Payroll Administration in Texas

The administration of payroll within the state of Texas represents a complex convergence of federal mandates established by the Fair Labor Standards Act (FLSA) and the Internal Revenue Service (IRS), alongside the specific state-level requirements enforced by the Texas Workforce Commission (TWC). While Texas is frequently cited as a business-friendly environment due to the absence of state personal income tax, the payroll function remains intricate, governed by strict statutes regarding pay frequency, final pay deadlines, and unemployment tax administration.

Modern payroll administration has evolved far beyond manual calculations, necessitating robust Human Capital Management (HCM) solutions to manage these multi-layered obligations. This report utilizes TimeTrex, an industry-leading workforce management and payroll software, as the primary exemplar for operationalizing these requirements. By integrating time and attendance data directly with payroll processing engines, organizations can ensure compliance, minimize clerical error, and streamline the gross-to-net calculation process.

The Regulatory Architecture of Texas Payroll

To successfully configure a system like TimeTrex, one must first possess a deep understanding of the legal parameters that dictate the software’s logic. Payroll is not merely a financial transaction; it is the fulfillment of a contractual and statutory obligation. In Texas, this obligation is primarily shaped by the Texas Payday Law, codified in Chapter 61 of the Texas Labor Code, which fills the regulatory gaps left by federal legislation.

The Texas Payday Law: Frequency and Delivery

The foundational statute governing wage payments in the state is the Texas Payday Law. Unlike federal law, which does not mandate a specific frequency of pay, Texas law is prescriptive. The law’s intent is to ensure that employees receive their earned wages in a predictable and timely manner.

Frequency of Pay Requirements

• Non-Exempt Employees: Employees covered by FLSA overtime provisions (typically hourly workers) must be paid at least twice per month. These paydays must be designated in advance and occur at regular intervals.
• Exempt Employees: Employees meeting executive, administrative, or professional exemptions may be paid once per month.

Final Pay Constraints: The 6-Day Rule

Perhaps the most operationally disruptive aspect of Texas payroll law is the regulation of final paychecks. The timing depends entirely on the nature of the separation.

The Tax Landscape: Federal vs. State

Texas occupies a unique position in the US tax landscape, characterized by a lack of personal income tax but a robust system of unemployment taxation.

Absence of State Income Tax (SIT): Texas is one of nine states with no tax on earned income. This simplifies the "Taxes & Deductions" configuration in TimeTrex. There is no requirement to calculate or withhold SIT for employees working exclusively in Texas.

State Unemployment Tax Act (SUTA): This is an employer-paid tax that impacts the bottom line directly.

• Wage Base (2025): The first $9,000 of earnings per employee.
• Tax Rates: Experience-rated, ranging from 0.25% to 6.25% for 2025.

TimeTrex Architecture and Environment Setup

Implementing payroll in Texas using TimeTrex requires a systematic approach to configuration. The software handles the complex "Gross-to-Net" calculation engine, but it relies heavily on accurate user definitions of pay periods, tax formulas, and organizational structure.

Initial System Configuration

The genesis of the TimeTrex setup is the establishment of the legal entity. By explicitly setting the company address state to "Texas," the system intelligently suppresses default State Income Tax (SIT) tables that would otherwise populate for states with income tax requirements. This action simplifies the "Tax Wizard" setup.

Pay Period Schedules

Reflecting the mandates of the Texas Payday Law, the Pay Period Schedule acts as the metronome of the payroll system.

• Type: For non-exempt employees, select "Bi-Weekly" or "Semi-Monthly" to strictly comply with the "twice a month" rule.
• Buffer: TimeTrex advises configuring a buffer (e.g., 5 to 7 days) between the period end date and the transaction date to allow for timesheet verification.

Configuring Tax Formulas

For Texas SUTA, specific manual configuration is often required to ensure the General Ledger accruals are accurate.

Community vs. Enterprise: Users of the TimeTrex Enterprise Edition benefit from automated tax table updates. Users of the Community Edition must manually maintain tax formulas, placing the burden of monitoring IRS and TWC rate changes squarely on the administrator.

Employee Onboarding and Data Management

New Hire Reporting Compliance

Texas law mandates that employers report all new hires and re-hires to the Office of the Attorney General (OAG) within 20 calendar days. This facilitates child support enforcement.

TimeTrex facilitates this via the "Payroll Export" or "New Hire Report" modules. The system can generate a CSV matching the Texas OAG portal requirements, replacing manual data entry with a streamlined upload process.

