Texas First Hire

How to Hire Your First Employee in Texas: The Steps in Order

By Jeremy Kenerson, Founder and CEO at DeskTeam360

Last updated . Every rule on this page was read on its official source that day.

To hire your first employee in Texas, you work through eight steps. You decide whether the person is an employee or a contractor. You get a federal tax ID. You register with the Texas Workforce Commission. You collect two federal forms. You report the hire to the Texas Attorney General's office. You make your workers' comp choice, set up payroll, and put up the required notices. Each step below names the office, the form and the deadline.

Not legal or tax advice. This page explains the rules in plain words. Ask your accountant or lawyer before you act.

Step 1. Is your first hire an employee or a contractor?

Whether your first hire is an employee or a contractor turns on who has the right to direct and control the work. Two tests apply: the IRS's and the Texas Workforce Commission's.

The IRS test. The IRS uses the common-law rules. It looks at the whole relationship and at the right to direct and control the worker, and no set number of factors decides it. It groups the facts three ways: behavioral, financial, and the kind of relationship the two sides have. A remote worker is an employee under those rules if the business can control what will be done and how.

The Texas test. The Texas Workforce Commission uses a 20-point guide. Its test is the right to direct or control the work.

Why the answer matters. For an employee, the IRS says a business generally must withhold income tax, Social Security tax and Medicare tax from wages. It generally must also pay the matching employer share of Social Security and Medicare, and pay unemployment tax. For an independent contractor, it generally doesn't have to withhold or pay any taxes on the payments.

What a wrong call can cost. If a business treats an employee as a contractor with no reasonable basis, the IRS says it may be held liable for employment taxes for that worker. The Texas Workforce Commission says a wrong call can mean more taxes, penalties and interest. If the status isn't clear, the business or the worker may file Form SS-8, and the IRS decides. That may take at least six months.

One number on how many companies use contractors comes from the Census Bureau's 2020 Annual Business Survey. Of the companies that answered, 33 percent said they used contractors, subcontractors, independent contractors or outside consultants. A US Government Accountability Office report gave that figure in November 2022. It counts the companies that answered that survey, and it isn't about first hires.

A second number comes from the Federal Reserve Banks. They surveyed firms with no paid employees from September 4 to November 4, 2024. Of the ones in business more than two years that planned to hire, 51% already used contract workers. That survey is a weighted sample, and it isn't about first hires either.

This page can't tell you which one your worker is. Not legal or tax advice. Ask your accountant.

Sources: IRS, independent contractor or employee, IRS Topic 762 and Texas Workforce Commission, classifying employees and independent contractors.

What paperwork comes with a contractor?

The paperwork for a contractor starts with Form W-9. Once you've decided a person is an independent contractor, the IRS says the first step is to have the contractor fill it out. You keep it in your files for four years.

You use Form 1099-NEC to report what you paid for services to a person who isn't your employee. For tax years that begin after 2025, the IRS instructions say to file it for each person you paid at least $2,000 during the year. The IRS says the amount may be adjusted for inflation from 2027 on.

What if the person lives and works outside the US?

When the work is done outside the US and the person paid is a nonresident alien, the IRS says the pay is normally not subject to US tax withholding. It normally doesn't have to be reported on an information return either. The IRS says the place where the work is done generally decides where the pay is from. Form W-8BEN is the form a foreign person gives the payer, when asked, to show foreign status. This isn't tax advice. Ask your accountant.

The steps from here on are for an employee.

Step 2. How do you get a federal tax ID?

You get a federal tax ID from the IRS online, and the IRS never charges a fee for it. It's called an Employer Identification Number, or EIN. You generally need one to hire employees.

Source: IRS, get an employer identification number.

Step 3. When do you register with the Texas Workforce Commission?

You register with the Texas Workforce Commission within ten days of the day you first owe Texas unemployment tax. That day comes in one of two ways. One is when you pay $1,500 or more in wages in one calendar quarter. The other is when you've had an employee in 20 different weeks of one calendar year. Full time or part time makes no difference.

