Hiring Employees in Texas

Classifying Your Workers Correctly

Your company must distinguish properly between employees and independent contractors under IRS common law tests and Texas Workforce Commission (TWC) guidance. You should review behavioral control, financial control, and the overall relationship to decide if a worker belongs on payroll or should be treated as a contractor.

Misclassification in Texas can trigger back wages, unpaid overtime, unemployment tax assessments, and federal penalties. You can reduce risk by using written contracts that reflect the actual working relationship and by periodically auditing roles against the IRS and TWC criteria – this guide may help: https://www.playroll.com/blog/employee-misclassification-guide.

Verify Employee Work Eligibility

For every employee you hire in Texas, you must complete federal Form I-9 within 3 business days of the start date. You need to physically inspect original identity and work authorization documents, such as a U.S. passport or a combination of driver’s license and Social Security card.

Texas does not impose a universal E-Verify mandate for private employers, though certain state contractors may be required to use it by contract. You must retain I-9s for at least 3 years after the hire date or 1 year after termination, whichever is later, and store them separately from general personnel files to protect privacy.

Create an Employee Onboarding Process

When onboarding Texas employees, you should issue a written offer letter outlining pay rate, pay schedule, exempt or nonexempt status, and key policies. On or before day one, you will collect Form W-4, direct deposit authorization if used, and signed acknowledgments for your handbook, arbitration agreements if applicable, and any safety or harassment policies.

Texas requires you to report all new hires to the Texas Employer New Hire Reporting Operations Center within 20 days and to provide any benefit plan notices that apply to your company. Building a consistent onboarding checklist also helps you forecast the full cost of hiring in Texas – including wages, benefits, and employer taxes – before you extend an offer.

Pay Frequency & Methods

Texas law requires you to pay nonexempt employees at least twice per month and exempt employees at least once per month, with regular paydays posted in writing. If you change a payday, you must give employees at least 30 days’ written notice, and you must pay final wages to terminated employees within 6 calendar days if you initiate the separation or by the next regular payday if they resign.

Failure to pay on time can lead to wage claims with the Texas Workforce Commission and liability for the full amount due plus possible administrative penalties. Keeping clear records of hours worked, pay rates, and deductions for at least 3 years will help you respond quickly to any audit or claim.

Payment Methods (How You Can Pay)

You can choose from several lawful payment methods in Texas, but you must always ensure employees receive full wages on time and a clear written wage statement each payday.

• Payroll Check: You may pay employees by check as long as it is payable at full face value in U.S. currency without fees or delays.
• Cash: You can pay in cash, but you must still provide a detailed written pay stub showing hours, rates, gross pay, and all deductions.
• Direct Deposit (EFT): You may require direct deposit in Texas if you give at least 60 days’ advance written notice and offer a way for employees to access wages without fees.
• Paycards: You can use paycards if employees can access full wages at least once per pay period without fees and you disclose all card terms in writing.
• Outsourced Payroll: You may outsource payroll to a provider, but your company remains legally responsible for accurate wage payments, tax withholdings, and recordkeeping.

When you hire in Texas, you will handle federal payroll taxes plus state unemployment insurance, even though Texas has no state income tax. You must register with the Texas Workforce Commission and the IRS, withhold and remit the correct amounts, and file returns on time to avoid penalties.

Employer Tax Contributions

As a Texas employer, you will pay federal Social Security and Medicare taxes, federal unemployment tax (FUTA), and Texas unemployment insurance (UI). You must open a TWC employer account as soon as you pay at least $1,500 in wages in a calendar quarter or employ at least one worker for 20 weeks in a year.

Employee Payroll Tax Contributions

Your Texas employees will have federal income tax and FICA taxes withheld from their paychecks, but there is no state income tax withholding. You must collect Form W-4, calculate withholdings correctly, and remit them with your federal payroll tax deposits and returns.

Minimum Wage in Texas

Texas adopts the federal minimum wage of $7.25 per hour for most nonexempt employees. You must also follow federal tipped wage rules, ensuring that cash wages plus tips reach at least $7.25 per hour or you make up the difference.

Working Hours in Texas

Texas does not set a daily maximum for adult employees, so you will mainly follow federal Fair Labor Standards Act (FLSA) rules on hours and recordkeeping. You should track actual hours worked each day and week for nonexempt staff and clearly define unpaid meal periods and paid rest breaks in your policies.

Overtime in Texas

Overtime in Texas follows federal law, requiring you to pay at least 1.5 times the regular rate for all hours worked over 40 in a workweek by nonexempt employees. You should designate a fixed 7-day workweek in writing and include nondiscretionary bonuses and commissions when calculating the regular rate.

