Texas Business Payroll & HR Guide

Mastering Payroll and HR Compliance in Texas

Explore our guide to payroll, HR laws, and compliance for Texas businesses. Everything Texas employers need in one place.

Introduction to Texas Business Environment

Texas continues to attract entrepreneurs and established companies alike with its pro-business climate, favorable tax structure, and growing population. From energy and healthcare to technology and hospitality, Texas supports a diverse economic landscape that demands smart, scalable HR and payroll solutions.

The rapid pace of economic development is creating new workforce challenges. As discussed in How Texas Economic Growth Shapes Modern HR Strategies, businesses are facing increased demand for agile HR systems, improved recruitment strategies, and competitive compensation packages to stay ahead.

Starting a Business in Texas

Launching a company in Texas involves more than filing paperwork. Entrepreneurs must choose a legal entity, register with the Texas Secretary of State, obtain an Employer Identification Number (EIN), and set up proper tax withholding and insurance. Employers should also prepare for new hire reporting, set payday schedules, and communicate clear employment policies to remain in compliance.

In addition to basic registration tasks, employers must prepare for wage notifications, workplace postings, and internal policies that align with Texas employment-at-will doctrine and anti-discrimination laws. The Texas Guidebook for Employers outlines key hiring considerations, such as avoiding unlawful pre-employment inquiries and maintaining defensible job descriptions.

Payroll Management

While Texas has no state income tax, employers are still responsible for federal withholding and state unemployment taxes. Understanding which forms to file and when is critical. Businesses must submit wage reports quarterly and stay current with any rate changes issued by the Texas Comptroller’s Office.

Affiliated HR & Payroll’s Texas Payroll Tax Overview breaks down what businesses need to know about SUTA, wage bases, and tax deadlines.

Texas Wage and Hour Laws

Texas adheres to the federal minimum wage of $7.25/hour, but certain workers—such as those receiving tips—may fall under alternative wage calculations. Employers must also follow strict rules regarding overtime pay (1.5x for hours worked over 40 in a week), final paycheck timing, and pay frequency.

The Texas Workforce Commission’s Payday Law outlines legal requirements for payment schedules and dispute resolution. For a practical approach, our Texas Minimum Wage Business Guide helps employers understand exemptions and recordkeeping responsibilities.

Local Taxes

While Texas does not levy a personal income tax, businesses must pay attention to local taxes such as property taxes. These vary by county and municipality and can affect both facility costs and asset planning.

The Texas Comptroller’s Office – Property Tax resource provides up-to-date tools for estimating liabilities and meeting local reporting deadlines.

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Human Resources

Texas HR regulations reflect a combination of federal standards and state-specific policies. Employers must carefully manage hiring practices, workplace conduct, employee classification, and termination protocols to stay compliant and competitive.

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The Texas Guidebook for Employers is an essential reference for navigating these responsibilities. It includes guidance on:

  • Employment-at-will and how to avoid creating implied contracts through casual language or inconsistent enforcement

  • Progressive discipline systems that protect employers against legal disputes

  • Documentation practices such as written warnings, attendance logs, and signed acknowledgments

  • Correct employee classification, particularly regarding overtime and exempt status under federal and state wage laws

Employers are encouraged to proactively address workplace policies before issues arise. Affiliated HR & Payroll offers tools and insights to help Texas businesses implement strong, compliant HR processes.

For deeper insights, explore these resources:

Texas Unemployment Insurance

Employers are required to register with the Texas Workforce Commission (TWC) and submit quarterly wage reports. New businesses begin with a standard SUTA rate that may later adjust based on claims history. Handling unemployment claims properly—especially terminations—is crucial for keeping tax rates low.

Our Texas Employers Guide to Navigating Unemployment Insurance Claims explains how to respond to claims, maintain compliance, and reduce audit risk.

Labor Laws and Compliance

Texas employers are required to display current labor law posters, follow wage and hour laws, and maintain safe work environments. Changes in state and federal legislation can impact leave policies, discrimination protections, and workers’ compensation.

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Useful compliance resources include:

Texas Workers Compensation Insurance explains employer obligations in providing or opting out of coverage.

    Employer and Employee Forms

    Texas employers must gather and retain both federal and state-required forms as part of hiring and payroll operations.

    Texas-Specific:

    Notice of Paydays

    Must be posted to inform employees of designated payday schedules.

    Workers’ Compensation Coverage Notification

    Informs employees about workers’ comp coverage status.

    Texas New Hire Reporting

    Mandatory reporting of all new hires within 20 days.

    Federal Forms:

    IRS W-4

    Employee withholding certificate.

    USCIS I-9

    Verifies identity and employment eligibility.

    Common Questions Texas Employers Ask

    Explore answers to frequently asked questions regarding payroll and HR compliance for Texas employers.

    Can I deduct money from an employee’s paycheck for uniforms or damage?

    Only with written authorization. The Texas Guidebook for Employers recommends maintaining a signed agreement and only deducting within legal limits.

    What records must I keep for employees?

    At a minimum: time records, pay records, job descriptions, signed policies, and performance evaluations. The Guidebook outlines timelines and document types to retain.

    What’s the best way to handle job abandonment?

    Texas follows at-will employment, but documentation is critical. The Guidebook includes sample job abandonment policies and response protocols.

    Ready to Simplify Payroll and HR in Texas?

    Managing compliance and efficiency doesn’t have to be complicated.
    Contact Affiliated HR & Payroll today to simplify your payroll and HR needs in Texas!