- Corporate Franchise Tax
- Property Tax
- Sales & Use Tax
- Unemployment Insurance & Workers’ Compensation
- Texas Enterprise Zone Program
- Tax Exemptions & Credits
- Training Programs
- Texas Enterprise Fund
- Chapter 380/381 Financing
- Economic Development Sales Tax Corporations
- Texas Small Business Credit Initiative
- Texas Semiconductor Innovation Fund
- Cancer Prevention & Research Institute of Texas Grants
- Texas Product Development & Small Business Incubator Fund
- Tax Increment Financing
- Industrial Revenue Bonds
- Texas Moving Image Industry Incentive Program
- Foreign Trade Zone 183 of Central Texas
- Other Assistance
- Local Incentives Summary
Employer costs for unemployment insurance and workers' compensation are relatively low in Texas.
Businesses that employ one or more individuals may be subject to the state unemployment tax. New employers pay 2.7% on the first $9,000 of wages per employee. A minimum of six quarters is required to obtain an experience rating in order to determine an employer's revised rate. The Texas Workforce Commission indicates that the effective tax rate in 2023 ranges from a minimum of 0.23% to a maximum of 6.23% for experienced-rated accounts and the average experience tax rate is 0.89%.
Estimated employer contribution rates, 2023
|AVERAGE EMPLOYER TAX RATE AS A % OF TAXABLE WAGES
|AVERAGE EMPLOYER TAX RATE AS A % OF TOTAL WAGES
Source: U.S. Employment & Training Administration, Average Employer Contribution Rates by State.
The Texas Workers' Compensation Act limits a business' liability for job-related injuries if the employer has a workers' compensation policy from a licensed insurance carrier or has been certified to self-insure by the Texas Workers' Compensation Commission. Only companies specifically licensed to sell workers' compensation in Texas may legally offer such insurance. They may sell only the standard policy adopted by the Commissioner of Insurance.
Businesses without workers' compensation coverage face unlimited liability if an employee is injured and can prove in court that the employer was negligent in any way. Texas employers who do not carry workers' compensation insurance coverage are required to report their non-coverage status to their employees and to the DWC, as well as report work-related injuries and occupational diseases to the DWC.
An insurance carriers may choose to base its rates on its own independent company-specific relativities filed by the company or loss costs filed by the National Council on Compensation Insurance. Thus, rates and rating plans varying from one insurance carrier to another. It is now to an employer's benefit to shop around for the most affordable coverage. The TDI publishes basis of rate tables which set out the relativities by classification which are the base rates for a majority of insurance carriers. This will assist employers in comparison shopping for workers' compensation and employers' liability insurance in Texas
The insurance company assigns policyholders to one or more classifications based on the policyholder’s type of business. The company then determines the employer’s payroll for each classification. The total payroll for each classification is multiplied by the company’s rate for that classification (rate per $100 payroll). The employer’s premium is the sum of the premiums for the individual classifications, plus fees and credits.
There are other factors that may be utilized to increase or decrease the employer's premium. An experience rating modifier that reflects the employer's past loss history may be applied to the premium. (The employer may be able to negotiate the experience modifier downward if they have improved loss ratios or implemented improved safety programs.) A schedule rating debit or credit may be applied to the premium depending on individual characteristics of the employer's business that may not be reflected in the rate. In addition, there are several optional rating plans such as deductibles or retrospective rating that are available to insureds that may reduce premiums.
Workers’ compensation program costs per $100 of covered wages
Source: National Academy of Social Insurance, Workers' Compensation: Benefits, Coverage, and Costs, 2020, November 2022.