How to Hire Employees in Texas: Employer Guide (2026)

Hiring your first employee in Texas creates a sequence of legal and tax obligations that need to happen in a specific order. Most employers miss one or more, and the missed obligation shows up later as a TWC audit, a Payday Law claim, an unemployment hearing where you cannot produce the documentation, or a non-subscriber injury suit you cannot defend. None of these problems are exotic. They are the predictable result of skipping a step at the start.

This guide is for Texas business owners hiring their first employee, switching from contractors to employees, or formalizing a hire that has been running on a handshake. It covers what you have to register for before the first day, the paperwork you need on file, the Texas-specific notices and postings, and the deadlines that matter.

Short answer: before your first employee starts, you need a federal EIN, a Texas Workforce Commission unemployment tax account, a workers’ comp decision (subscriber or non-subscriber, with the non-subscriber notice if you choose not to carry it), an I-9 and W-4 on file, an offer letter that does not undermine at-will employment, and a plan to submit the Texas new-hire report within 20 days of the start date. The rest of this guide is how to do each piece.

Do I Need to Register My Business to Hire in Texas?

Yes. Three registrations apply to almost every Texas employer, and a fourth applies if you sell taxable goods or services:

• Federal EIN: Required for payroll, federal employment tax filings, and most state registrations. Obtain free from the IRS online. Most LLCs and corporations already have one from formation.
• Texas Workforce Commission unemployment tax account: Required as soon as you have at least one employee. Register through the TWC Unemployment Tax Services portal. You will receive a TWC account number and a tax rate.
• Workers’ compensation decision: Texas is the only state where private employer workers’ comp is optional for most employers. You either carry workers’ comp insurance (subscriber) or you do not (non-subscriber). Either decision has follow-on obligations described below.
• Texas Comptroller sales tax permit: Only if your business sells taxable goods or services. This is separate from hiring but should be in place before opening operations.

Do this before the first day, not after. Several of the new-hire steps below assume the registrations are already in place.

Employee or Independent Contractor: Settle This First

Texas employers sometimes try to convert what should be an employee into a 1099 contractor to skip the paperwork and tax obligations. This rarely ends well. The IRS and TWC both look at how the working relationship functions, not what you call it. A misclassified contractor reclassified as an employee triggers back wages, unpaid payroll taxes, TWC penalties, and exposure under the Texas Payday Law.

If you have any doubt about which category your worker belongs in, read our Texas independent contractor compliance guide before drafting an offer. The rest of this guide assumes you have decided the worker is an employee.

The Offer Letter and At-Will Employment

Texas is an at-will employment state, meaning either the employer or the employee can end the relationship at any time, with or without cause and with or without notice, subject to anti-discrimination and other state and federal limits. At-will is a strong default protection for the employer, but employers regularly undermine it by accident in the offer letter or handbook.

A clean Texas offer letter should:

• Identify the parties and the position: employer legal name, position title, full-time or part-time, and the start date.
• State the pay structure clearly: hourly rate or annual salary, pay frequency (and whether the employee is exempt or non-exempt from overtime), overtime authorization rules, and any commission or bonus terms with a separate written commission agreement if applicable.
• State that employment is at-will: a clear sentence saying employment can be ended by either party at any time, for any lawful reason or no reason, with or without notice.
• Avoid language that contradicts at-will: no promises of continued employment, no mandatory progressive discipline (“three warnings before termination”), and no language describing the position as permanent.
• Reference any required attachments: non-disclosure, non-solicitation, IP assignment, handbook acknowledgment, direct deposit authorization.
• Get signatures before the start date: not after, not on the first day in a stack of forms while the employee is trying to be polite.

New Hire Paperwork: The Checklist

Required paperwork comes from federal law, Texas state law, and your own internal policies. The order and deadlines matter.

