Texas Workers' Compensation And Payroll Guide
Texas Payroll And Workers' Compensation Rules
Texas payroll professionals play an important role in workers' compensation administration because payroll records provide important wage, hours, employment, classification, and payment information used to administer workers' compensation claims, calculate income benefits, support insurance reporting and audits, and document an employer's compliance responsibilities.
Understanding Texas workers' compensation rules is especially important for payroll professionals who maintain employee records, calculate wages, process payroll after workplace injuries, respond to workers' compensation claims, or provide payroll information to an employer's insurance carrier, third-party administrator, self-insurance program, or the Texas Department of Insurance, Division of Workers' Compensation.
Texas Workers' Compensation Compliance Overview
At A Glance
- Texas generally does not require most private employers to carry workers' compensation insurance.
- Private employers that choose to provide workers' compensation coverage generally obtain coverage through a licensed insurance carrier or qualify for approved self-insurance.
- Private employers that do not provide workers' compensation coverage are generally considered non-subscribers and have separate notice and reporting responsibilities.
- Employers that provide workers' compensation coverage generally must report qualifying work-related injuries, illnesses, and deaths to their insurance carrier.
- Texas employees generally must notify their employer of a workplace injury within 30 days of the date of injury or the date they knew or should have known that the injury or illness was work-related.
- An injured employee generally must file a claim with the Texas Division of Workers' Compensation within one year of the date of injury to protect the employee's rights.
- Texas uses specific rules to determine the average weekly wage used for workers' compensation income benefits.
- For most employees, the employer's wage statement generally reports wages and hours for the 13 weeks before the injury.
- Texas workers' compensation income benefits generally begin to accrue on the eighth day of disability, subject to statutory rules concerning the waiting period.
- Texas workers' compensation benefits can include medical benefits, temporary income benefits, impairment income benefits, supplemental income benefits, lifetime income benefits, and death benefits.
- For the 2026 fiscal year, the Texas state average weekly wage is $1,271.05, with a temporary income benefit maximum of $1,271 per week and a minimum of $191 per week.
- Texas workers' compensation rates and insurance costs can vary based on the employer's classification, insurance carrier, loss costs, and other applicable rating factors.
Texas Workers' Compensation Employer Requirements
Texas differs from most states because most private employers are not required to purchase workers' compensation insurance. An employer that chooses not to provide coverage is generally referred to as a non-subscriber and must comply with separate Texas notice and reporting requirements.
Texas Workers' Compensation Insurance
Employers that provide workers' compensation coverage generally purchase a policy from an insurance company licensed to sell workers' compensation insurance in Texas. Large private employers may also qualify for self-insurance if they meet the applicable requirements and receive approval.
Payroll departments should maintain current workers' compensation insurance information, including the carrier, policy information, applicable payroll classifications, and claims administrator contact information. Payroll should also coordinate with HR and management whenever employee classifications, work locations, job duties, or payroll arrangements change.
Texas Non-Subscriber Employers
A Texas private employer that does not provide workers' compensation insurance is generally a non-subscriber. Non-subscribers have different legal and administrative obligations from employers that carry workers' compensation insurance.
Non-subscribers generally must provide required notices to employees and file required notices with the Texas Division of Workers' Compensation. Payroll and HR departments should coordinate to ensure that employee notices and required state reporting are handled through the employer's established compliance process.
Texas Workers' Compensation Coverage For Multistate Employers
Employers operating in multiple states should review Texas workers' compensation requirements whenever employees perform services in Texas. The applicable requirements can depend on the employee's work location, the employer's coverage status, the nature of the work, and other circumstances.
Payroll departments should maintain accurate records showing where employees perform services. Particular attention should be given to employees who regularly travel between states, relocate, work remotely, or perform services in multiple jurisdictions.
Texas Workers' Compensation Coverage Requirements
- Is Workers' Compensation Insurance Required For Most Texas Private Employers?: No. Texas generally allows most private employers to choose whether to provide workers' compensation insurance coverage.
- What Is A Texas Non-Subscriber?: A non-subscriber is an employer that does not provide workers' compensation insurance coverage to its employees.
- Can A Texas Employer Choose To Carry Workers' Compensation Insurance?: Yes. Private employers generally may choose to purchase workers' compensation coverage even when coverage is not otherwise required.