Texas does not mandate many private-sector benefits, so your company’s health insurance, retirement plans, and paid leave policies are key tools for attracting talent. If you average 50 or more full-time employees nationwide, you must comply with the federal Affordable Care Act employer mandate and offer qualifying health coverage or face potential penalties.

Mandatory Leave Policies in Texas

Paid Time Off in Texas

Texas does not require you to offer paid vacation or general PTO, so you have flexibility to design a policy that fits your budget and talent strategy. If you do offer PTO, you should clearly state in writing how it accrues, whether unused time carries over, and whether it is paid out at separation.

Texas law generally allows you to decide whether to pay out unused PTO at termination, but your written policy and past practice will usually control. To avoid disputes, your company should apply PTO rules consistently and document any caps, forfeiture provisions, or blackout periods.

Maternity & Paternity Leave in Texas

Texas relies on federal protections for maternity and paternity leave, primarily through the Family and Medical Leave Act (FMLA) for covered employers. If you have at least 50 employees within a 75-mile radius, eligible employees may take up to 12 weeks of unpaid, job-protected leave for birth, adoption, or foster placement.

Even if FMLA does not apply, you must comply with federal pregnancy discrimination and accommodation laws, which require you to treat pregnancy-related limitations at least as favorably as other temporary disabilities. Many Texas employers enhance competitiveness by offering some paid parental leave or by allowing parents to use accrued PTO during bonding time.

Sick Leave in Texas

There is no statewide paid sick leave mandate for private employers in Texas, and local ordinances that attempted to require it have been blocked. You may still choose to provide paid or unpaid sick leave, and if you do, your policy should define eligible uses, accrual rates, and any documentation requirements.

Under federal law, you may also need to provide unpaid leave or reasonable accommodations for serious health conditions or disabilities. Clear communication about how sick leave interacts with FMLA, short-term disability, or PTO will help your employees understand their options and reduce administrative confusion.

Military Leave in Texas

Your company must comply with the federal Uniformed Services Employment and Reemployment Rights Act (USERRA), which protects employees who serve in the armed forces, National Guard, or reserves. Texas law also provides protections for members of the state military forces, including job restoration after qualifying service.

You are not generally required to pay employees during military leave, but you must allow them to use accrued PTO if your policy permits. Maintaining benefits and seniority rights as required by USERRA is critical to staying compliant and supporting service members on your team.

Jury Duty in Texas

Texas law prohibits you from firing or otherwise retaliating against an employee because they are called for or serve on a jury. While you are not required to pay employees for time spent on jury duty, many employers choose to provide some paid time to support civic participation.

You may ask employees to provide a copy of their jury summons or proof of service for your records. Make sure your attendance and disciplinary policies clearly state how jury duty absences are handled so supervisors apply the rules consistently.

Voting Leave in Texas

In Texas, you must provide employees with paid time off to vote if they do not have at least two consecutive hours to vote outside their working hours. You may set reasonable limits on when employees can leave to vote, such as at the beginning or end of a shift, as long as they still have sufficient time.

To stay compliant, you should train managers not to discourage voting leave or penalize employees for using it. Including a short voting leave section in your handbook helps employees understand their rights and your expectations on notice and scheduling.

Bereavement Leave in Texas

Texas does not require employers to provide bereavement leave, so any time off for a death in the family will come from your company’s own policy. Many employers offer 3 to 5 days of paid or unpaid leave for the death of an immediate family member to support employees during difficult times.

Whatever you decide, you should define eligibility, duration, and any documentation requirements in writing and apply the policy consistently. Offering flexible options, such as allowing employees to use PTO or unpaid leave for extended needs, can improve morale and retention.

Termination Process

Texas is an at-will employment state, meaning you can generally terminate employment at any time for any lawful reason, provided you do not violate anti-discrimination or retaliation laws. You should document performance issues, policy violations, and prior warnings, and conduct a structured termination meeting that covers final pay, benefits, and return of company property.

Notice Period

Texas law does not require you to provide advance notice of termination or resignation, unless you have agreed otherwise in a contract or collective bargaining agreement. However, you must meet state deadlines for final wage payment and comply with any notice requirements tied to benefits, such as COBRA or health plan continuation notices.

Severance

Severance pay is not required under Texas law, but you may choose to offer it in individual agreements or company policies. If you provide severance, you should document the terms in a written agreement, including any release of claims, and ensure payments are processed through payroll with appropriate tax withholdings.