Texas Minimum Wage: What Small Businesses Need To Know

Did you know that compared to other states, Texas offers a relatively uncomplicated payroll system? There’s no state income tax, no mandatory workers’ comp insurance, and only state unemployment taxes to consider!

But that doesn’t give us a free pass to ignore the rules.

The Texas Payday Law, overseen by the Texas Workforce Commission (TWC), has its set of mandates which, if not followed, can result in hefty fines and other punishments.

In this guide, we’ll cover everything around Texas's minimum wage essentials, overtime, and pay frequency laws. By the end, you'll have a roadmap to navigate the Texas wage landscape confidently so your business stands tall and compliant.

{{banner-cta}}

Understanding minimum wage laws in Texas

Texas follows the federal minimum wage, currently set at $7.25 per hour in 2024. It translates to a weekly pay of $290 for a regular 40-hour week. Most employees in Texas are entitled to this rate. However, there are specific exceptions - student workers, tipped employees, and some exempt professions (discussed in the next section).

Texas doesn't have its distinct minimum wage; it aligns with federal standards. The state last updated this rate in 2008, raising it from $6.55 to $7.25 per hour. And, similar to other states, the Texas minimum wage rate is tied to the Consumer Price Index, so it adjusts with inflation over time.

To provide you with a broader perspective, here's how Texas compares to the minimum wage regulations in other key states:

State

Minimum Wage 2024

Special Conditions/Notable Changes

California

$16.00/hr

California has a minimum hourly wage tiered structure that varies by business size.

Illinois

$14.00/hr

Set to increase to $15.00/hr in 2025

Florida

$12.00/hr

Set to increase to by $1.00 every Sept. 30th until reaching $15.00/hr on Sept. 30, 2026

Texas

$7.25/hr

Same as federal rate

Nevada

$10.25 or $11.25/hr

Rate depends on if qualifying health insurance is offered by the employer. A uniform minimum wage of $12.00/hr for all employees will take effect on July 1, 2024.

Keeping track of wage rates, tax withholdings, and labor laws can get tricky. With a platform like Homebase, you can set custom break and overtime rules so you comply with all labor laws, both at the state and federal levels.

Source

Caption: Homebase lets you add and update all important documents like W-2s before tax filings

Homebase also accurately calculates tax withholdings for every employee, sends timely payments, and ensures taxes reach the right government departments. And come tax season, your compliance toolkit with Homebase automatically handles 1099s and W-2s, letting you focus on your business's growth rather than drowning in legal paperwork.

Note: Certain non-profit organizations and educational institutions in Texas may apply to the labor department with permission to pay below the standard minimum wage.

Current minimum wage rates

As outlined in our guide to paying employees, Texas aligns with the federal minimum wage of $7.25 per hour. This rate applies to most workers, with exceptions detailed below:

Mandatory labor law posters

You need to prominently display Texas Minimum Wage and Labor Law posters in your workplace. These posters help inform your employees about their rights and ensure you comply with state regulations. You can access the poster from our Texas employment law guide.

Overtime pay

For any employee working beyond 40 hours a week, you're required to compensate at 1.5 times their standard wage for those additional hours. Ensure your overtime calculations are accurate to avoid complications with the Texas Department of Labor.

Breakdown by employee categories

Here’s a short snapshot of wage rates based on different employee categories:

Employee typeWage rateConditions/remarksTax implicationsStandard Employees$7.25/hrState and federal standard rateSubject to federal income taxYouth (Under 20)$4.25/hrTraining wage, applicable for the first 90 daysReduced tax bracket due to lower incomeStudents$6.16/hr (up to 20hrs/week)For part-time high school/college studentsEligible for student tax benefitsTipped EmployeesBase: $2.13/hr.Earnings (wage + tips) should be at least $7.25/hr. Must report tips monthlyTips are taxable; employers can claim a tip credit against their obligation to pay the federal minimum wage

Recent changes and updates

Interestingly, Texas has maintained its minimum wage at $7.25 per hour since 2009, matching the federal rate. This was a $0.70 rise from its former rate of $6.55. Currently, Texas hasn't made any legislative changes to elevate this rate, setting it apart from many states that adjust their minimum wage in line with inflation or living costs.

Local entities in Texas, however, have taken matters into their own hands. San Antonio's Security Services Federal Credit Union elevated its minimum wage from $15 to a significant $20 per hour for almost 400 employees in September 2021. This wage is notably higher than both the state and federal minimum rates.

As for the future, while no bills have been passed to bolster the minimum wage in Texas, discussions and proposals are brewing both at the state and local levels. It's uncertain when or if the Texas minimum wage will see an official increase in the upcoming years.

Steps to comply with and implement minimum wage laws

For employers, adhering to minimum wage regulations is not just about compliance; it's about fostering a trustworthy business reputation and ensuring employees are treated fairly. Let's break down the steps:

1. Establish your company as an employer

Start by obtaining your Employer Identification Number (EIN) and setting up an account with the Electronic Federal Transfer System at the federal level. It's the business equivalent of a Social Security Number (SSN).

2. Register with the Texas Workforce Commission

The TWC is the state agency that oversees and provides workforce development services to employers and job seekers in Texas. By registering with the TWC, you ensure that your business complies with state employment laws, access valuable resources for employers, and remain updated on any changes in employment regulations in Texas. Remember to do this within ten days of the date of the first paycheck.

3. Set up your payroll schedule

Texas law mandates that employees exempt from the Fair Labor Standards Act (FLSA) get paid at least once a month. All other employees should be paid at least twice a month, with semi-monthly pay periods as long as possible.

So, if you're paying employees twice a month, the goal is to have the two pay periods as close to 15 days each as practicable. This avoids situations where one pay period might be significantly shorter or longer than the other.

4. Collect essential employee paperwork

Initiating this during the onboarding process is efficient. This includes forms like W-4, I-9, and Direct Deposit details.

5. Manage timesheets efficiently

Make it a point to collect, review, and approve timesheets a few days before payday. This ensures adherence to Texas' Deadline Law, guaranteeing employees receive their wages on or before the designated payday.

6. Execute payroll with perfection

Source

Caption: Homebase automates the entire payroll process with a few simple steps

When it comes to payroll, accuracy is non-negotiable, especially when you have several employees clocking in at different times and rates. Homebase automatically tracks employee hours, breaks, and overtime, adjusting in real-time, ensuring that each minute worked is accounted for and your timesheets are payroll-ready.

7. Annual tax return filings

By the end of each fiscal year, you must file the federal W-2 (for employees) and 1099 forms (for contractors). These forms capture the income your employees received and detail any withholdings and deductions, serving as both a record and a tool for payment transparency.

Seamlessly pay taxes with Homebase

Texas is known for its lenient tax laws and alignment with federal minimum wage standards. However, you should always keep an eye out for updates on the state's specific requirements and follow best practices.

Homebase can automatically calculate wages and taxes and send the correct payments to employees, the state, and the IRS. We also offer HR and compliance features and hiring and onboarding capabilities so you can communicate your policies easily to every new team member.

And with our free plan, small businesses can access many of these high-impact features for up to 20 employees at a single location without any cost. Because with Homebase, you can control your and your team’s time on your own terms.

{{banner-cta}}