New Employers and Tax Rates in Texas

Newly liable employers who do not acquire compensation experience from a previously liable employer begin with a predetermined tax rate set by the Texas Unemployment Compensation Act. That rate is set by the Texas Legislature and is the greater of the average rate for all employers in the NAICS code to which they belong or 2.7%. This percentage is multiplied by the taxable wages for each quarter to determine the amount of tax due for that quarter. The taxable wage limit is also set by statute and is currently $9000.00 per calendar year, per employee.

These newly liable employers continue with the entry-level rate until they are chargeable throughout four full quarters. Chargeable simply means that they could have been charged with benefits to a former employee, it is not required that a claim be filed. In most cases an employer is not chargeable until their third quarter of paying wages. Employers must pay wages a minimum of 6 quarters to receive an experience rating.

Upon completion of the four chargeable quarters, an interim tax rate is assigned to the new employer and that rate is applicable for the duration of the calendar year that it is assigned. After that, an annual rate is assigned and it is applicable for a full calendar year. Tax rates (interim or annual) are calculated by using the taxable wages (upon which tax has been paid timely) and the amount of charges (if any) paid to former employees.

Questions concerning tax rates can be directed to any TWC Tax employee located in our Tax Offices throughout Texas or you can contact the TWC Experience Rating Section at (512) 463-2887 or 463-2756.

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