |
Paid Family & Medical Leave
Texas has no state-mandated paid family or medical leave program, and HB 2127 preempts cities from creating one locally. Federal FMLA (unpaid, job-protected leave at employers with 50+ employees) is the baseline. However, House Bill 1996 (2023) created a regulatory framework allowing insurers to offer voluntary group family leave insurance as an employer-purchased benefit — available since January 1, 2024, but entirely optional with no state fund or mandatory contribution.
| Item | Status | Notes |
|---|---|---|
| Mandatory PFML program | None | No employer or employee payroll contribution exists |
| Voluntary group leave insurance | HB 1996 (2023) | Optional employer-purchased coverage; available since Jan 1, 2024 |
| Federal FMLA | Applies | Unpaid, job-protected; 50+ employee threshold, unpaid |
| Local paid sick leave | Preempted | HB 2127 nullified Austin/Dallas/San Antonio ordinances |
Unemployment Insurance (SUI)
Texas Unemployment Insurance is administered entirely by the Texas Workforce Commission and is the state’s only payroll tax. The wage base has sat at the FUTA-required minimum of $9,000 for years. Every employer’s effective rate is built from five components: a General Tax Rate (experience-based), the flat Replenishment Tax Rate, the Obligation Assessment, a Deficit Tax Rate, and the Employment & Training Investment Assessment.
| Item | 2026 Value | Notes |
|---|---|---|
| SUI taxable wage base | $9,000 | Tied to the FUTA floor; unchanged in recent years |
| New employer (entry-level) rate | 2.70% | Higher of NAICS industry average or 2.70% — all groups at floor for 2026 |
| Experienced employer range | ~0.23% – 6.23% | Based on 3-year chargeback ratio; confirm exact ceiling via TWC notice |
| Replenishment Tax Rate (RTR) | 0.21% | Flat, applies to all employers; funds unassigned benefit charges |
| Obligation Assessment (OA) | 0.00% | Covers interest on federal UI loans; zero for 2026 |
| Experience rating begins | ~6 chargeable quarters | New employers hold the entry rate until then |
| Registration form | Online UTR / Form C-1 | Register within 10 days of becoming a liable employer |
| Quarterly filing | Forms C-3 & C-4 | C-3 = wage/tax summary; C-4 = employee-level wage list; due even with zero wages |
Official Texas .gov Resources
Verify every figure and register for accounts at the source. These are the agencies Texas employers work with for payroll.