Every payroll run in Texas carries hidden compliance risks. One mistake in minimum wage requirements can lead to penalties that stack up fast, whether you’re running a small team or managing payroll across dozens of locations.
This Texas state minimum wage guide breaks down exactly what employers need to know in 2025, from basic wage rates to complex exemptions that could save or cost you thousands. While minimum wage laws protect workers, they also create compliance challenges that affect both employers and employees across the state. We’ll show you how to navigate Texas labor laws without drowning in paperwork, whether you’re running a restaurant in Houston or a retail shop in El Paso.
Key Takeaways
- Classify employees correctly: Make sure every worker is properly identified as exempt, non-exempt, or independent contractor to avoid costly misclassification errors.
- Track hours and pay accurately: Keep detailed records of employee hours and wages, and regularly review payroll to ensure everyone is paid according to the law.
- Stay current and document everything: Post required labor law notices, update payroll practices when laws change, and keep all payroll and compliance records for at least three years
What Is the State Minimum Wage in Texas?
Understanding the current minimum wage in Texas starts with knowing both the rate and its history. The state’s approach to wage laws affects every employer, from tech startups in Austin to family restaurants in San Antonio.
Texas Minimum Wage Rate for 2025
The current minimum wage in Texas stands at $7.25 per hour, identical to the federal minimum wage. This standard minimum wage applies to most non-exempt employees across the state, creating consistent wage requirements from Dallas to El Paso.
Texas hasn’t increased its state minimum wage since July 24, 2009, when it rose from $6.55. That’s over 15 years without a change—the longest stretch in the state’s history. While other states adjust their minimum wage rates annually for cost of living, Texas maintains its alignment with federal standards.
Here’s how the Texas minimum wage has evolved:
- 2009-2025: $7.25 (current rate, 16+ years unchanged)
- 2008: $6.55 (increased $0.70)
- 2007: $5.85 (increased $0.70)
- 1997-2006: $5.15 (9 years unchanged)
Note that some Texas cities pay their municipal workers significantly more. Austin and some other Texas cities pay their own municipal employees higher wages, but these rates do not apply to private businesses. Some private employers voluntarily pay above the minimum wage to attract workers, but this is not mandated by law.
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Why Does Texas Use the Federal Minimum Wage?
Texas lawmakers have consistently chosen to adopt the federal rate rather than establish a different minimum wage. The Texas Minimum Wage Act specifically references the Fair Labor Standards Act (FLSA), creating uniformity between state and federal law.
This approach means the Texas Workforce Commission enforces the same $7.25 rate statewide. Unlike 30 other states with higher minimums, Texas prohibits cities from setting their own wage laws for private employers. Dallas can’t require different wage rates than Houston, keeping compliance straightforward for business owners operating in multiple locations.
The decision impacts payroll taxes, benefits calculations, and overtime pay across every Texas business. Whether you’re managing finances for a single location or multiple sites, you follow the same minimum wage requirements statewide.
Who Is Covered by Texas Minimum Wage Laws?
Texas wage laws cast a wide net, but understanding who’s covered—and who’s exempt—can save employers from costly compliance mistakes. The distinctions between covered and exempt employees affect everything from your payroll software setup to your overtime pay calculations.
Covered Employees
Texas minimum wage requirements apply to nearly all workers covered by the Fair Labor Standards Act. This includes hourly employees in retail, hospitality, and service industries, whether they work full-time or just a few hours per week.
The coverage extends beyond obvious categories. Even small businesses engage in interstate commerce when they accept credit cards or order supplies from other states. If your annual gross sales exceed $500,000, or if you employ workers who handle goods moving across state lines, federal minimum wage laws apply through the Department of Labor.
Common covered employees include:
- Restaurant servers, cooks, and hosts
- Retail sales associates and cashiers
- Office clerks and receptionists
- Warehouse and delivery workers
- Hotel housekeepers and front desk staff
Temporary workers, seasonal staff, and part-time employees all qualify for the standard minimum wage. The Texas Labor Code doesn’t distinguish between someone working 40 hours or four—both deserve at least $7.25 per hour.
Texas Minimum Wage Exemptions
Not everyone qualifies for the standard minimum wage, and understanding these exemptions can significantly impact your labor costs. The Texas Minimum Wage Act and FLSA create several categories where different minimum wage rules apply.
Key exemptions include:
- Independent contractors: Set their own rates but misclassification carries steep penalties. True contractors control their work methods, provide their own tools, and work for multiple clients
- Agricultural workers: May receive piece rates from the Commissioner of Agriculture, though total earnings must still average at least minimum wage
- Full-time students: Can earn 85% of minimum wage ($6.16) with proper Department of Labor certification
- Workers with disabilities: May qualify for sub-minimum wages based on productivity with special certificates and regular reviews
- Youth workers under 20: Can be paid $4.25 per hour for their first 90 days of employment
Small businesses note: If you have fewer than 25 employees and less than $2 million in annual sales, you might escape state minimum wage requirements. However, federal law likely still applies, making this exemption less useful than it appears.Texas Minimum Wage for Tipped Employees
How Tipped Employee Wages Work
Texas follows federal guidelines that allow a two-tier wage system for employees who regularly receive more than $30 monthly in tips. The math seems simple but requires careful tracking.
