A Guide to PEO in Texas

Correctly hiring, paying, and managing a workforce in Texas demands an in-depth understanding of both state and federal laws. By partnering with a professional employment organization (PEO), companies can delegate compliance and HR tasks to a trusted provider—and as a result, hire with more confidence, compliance, and speed.

Read on to explore the benefits and process of using a PEO in the state of Texas.

The role of PEOs in Texas

PEOs allow Texas businesses to outsource a number of employee and HR management functions including payroll and benefits administration. When you partner with a PEO provider, they can also help you maintain continuous compliance with all relevant state and federal laws.

Engaging a PEO means entering into a co-employment relationship with the service provider, meaning you share certain responsibilities and liabilities with the PEO while maintaining control of your workforce’s daily operations.

Texas regulates all PEO providers that operate within its jurisdiction. According to state law, providers must obtain a license and meet the strict requirements of the Texas Department of Licensing and Regulation (TDLR). 

Many employee benefits are not required under state or federal law. However, if the PEO does offer benefits such as health insurance, retirement plans, or worker’s compensation, they must comply with applicable regulations.

Benefits of Texas PEO services

Working with a PEO helps Texas companies simplify their HR operations, offer comprehensive benefits to employees, and stay updated with state-specific employment laws. 

Increased efficiency 

HR outsourcing can lead to more streamlined operations by reducing the amount of time and resources dedicated to tasks. This approach frees up CFOs and finance teams to focus on strategic initiatives with the knowledge that the company’s core operations are in good hands.

PEOs also come with sophisticated HR software that can automate US payroll and benefits, track expenses, and provide insights through real-time analytics. Having these tools allows companies to create more efficient and scalable processes that drive growth.

Access to expertise

PEOs grant access to a bank of expertise and regulatory knowledge that’s often beyond the scope of startups or small businesses. The service tends to be more cost-effective than hiring in-house specialists as it has lower, more predictable costs.

It also enables HR teams, CFOs, and Finance departments to make well-informed decisions based on expert insights regarding payroll, HR, and regulatory compliance, ensuring they make strategic choices supported by specialized knowledge.

Cost-effective employee benefit plans

A significant advantage of partnering with a PEO is the opportunity to offer a more attractive and affordable benefits package to employees. 

Employee health insurance and other benefits come at a steep price for small businesses and startups. Since PEOs employ a larger workforce, they’re able to provide small businesses with more purchasing power, enabling them to access affordable and comprehensive benefits plans including health, dental, and vision coverage, retirement plans, and more.

While Texas doesn’t require you to provide benefits, it currently has one of the hottest job markets in the US. Offering a comprehensive selection of plans is crucial for recruitment and retention, and a PEO allows smaller businesses to compete with larger corporations for top talent.

Enhanced compliance

Non-compliance has high stakes as violating state laws can lead to fines, legal cases, and reputational harm. PEOs help companies navigate and stay updated with state and federal laws to prevent issues.

Given that Texas can impose harsh penalties, robust compliance management is vital. For instance, the city of Austin recently introduced a Wage Theft Program. Officials may list business owners on a public database if they find them guilty of offenses like incorrectly paying overtime or misclassifying workers.

Delegating compliance management to a PEO also allows for more effective resource management. Businesses can focus on overhead strategy rather than appointing team members to research and interpret complex regulations.

Payroll, labor, and employment laws in Texas

The regulations in Texas are comprehensive and known for being employer-friendly. Here are the most important state-specific laws to be aware of:

Payroll and benefits laws

• Minimum wage: Texas aligns its minimum wage with the federal standard which is currently $7.25 USD per hour. If the US Congress increases the rate, the state will adjust the amount accordingly
• Wages: Organizations must pay employees in US dollars using reasonable means such as post or direct deposit. They can pursue alternative methods if specific team members agree in writing
• Pay frequency: Employees exempt from the Fair Labor Standards Act (FLSA) must receive pay at least once a month. All others must receive pay at least semi-monthly. If the employer doesn’t assign dates, the default are the 1st and 15th
• Final paychecks: Laid-off or terminated employees must receive their final paycheck within six calendar days. If workers resign, businesses can pay them on the following payday
• Paid sick leave: Texas doesn’t require companies to provide sick leave unless it’s a reasonable accommodation for disability or pregnancy. Individual employers may determine their own policies
• Paid vacation: Similarly, Texas doesn’t mandate paid vacation but employers must follow any policies they make in writing
• Unused benefits: When workers leave, employers must include all unused benefits such as vacation pay or parental leave in the final paycheck if it’s written in their policy
• Deductions: Organizations must obtain written authorization from the employee, the government, or a court before making payroll deductions
• Pay transparency laws: According to a recent bill, Texas employers can’t discriminate against candidates who ask about pay. However, the state hasn’t passed a law requiring companies to post salary bands in job descriptions

Labor laws

• Meal and rest breaks: The Texas Payday Law doesn’t require employers to offer paid breaks unless they’re 20 minutes or under 
• Paid time: Workers must receive full pay for any time worked, including mandatory training or meetings
• Overtime: State law says employees who work more than 40 hours during a week are entitled to overtime. The employer can either pay them or give them the equivalent time off at a rate of 1.5 hours for every hour worked. Workers aren’t allowed to accumulate more than 240 hours of overtime that can be taken as leave
• Whistleblower protections: Texas Whistleblower Act protects workers from adverse employment-related actions from their employers when they report a law violation to an appropriate law enforcement authority in good faith

Employment laws

• Worker classification: Texas defines an employee as someone that a business directs and controls. Misclassification can lead to tax penalties, interest, and fines
• Right to work: Businesses can’t discriminate against candidates based on their membership in unions and similar groups
• Discrimination: According to the Texas Workforce Commission, the Equal Employment Opportunity prohibits discrimination in employment because of race, color, national origin, religion, sex, age, or disability
• Terminations: Texas is an “at-will employment” state, which means employees can be terminated for any reason, at any time, provided it doesn’t violate the terms of their contract or any state or federal laws
• Workers’ compensation: Texas state law doesn’t require private employers to offer workers’ compensation

Additional requirements and enforcement

The above information covers just some of the labor, payroll, and employment laws in Texas. Companies must also comply with federal labor, employment, and payroll laws, such as the FMLA and COBRA.

