PEOs in Texas

What makes Texas different

• Texas is the only state where private employers can generally opt out of workers comp entirely (non-subscription), trading premium savings for exposure to negligence suits without common-law defenses.
• No state income tax means no state withholding to administer, one less thing a PEO does for you here.
• The Texas Workforce Commission administers unemployment tax with a low wage base ($9,000), so SUTA arbitrage through a PEO is worth less than in high-wage-base states.
• Texas has no state-mandated paid sick leave, and state law has preempted city attempts to require it.
• PEOs operate under a specific Texas licensing statute (Labor Code Chapter 91) and must be licensed by TDLR to do business in the state.

PEO regulation in Texas

Texas licenses PEOs through the Texas Department of Licensing and Regulation under Labor Code Chapter 91. Verify the contracting entity's license status on the TDLR site before signing.

What a PEO does and does not solve here

A Texas-only company should weigh a PEO heavily on the actual benefits proposal, workers compensation strategy, service, and contract. Multi-state hiring adds another reason to price support, but it does not make a PEO automatically preferable.

Common questions

If workers comp is optional in Texas, why buy it through a PEO?

Non-subscription avoids premium but exposes the employer to injury lawsuits where several traditional defenses are unavailable. Many PEOs require clients to carry workers compensation through the PEO program. Compare that policy's premium, claims services, exclusions, and limits with the company's non-subscriber exposure.

Is a PEO worth it for a Texas company with no out-of-state employees?

It depends on the benefits, workers compensation, HR support, and contract. Compare PEO proposals with payroll software, a broker-sourced health option, and a standalone workers compensation policy using the same workforce data.