Table: Texas unemployment tax: the rates, the pay it applies to, and what a new employer pays. Sources: Texas Workforce Commission, unemployment tax rates and who owes unemployment tax. Read October 2, 2026.
Texas unemployment tax The rule Year
Rate for a new employer 2.70% 2026
Pay it applies to The first $9,000 of each worker's pay in a calendar year 2026
What a new employer pays $243 a year for each worker paid $9,000 or more, at the 2.70% entry rate 2026
How long the entry rate lasts Until the employer has four chargeable quarters 2026
Rates for employers with a claims record From 0.32% up to 6.32% 2026

Sources: Texas Workforce Commission, unemployment tax rates and Texas Workforce Commission, who owes unemployment tax.

Step 4. What forms does a new employee fill out?

A new employee fills out two federal forms: Form W-4 and Form I-9. Texas has no state income tax to withhold.

  • Form W-4. The new employee fills it out so you can withhold the right federal income tax.
  • Form I-9. It's required. E-Verify is voluntary for most employers.

Sources: IRS, about Form W-4, E-Verify and Form I-9 and the Texas Constitution, Article 8, Section 24-a.

Step 5. Where do you report a new hire in Texas?

You report a new hire in Texas to the Texas Attorney General's office. The report is due within 20 calendar days of the day the person starts earning wages. Rehires count too. Federal law sets the 20 days. It says to report each new hire to the state where the employee works.

Sources: Texas Attorney General, new hire reporting and acf.gov, new hire reporting for employers.

Step 6. Is workers' comp required in Texas?

Workers' comp isn't required in most cases for a private employer in Texas. Private employers can choose whether to carry workers' compensation insurance. Texas government employers must carry it.

The choice is yours. The state spells out what each side of it means.

What coverage does, in the state's words. It pays lost wages and medical benefits to workers hurt on the job. It also limits what the business owes if an employee sues, except when gross negligence causes a death.

What you do if you go without it.

  1. File a notice of no coverage with the state after you hire your first employee, and again each year between February 1 and April 30.
  2. Post a notice of no coverage at work.
  3. Give each new employee written notice.
  4. With five or more employees, report work injuries with more than one day of lost time.

This page doesn't tell you which to pick.

Sources: Texas Department of Insurance, workers' comp for employers, coverage rules, employers with no coverage and Texas Labor Code, chapter 406.

Step 7. What does payroll have to cover?

Payroll has to cover what you take out of each paycheck and what you pay on top as the employer.

Table: What payroll has to cover, with the rule for each item and its year. Sources: IRS, US Department of Labor, Texas Workforce Commission and the Texas Constitution. Read October 2, 2026.
Item The rule Year
Federal income tax Withheld from wages, based on the employee's Form W-4 Current
Social Security The employer pays 6.2% on wages up to $184,500 2026
Medicare The employer pays 1.45% on all wages Current rate
Federal unemployment tax (FUTA) 6.0% on the first $7,000 per worker. With the full state credit it's 0.6%, or $42 a worker Current rate. The IRS page gives no year
Texas unemployment tax 2.70% for a new employer, on the first $9,000 of each worker's pay 2026
Texas income tax None on people In the Texas Constitution since November 5, 2019
Minimum wage $7.25 an hour. Texas uses the federal rate In effect since July 24, 2009

Employer Social Security and Medicare add up to 7.65%. The US Labor Department lists the states that could get a smaller federal credit for 2026. Texas isn't on that list. Only California and the Virgin Islands are. The final list is set after November 10, 2026.

This site explains these rules. It doesn't offer payroll, legal or tax help.

Sources: IRS Topic 751, IRS Topic 759, US Department of Labor, FUTA credit reductions, Texas Workforce Commission, Texas minimum wage law and US Department of Labor, minimum wage.

Step 8. Which workplace notices are required?

From your first employee, four notices on the Texas Workforce Commission's list can apply: the Payday Law poster, a workplace violence notice, a workers' comp notice, and an Earned Income Tax Credit notice. Texas has required posters that every Texas employer must display. You can download and print them for free, and you don't need to buy them.

Here are the four, as the state's page lists them:

  1. The Texas Payday Law poster. If you owe Texas unemployment tax, it's the combined Unemployment and Payday Law poster.
  2. A Reporting Workplace Violence notice, in English and Spanish. It's for employers with one or more employees.
  3. Telling employees whether you carry workers' comp coverage, as in step 6.
  4. Telling employees about the federal Earned Income Tax Credit by March 1 each year.

The Equal Employment Opportunity poster is for employers with 15 or more employees, or smaller ones with federal grants and contracts.