Texas Required Notices and Postings

The required labor-law posters cluster fall into three buckets. Most are covered by a single all-in-one Texas-and-federal labor-law poster, which you can order from TWC or several private vendors:

• Federal: FLSA minimum wage and overtime, FMLA (at 50+ employees), EEO Is the Law, USERRA, Polygraph Protection Act, IRCA (E-Verify, if applicable), OSHA workplace safety.
• Texas: Workers’ Compensation Notice to Employees (subscriber or non-subscriber version), Texas Payday Law notice, Earned Income Tax Credit notice, ombudsman contact information.
• Industry- or location-specific: Certain Texas cities have local paid-sick-leave ordinances, public-employer notices, or industry postings (childcare, construction, healthcare). Confirm any local requirements that apply.

Posters must be displayed in a place where employees can readily see them. For remote employees, distribute electronically and document the distribution.

Texas Small Business Employment Documents: The Working File

Many of the queries that land Texas employers on this page are not really about hiring procedures. They are about which documents to keep on file for each employee. Here is the working file every Texas employer should be able to assemble on demand:

The recommended set is what separates a TWC unemployment hearing you win from one you lose. Without written authorization for a deduction, the deduction violates the Payday Law no matter how reasonable it was. Without a written commission agreement, an unpaid bonus claim becomes a he-said-she-said. The cost to create these documents at hiring is trivial compared to the cost of producing them on demand under a TWC notice.

Common Texas Hiring Mistakes

• Hiring before registration: The first day of work happens before the TWC account is open or before the workers’ comp decision is made. Back-filing is possible but penalty-prone.
• Skipping the non-subscriber notice: Choosing non-subscriber status without giving the required written notice to new hires before they begin work. This eliminates important defenses in a later negligence suit.
• Missing the 20-day new-hire report: The OAG report is mandatory and penalty-bearing.
• Generic offer letters that contradict at-will: Probationary-period promises, “permanent employee” language, and mandatory discipline steps all narrow the at-will default.
• Treating the I-9 like a personnel form: I-9s should be kept separately from personnel files for audit response and to prevent accidental disclosure of immigration-related information.
• Using a contractor agreement when the worker is really an employee: Texas employers face material reclassification exposure. (See the IC compliance guide.)
• Forgetting to update workers’ comp at scale changes: Adding employees or changing the nature of the work without updating coverage or notice is a common Texas pitfall.

When to Talk to an Attorney

Most first-employee hires in Texas are straightforward. The situations that justify attorney involvement before you sign anything:

• Hiring an exempt or salaried employee with commission, bonus, or equity components
• Bringing on a former contractor as an employee (classification audit before the switch)
• Hiring an employee subject to a non-compete or non-solicitation from a prior job
• Hiring across state lines (remote employees outside Texas)
• Choosing non-subscriber status for the first time
• Drafting a commission or bonus plan that needs to hold up in a Texas wage claim

Related Reading

• Texas Small Business Law Hub, overview of our Texas practice and team
• Texas Independent Contractor Requirements
• Texas Employee Handbook Requirements
• Texas Payday Law and TWC Wage Claims
• How to Fire an Employee in Texas
• 1099 vs W2 Worker Classification

Free Resource

Download the Texas Small Business Employment Guide. Covers offer letters, new-hire paperwork, posting requirements, and what good employment records look like. No registration required.

When the Next Hiring Question Comes Up

Hiring one employee is one question. The next ones, an offer letter that crosses state lines, a commission plan for a salesperson, a performance issue with a probationary hire, a non-subscriber injury report, all show up later, with no time to look them up from scratch.

Momentum Membership gives Texas employers unlimited email access to our attorneys for $95/month, for exactly the day-to-day employment questions that come up after the first hire is on payroll. It is the bridge between a one-time formation or hire and the ongoing legal questions of running an actual Texas employer.

Hiring a first employee and want the offer letter, handbook acknowledgment, and posting compliance handled at the same time? Schedule a consultation or see our Launch service for flat-fee Texas formations and employer setup.