Employee Tax and Pay Settings

In the Employee Profile, the "State" field must be set to Texas to disable SIT logic. Regarding payment methods, Texas law allows employers to mandate direct deposit, provided the employee can choose the financial institution. TimeTrex’s "Bank Accounts" tab supports multiple splits (e.g., Savings/Checking), accommodating this requirement.

Time & Attendance: The Pre-Payroll Foundation

One of TimeTrex's distinct advantages is the unification of Time & Attendance with Payroll. Payroll becomes a calculation logic applied to verified time data that already exists within the system.

Defining the Workweek and Overtime

Texas adheres to the federal FLSA standard: 1.5x regular rate for hours over 40 in a workweek. The "Overtime Policy" in TimeTrex should be set to "Weekly > 40 hours."

Regular Rate of Pay: TimeTrex’s engine automatically calculates the "Regular Rate" (Weighted Average) if an employee works at two different pay rates during the same week (e.g., a tipped role and a non-tipped role). This ensures the overtime premium calculation satisfies strict FLSA regulations.

Geofencing and Remote Work

For remote Texas workers or field teams in the oil and gas sector, TimeTrex's mobile app supports geofencing. Administrators can define a virtual perimeter around a job site; if an employee attempts to clock in outside this radius, the system can block the punch or flag it for review.

The Payroll Processing Cycle (Step-by-Step)

Executing a payroll run in TimeTrex follows a structured workflow to ensure data integrity.

1. TimeSheet Verification (The Audit): Managers review timesheets for missed punches. The "Timesheet Verification" feature allows employees to digitally sign off on hours, creating a vital audit trail for wage claims.
2. Initiating the Run: Navigate to Payroll > Processing Payroll > New. Select the correct schedule (e.g., Bi-Weekly Hourly).
3. Calculation & Deductions: TimeTrex performs a "Trial Run."
   • Garnishments: Texas generally prohibits garnishment for consumer debt but enforces it for Child Support. TimeTrex deduction limits must be configured to respect the 50% disposable income cap.
4. Preliminary Report: Audit the "Payroll Register." Check for negative net pays or SUTA calculation errors (ensure the $9k cap is working).
5. Finalizing & Committing: Locks the data and generates pay stubs for the Self-Service Portal.
6. Disbursement: Generate the NACHA file for bank upload or print physical checks.

Tax Administration and Reporting

Completing the pay run is only half the battle. The subsequent phase involves remitting taxes to the appropriate agencies.

Federal Tax Deposits (Form 941)

Employers must deposit federal income tax and FICA taxes withheld. TimeTrex's "Tax Wizard" or "Form 941 Report" aggregates liabilities, detailing wages, tips, and tax withheld to support the quarterly Form 941 filing.

State Unemployment Tax (SUTA) Remittance

In Texas, unemployment taxes are paid to the TWC. Employers file the Employer's Quarterly Report (C-3). Deadlines align with federal 941 deadlines (April 30, July 31, Oct 31, Jan 31).

Administrators use the "Tax Summary" report in TimeTrex to extract:

• Total Gross Wages
• Taxable Wages (Wages up to the $9,000 cap)
• Tax Due (Taxable Wages × Assigned Tax Rate)

Special Scenarios and Troubleshooting

Handling "End of Service" (Termination)

When an employee leaves, the TimeTrex "End of Service" wizard is utilized. Crucially, the administrator must select the correct "Reason" (Voluntary vs. Involuntary). If Involuntary, the system aids in processing the "Preliminary Process EOS" immediately to meet the strict 6-day payment deadline required by Texas law.

Retroactive Pay and Amendments

If an error is discovered—such as a missed shift from a previous month—TimeTrex uses "Pay Stub Amendments" to correct the historical record without unlocking the closed period. The system calculates the tax difference and applies it to the next regular payroll run.

Conclusion: The Strategic Value of Precision

Executing payroll in Texas using TimeTrex is a discipline that marries legal adherence with technical precision. The absence of state income tax lowers the barrier to entry, but the strictures of the Texas Payday Law and the complexities of federal tax deposits maintain a high cost of failure.

By leveraging TimeTrex’s integrated architecture, organizations can move from a defensive posture to a strategic one. Automated SUTA capping ensures tax efficiency; integrated timekeeping eliminates wage theft; and streamlined reporting satisfies the Texas Attorney General and the IRS simultaneously.

Summary of Key Texas Payroll Parameters (2025)