Employers can pay a cash wage of just $2.13 per hour—less than a third of the standard minimum wage. The tip credit allows you to count up to $5.12 per hour in tips toward meeting the $7.25 minimum. Together, these must equal at least the federal minimum wage for every hour worked.
Here’s where it gets tricky. If an employee’s wages and tips fall short during any workweek, you must make up the difference. A slow Tuesday lunch shift can’t be offset by a busy Saturday night—you calculate compliance for the entire workweek.
Consider this real-world example: Maria works 40 hours as a server. Her cash wages total $85.20 ($2.13 × 40). She earns $180 in tips for the week, bringing her total to $265.20—or $6.63 per hour. You must add $24.80 to bring her to the $290 minimum ($7.25 × 40 hours).
Documentation matters as much as math in these cases. You must inform employees in writing that you’re claiming a tip credit, and they must retain all their tips except for valid tip-pooling arrangements. Skip the written notice, and you lose the right to pay the lower cash wage entirely.
Another pro tip: Many payroll software systems can automatically calculate tip credits and flag when employees fall below minimum wage. This automation helps prevent costly violations while simplifying your weekly payroll taxes.
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Texas Minimum Wage Compliance and Employer Obligations
Compliance with wage requirements extends far beyond cutting paychecks. Texas employers face specific obligations that, when missed, can trigger investigations and penalties from the Texas Workforce Commission.
Wage Laws and Posting Requirements
Every Texas workplace must display current federal minimum wage posters where employees can easily see them. Break rooms, time clocks, and employee entrances work well—anywhere workers naturally gather. Thankfully, Mosey makes this process easy with automated labor law poster updates.
But posters are just the beginning, though. The Texas Labor Code requires employers to provide detailed written earnings statements with every paycheck. These statements must include hours worked, hourly wage rates, overtime calculations, and any deductions. Employees need enough information to verify they’re receiving proper wages.
Record-keeping extends beyond pay stubs. Employers must maintain payroll records for at least three years, including time sheets, wage calculations, and tip credit documentation. The Department of Labor can request these records during investigations, and missing documentation often results in penalties, regardless of actual wage compliance.
Labor law posters require updates whenever minimum wage rates change or new provisions take effect. A poster subscription service ensures you’re never caught with outdated information—a small investment that prevents larger penalties.
What to Do If You’re Paid Below Minimum Wage
Employees have powerful tools to address wage violations, and smart employers understand these remedies to avoid becoming targets. Workers can pursue two main paths when they believe they’re owed wages.
Filing with the Texas Workforce Commission must happen within 180 days after wages were due. The TWC investigates complaints, audits employer records, and can order back pay plus penalties. Their process typically moves faster than court proceedings and doesn’t require an attorney.
Civil lawsuits offer a longer deadline—two years from when wages were due—but potentially larger awards. Courts can order back wages plus liquidated damages that double the amount owed. Employers may also pay attorney fees and court costs, turning a small wage dispute into a significant financial burden.
The stakes escalate quickly. Administrative penalties can reach thousands per violation, and intentional violations may trigger criminal charges. The TWC actively pursues non-compliant employers, conducting audits that often uncover additional violations beyond the original complaint.
What does this mean in real dollars? To use a hypothetical real-world example, a restaurant with 20 tipped employees could face:
- Back wages for every underpaid hour
- Liquidated damages, doubling the amount owed
- $10,000+ in administrative penalties
- Attorney fees that often exceed $50,000
Healthy, compliant businesses implement strong payroll practices before problems arise. Regular wage audits, clear documentation, and prompt correction of any errors show good faith efforts that can reduce penalties if violations occur.
Get and Stay Compliant with Mosey
So, what’s the biggest takeaway from this Texas minimum wage guide? Minimum wage compliance demands attention to detail across multiple areas—from basic hourly rates to complex tip credit calculations. At $7.25 per hour since 2009, the rate seems straightforward, but exemptions, tipped employee rules, and documentation requirements create layers of complexity.
The landscape continues shifting even without rate changes. Federal proposals could override state law, while cities push boundaries where possible. Rising cost of living pressures mean many businesses already pay above minimum wage to attract workers in competitive markets like Houston and Austin.
Ultimately, managing compliance manually means juggling federal and state requirements, tracking different employee classifications, and staying current on labor law changes. One missed update or calculation error can trigger penalties that can far outweigh any perceived savings from minimum wage strategies.
That’s where Mosey steps in. Our compliance platform automates wage law tracking across all your locations, flagging potential violations before they become expensive problems. In fact, from labor law automations to multi-state payroll compliance—and plenty in between—we transform thorny compliance regulations into simple workflows.
Ready to eliminate wage compliance headaches? Schedule a demo with Mosey today to see how easy compliance really can be.