Some federal laws also require notices. The rules differ by law. Not every employer is covered by every law. US Labor gives the posters away free. US Labor's Poster Advisor shows which federal posters apply to you. For help with the Texas ones, call 800-832-9243. That's the Wage and Hour team at the Texas Workforce Commission.

Sources: Texas Workforce Commission, posters for the workplace and US Department of Labor, workplace posters.

What if your first hire lives in another state?

A remote employee who lives in another state may fall under that state's rules. Check with that state's workforce agency. Texas unemployment law covers work that's localized in Texas.

Source: Texas Labor Code, chapter 201.

How is Texas different from a general first-hire checklist?

Texas differs from a general first-hire checklist in at least seven ways: for example, workers' comp is the owner's choice for most private employers, and there's no state income tax to withhold. The table below lists seven. This site read 7 top-ranked pages for this question on October 1, 2026, and saved 13 AI answers the same day. None of the 7 pages gives a single Texas fact. None of the 13 answers gives one either.

Table: Seven Texas rules, and how many of the 7 top-ranked pages read and the 13 AI answers saved give each one. Sources: Texas Department of Insurance, Texas Workforce Commission, Texas Constitution, Texas Attorney General, and this site's own research. Read October 2, 2026, except this site's own research, read October 1, 2026.
The Texas rule In the 7 top-ranked pages read In the 13 AI answers saved Texas source
Private employers can choose whether to carry workers' comp. It isn't required in most cases 0 give it. 2 get it wrong: one says all businesses with employees must carry it, and one calls it required by the state 0 give it. 9 tell the reader to buy, get or arrange it, and 2 of those call it mandatory Texas Department of Insurance
A new employer pays 2.70% unemployment tax in 2026 on the first $9,000 of each worker's pay 0 give it 0 give it Texas Workforce Commission, tax rates
The tax starts at $1,500 in wages in a calendar quarter, or one employee in 20 different weeks of a year. Register within ten days of owing it 0 give it 0 give it Texas Workforce Commission, who owes the tax
Texas has no state income tax on people, so there's none to withhold 0 give it 0 give it. 5 say to collect state tax forms Texas Constitution, Article 8
The minimum wage is $7.25 an hour. Texas uses the federal rate 0 give it 0 give the Texas rate Texas Workforce Commission, minimum wage
New hires are reported to the Texas Attorney General's office within 20 calendar days 0 name the Texas office 0 name the Texas office Texas Attorney General
The Texas Workforce Commission uses a 20-point guide to tell an employee from a contractor 0 give it 0 give it Texas Workforce Commission, classifying workers

How to read the counts. The page counts hold for any reader, because a page reads the same from any state. The AI answers are a sample from one browser on one day. That browser was in Arizona. One of the four engines answered with Arizona rules, so its answer shows nothing about what a searcher in Texas gets.

For what all of this costs by the month, see the first hire cost page. It also covers benefits.

If your first hire would do production work

This site's fourth option, after an employee, a contractor and outsourcing overseas, is insourcing with DeskTeam360: its flat-rate team, for production work. DeskTeam360's Entrepreneur plan is $1,497 a month at its published price as of October 2026. If you're turning work away at your agency, a call shows whether it fits.

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How we worked this out

  • Where the rules come from. Each rule was read on its official source on October 2, 2026. That means the agency's own page, or the law itself. The Sources list names every one.
  • Where the counts come from. The counts of top pages and AI answers come from research done for this site on October 1, 2026. Pages and answers change, so those counts can go stale.
  • What's kept from the source. Where a source says "generally," "normally" or "may," this page keeps the word.
  • What this page leaves out. Whether your worker is a contractor. Which federal posters apply to you. Work done inside the US by a person from another country. Rules in states other than Texas. Each would be legal or tax advice, and no source read for this page backs it.

Cite this page: Texas First Hire, "How to Hire Your First Employee in Texas: The Steps in Order," https://texasfirsthire.com/first-hire-steps, last updated October 2, 2026.

Sources

This list backs the rules here and on the home page.

All read October 2, 2026, except this site's own research, read October 1, 2026. Texas First Hire is a private site. It has no tie to the State of Texas, to any agency named above, or to any other part of government.

What changed

  • October 2, 2026: First version of this page.