For example, in Texas, all employers must register for an unemployment tax program and make contributions. The tax rate for 2025 ranges from 0.25% to 6.25% on a taxable wage base of $9,000 per employee.

When there’s an overlap between different US laws, businesses are required to follow the policies that grant workers the most rights and protections.

See also: Your ultimate guide to US payroll in Texas

How Deel PEO is different

Deel’s in-house PEO is built to support fast-growing teams with the tools, coverage, and service they need, all in one platform.

Fully in-house support

Deel PEO is run entirely by internal specialists, including certified professionals, licensed advisors, and dedicated HRBPs. Clients get direct access to expert guidance across payroll, benefits, and compliance, with no third-party handoffs or delays.

Benefits admin made easy

Admins can choose, enroll, and manage health benefits for US employees directly in the Deel platform. They can view costs, track coverage, and handle renewals—all in one place, without chasing brokers or juggling paperwork.

Exclusive access to Aetna International plans

For teams with globally mobile employees, Deel is the only PEO to offer Aetna International health plans, ensuring continuous coverage across borders without needing to manage separate providers.

All-in-one platform

Admins can manage hiring, onboarding, payroll, and benefits in one place. Deel simplifies every step, from enrollment to renewals, reducing HR admin time.

Compliance coverage at every level

Deel helps businesses meet federal, state, and local employment laws, taking the guesswork out of US HR compliance.

How to choose the right PEO in Texas

The state of Texas has unique laws and requirements that require a thoughtful approach to selecting a PEO. Consider the following strategy to help you find a provider that matches your organization’s HR needs and goals.

1. Define your business needs

Review your current HR operations to see where you might be facing inefficiencies or overspending. Go beyond your immediate needs to consider long-term goals.

Key areas of focus include your payroll processing, benefits administration, and risk management. Consider your organization’s growth projections as you’ll need your PEO to scale alongside your operations.

2. Research PEOs with Texas expertise

Narrow down your options by focusing on PEOs with a significant presence in Texas and a proven track record. The best providers will have case studies, high ratings, and reviews that demonstrate their expertise. 

3. Evaluate the range of services and quality of benefits

Consider the range of services provided by potential PEOs to see whether they cover your business needs in Texas. Do they have robust administrative support, tax filing, HR services, and employee onboarding?

Balance the range and quality of the PEO’s benefits packages against the pricing. Their plans should accommodate your workforce’s shifting needs while fitting into your budget.

4. Assess compliance and risk management capabilities

Learn more about the PEO’s specific approach to maintaining compliance with Texas laws and regulations. Understanding what proactive measures they take will show you how they can reduce errors and mitigate risks. 

Also, explore how they notify companies about upcoming regulatory changes. For example, Deel has a Compliance Hub with all the latest updates about any state, federal, or international policies that could impact your business.

5. Check customer service and support

Since you’re partnering with the provider, effective customer support is essential for seamless collaboration and communication. Research the PEO’s support in terms of response rate, availability, and contact options. Also, consider the quality of the tools they can access to resolve issues. For example, data security and protection are often a top concern. 

6. Review and negotiate the contract

Ensure you understand every detail of the PEO contract including terms, fees, and the termination process, seeking legal counsel if necessary. Aim to negotiate conditions that align with your business objectives and interests, ensuring the responsibilities of both parties are clear. 

7. Plan for implementation and transition

Inform your team about the upcoming changes. Start by explaining all the benefits and different stages of the transition to a PEO. Develop a step-by-step process for the PEO transition with the provider and key stakeholders. Assign responsibilities to specific team members and schedule regular update sessions to stay on track.

See also: How to Choose a PEO or US Payroll Provider: 9 Questions to Answer

Manage your Texas, US, and global workers with Deel

Deel’s in-house PEO is built to support fast-growing teams with the tools, coverage, and service they need, all in one platform.

Fully in-house support

Deel PEO is run entirely by internal specialists, including certified professionals, licensed advisors, and dedicated HRBPs. Clients get direct access to expert guidance across payroll, benefits, and compliance, with no third-party handoffs or delays.

Benefits admin made easy

Admins can choose, enroll, and manage health benefits for US employees directly in the Deel platform. They can view costs, track coverage, and handle renewals—all in one place, without chasing brokers or juggling paperwork.

Exclusive access to Aetna International plans

For teams with globally mobile employees, Deel is the only PEO to offer Aetna International health plans, ensuring continuous coverage across borders without needing to manage separate providers.

All-in-one platform

Admins can manage hiring, onboarding, payroll, and benefits in one place. Deel simplifies every step, from enrollment to renewals, reducing HR admin time.

Compliance coverage at every level

Deel helps businesses meet federal, state, and local employment laws, taking the guesswork out of US HR compliance.

Book a demo to learn more about using Deel’s PEO in Texas.