Texas Payroll Laws & Requirements

Fire someone in Texas on a Monday and their final paycheck is due by Sunday. The Texas Payday Law gives employers six calendar days after a discharge, whatever the regular payday. It's the only one of our seven complexity factors that applies here. Texas has no state income tax, no paid leave program and no daily overtime, and cities can't set their own minimum wage for private employers. That puts Texas payroll at 2 out of 5 on our Payroll Complexity Score. Most of what goes wrong happens under the Payday Law, in final pay, deductions and pay dates.

Minimum Wage in Texas

The Texas minimum wage is $7.25 an hour, the federal rate. The Texas Minimum Wage Act (Labor Code chapter 62) adopts the federal figure, so it changes only if Congress changes it. No increase is scheduled.

• Tipped employees can be paid a cash wage of $2.13 an hour, with a tip credit of up to $5.12. Tips must make up the difference to $7.25.
• Cities and counties can't set a minimum wage for private employers. Labor Code 62.0515 blocks it, apart from wages set through government contracts, such as Austin's living wage for certain city contractors.
• Exempt staff follow the federal salary test, since Texas has no salary threshold of its own.

Two bills filed for the 2027 session would raise the rate to $15.00 from September 1, 2027. Neither has passed, so nothing changes for now.

Overtime Rules in Texas

Texas has no overtime law of its own. Overtime follows the federal Fair Labor Standards Act: time and a half for hours over 40 in a 7-day workweek. There's no daily overtime, so a construction crew on four 10-hour days owes nothing extra.

The weekly count is where Texas employers slip. Overtime has to be paid on the regular rate, which includes shift differentials and nondiscretionary bonuses, not just base pay. More on that in overtime compliance software that catches FLSA violations before payday.

Pay Frequency and Payday Rules in Texas

Under Labor Code 61.011, nonexempt employees must be paid at least twice a month, and exempt employees at least once a month. Weekly and biweekly schedules meet that minimum. Paydays must be designated and posted where employees can see them. An employer that never designates paydays defaults to the 1st and 15th of the month.

Deductions are tightly limited. Labor Code 61.018 allows them only under a court order, a state or federal law, or the employee's written authorization for a lawful purpose. A uniform charge or a cash-register shortage taken without signed consent is an unlawful deduction.

Final Paycheck Deadlines in Texas

The Texas final paycheck law (Labor Code 61.014) splits on how the job ended:

• Discharged or laid off: all wages are due within 6 calendar days.
• Resigned or left any other way: due by the next regularly scheduled payday.

Unused vacation or sick pay is owed only if a written policy or agreement promises it. If the handbook says accrued vacation is paid out, Texas treats it as wages. Employees have 180 days to file a wage claim with TWC, and an employer found to have withheld wages in bad faith faces a penalty of the lesser of the wages owed or $1,000.

Texas Income Tax and Local Withholding

Texas has no state income tax, and a 2019 constitutional amendment bars the legislature from adding one. No city or county withholds income tax either, so the only income tax on a Texas paycheck is federal.

Texas payroll taxes come down to unemployment insurance, which the employer pays:

• The taxable wage base is the first $9,000 of each employee's wages.
• New employers pay 2.70% in 2026. Experience rates run from 0.32% to 6.32%.
• Rates include a 0.10% Employment and Training Investment Assessment.

Reports and payments are due quarterly, by the last day of the month after the quarter ends. For multi-state employers, the risk is often a Texas employee taxed as if they worked elsewhere. See what operators get wrong in payroll tax management.

Payroll Record Retention in Texas

The Texas Payday Law sets no retention period, so the federal FLSA applies: 3 years for payroll records and 2 years for time cards. TWC Rule 815.106 requires unemployment payroll records to be kept for 4 years, so most Texas employers keep everything for 4.

Where Texas Payroll Goes Wrong

Lighter rules mean fewer settings to get wrong. The errors that do happen tend to be federal ones, plus the Payday Law's timing and deduction rules.

Texas payroll laws are short, but the federal rules underneath them still apply in full. Here's how to catch underpayment before it becomes wage theft.

What Changes in Texas in 2027

No Texas payroll change is confirmed for 2027. These are the items to watch:

• Proposed, not law: $15.00 minimum wage. HB 132 and HB 110 would raise the rate from September 1, 2027. The legislature convenes January 12, 2027.
• Check before payroll: 2027 unemployment rates. TWC mails new rates each year. Load the 2027 rate before the first January run.
• Federal changes still apply. Any change to the federal minimum wage or exempt salary test changes Texas pay too.

Running Payroll in Texas Without Errors

Before each payday:

• Flag every discharge in the period and confirm the final check went out within 6 calendar days.
• Match every deduction to a court order, a law or a signed authorization.
• Calculate overtime on the full regular rate, including bonuses and shift differentials.
• Check that tipped employees reached $7.25 an hour with tips.
• Add any vacation the written policy promises to final checks.
• Confirm nonexempt staff are paid at least twice a month on the posted paydays.