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Texas PEO Laws: Registration, Bonding and Payroll Requirements

Texas licenses PEOs under Labor Code Ch. 91: TDLR issues full or limited licenses renewed annually, requiring audited positive working capital of $50,000-$100,000 with bond/LC/guaranty for deficiencies. Workers' comp has no monopolistic fund and is optional for most private employers. SUI wage base $9,000; new employer rate 2.70%.

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Texas: PEO regulatory and payroll facts. Each populated field links to the statute, agency page or filing it came from.
PEO registration or licensing requiredYes — a PEO license is required before offering professional employer services (Texas Labor Code 91.011); two tiers exist: full license and limited license (out-of-state PEOs with 50 or fewer assigned employees in Texas), both issued by TDLR. source (opens in new window)
Regulating agencyTexas Department of Licensing and Regulation (TDLR) for PEO licensure under Labor Code Chapter 91 and 16 TAC Chapter 72; Texas Workforce Commission (TWC) for unemployment tax; Texas Department of Insurance (TDI) Division of Workers' Compensation for wc. source (opens in new window)
Bond or security requirementNo fixed bond: applicants and licensees must demonstrate audited positive working capital of $50,000 (fewer than 250 covered employees), $75,000 (250–“750), or $100,000 (over 750); any deficiency is satisfied through a surety bond, letter of credit, or guaranty (Labor Code 91.014). source (opens in new window)
Registration renewal cycleAnnual — licenses are valid for one year (Labor Code 91.016); renewal fees $300–“$700 by covered-employee count; late renewals accepted for up to 18 months with increased fees (89(R) SB 1254 extended employer status through the 18th month). source (opens in new window)
SUI taxable wage base$9,000 (2026) source (opens in new window)
New-employer SUI rate2.70% — entry-level rate applied to all new employers with no exceptions (2026, TUCA 204.006) source (opens in new window)
State workers' comp fundFalse source (opens in new window)
State paid leave mandateNot verified
State minimum wage$7.25 per hour (federal; Texas adopts the federal minimum wage) source (opens in new window)
PEO SUI reporting basisNot verified

Sources

What we know about Texas

Texas is a licensing state for professional employer organizations, a fact that is frequently overlooked because Texas does not use the word "registration" for its PEO program. Under Chapter 91 of the Texas Labor Code, a person may not engage in or offer professional employer services unless the person holds a license issued under the chapter, and TDLR, the Texas Department of Licensing and Regulation, administers the program under administrative rules in 16 Texas Administrative Code Chapter 72. Any company with even one covered employee in Texas must be licensed, whether it is a Texas company or an out-of-state company serving Texas clients. Two license types exist: a full PEO license and a PEO limited license, with the limited license restricted to out-of-state companies assigning 50 or fewer employees in Texas. Applications trigger background investigations, including fingerprint submissions for every controlling person, evidence of eligibility from the Texas Secretary of State, and audited financial statements prepared under GAAP. The financial requirements are the heart of the Texas system: a licensee must demonstrate positive working capital of $50,000 if it employs fewer than 250 covered employees, $75,000 if it employs 250 to 750, and $100,000 if it employs more than 750, and the requirement can be met for new companies with reviewed rather than fully audited statements. Any deficiency in working capital must be secured by a surety bond, letter of credit, or guaranty, and the security must stay in force for up to two years after the licensee ceases business in Texas. The background-investigation regime is unusually thorough: TDLR runs fingerprints and criminal-history checks on each applicant and controlling person under Labor Code 91.013, licenses cannot be transferred and a separate license is required for each business name, and the department may waive neither the audited financial statement nor the working-capital requirement. Licenses are valid for one year and must be renewed annually, with renewal fees of $300, $450, or $700 depending on the number of covered employees, and a $300 fee for limited licenses; legislation enacted in 2025, Senate Bill 1254 of the 89th Legislature, preserved a licensee's employer status for up to 18 months after expiration to smooth late renewals. TDLR specifically directs unemployment tax questions involving PEOs to the Texas Workforce Commission. For 2026 the TWC sets the taxable wage base at $9,000 and assigns every new employer an entry-level rate of 2.70 percent, with no exceptions by industry or geography; experience-rated employers range from 0.32 percent to 6.32 percent. Texas minimum wage is the federal $7.25 because no state rate exceeds it. Workers' compensation is unusual: coverage is optional for most private employers, and the market is competitive private carriers, with Texas Mutual Insurance Company, the former state fund, acting as the insurer of last resort; TDI regulates rates and loss costs, and for the July 1, 2026 loss-cost year it accepted an NCCI advisory filing reducing overall average loss costs by 3.8 percent. Texas provides no state paid family or medical leave program.

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