- Can A Texas Employer Self-Insure?: Certain large private employers may qualify to self-insure workers' compensation claims if they meet applicable financial and regulatory requirements and obtain approval.
- Are Part-Time Employees Covered?: An employee's part-time status does not by itself determine whether the employee is covered. Employers should review the applicable coverage arrangement and Texas requirements.
- Are Independent Contractors Covered?: Workers' compensation status depends on the actual employment relationship and applicable Texas requirements. Employers should not rely solely on a contract, job title, or Form 1099 when determining worker status.
- Are Construction Employers Subject To Special Rules?: Construction employers can be subject to specific Texas workers' compensation requirements and contractual coverage arrangements. Employers should review the applicable rules for their business and industry.
- What Happens When An Employer Does Not Carry Workers' Compensation Insurance?: The employer generally becomes a non-subscriber and must comply with applicable Texas notice and reporting requirements.
Texas Workers' Compensation Injury Reporting
- Employee Notice Of Injury: Employees generally must notify their employer within 30 days after the date of injury or after they knew or should have known that the injury or illness was work-related.
- Employee Claim Filing: An injured employee generally must file a DWC Form-041 with the Texas Division of Workers' Compensation within one year of the date of injury to protect the employee's rights.
- Employer Reporting: Employers that carry workers' compensation coverage must report qualifying work-related injuries, illnesses, and deaths to their insurance carrier through the required process.
- Employer First Report: Texas uses DWC Form-001, Employer's First Report of Injury or Illness, for employer reporting to the insurance carrier.
- Non-Subscriber Reporting: Non-subscriber employers have separate reporting requirements for certain work-related injuries, illnesses, and deaths.
- Payroll Information: Payroll should promptly provide accurate wage, hours, employment, and compensation information requested by the insurance carrier or claims administrator.
- Medical Treatment: Payroll generally does not administer medical treatment, but payroll should coordinate with HR and the claims administrator when medical restrictions affect work status, hours, wages, or return-to-work arrangements.
How Texas Payroll And Workers' Compensation Work Together
Workers' compensation and payroll are closely connected. When an employee is injured at work, payroll may need to provide historical earnings, hours worked, employment information, wage changes, and post-injury earnings.
Payroll may also become involved when an injured employee:
- Misses work because of a workplace injury
- Returns to work with medical restrictions
- Works reduced hours
- Performs modified or light-duty work
- Receives wages after returning to work
- Receives salary continuation or other employer-paid compensation
- Experiences a change in compensation following an injury
Texas payroll departments should maintain a documented procedure for responding to workers' compensation claims and producing historical payroll and hours-worked information. Payroll should coordinate with HR, management, the employee's supervisor, and the workers' compensation claims administrator when an injury changes an employee's work status or compensation.
Texas Workers' Compensation Wage Information
Payroll records can be particularly important when a Texas workers' compensation claim involves income benefits. Texas generally uses the employee's average weekly wage to determine applicable income benefits.
Employer's Wage Statement
Texas uses DWC Form-003, Employer's Wage Statement, to report wage information. For most employees, the employer generally reports the wages paid during the 13 weeks immediately preceding the date of injury and the number of hours worked during those weeks.
Special rules can apply when an employee has not worked for the employer for 13 weeks, is paid monthly or semi-monthly, works for multiple employers, or receives non-pecuniary wages. Payroll should follow the applicable Texas requirements when preparing the wage statement.
- Maintain complete wage records for the applicable pre-injury period
- Maintain hours-worked records
- Track regular wages
- Track overtime wages
- Track bonuses and commissions
- Track non-pecuniary wages and benefits when applicable
- Document wage changes before the injury
- Provide accurate wage information to the carrier or claims administrator
- Review the completed wage statement for accuracy before submission
Texas Workers' Compensation Benefit Calculations
- Average Weekly Wage: Texas workers' compensation income benefits generally depend in part on the employee's average weekly wage.
- Temporary Income Benefits: Temporary income benefits may apply when a compensable injury causes disability and the employee cannot earn pre-injury wages.
- Waiting Period: Texas income benefits generally begin to accrue on the eighth day of disability, subject to statutory rules concerning when the initial waiting period becomes payable.
- Impairment Income Benefits: Employees who reach maximum medical improvement and receive an impairment rating may qualify for impairment income benefits under Texas law.
- Supplemental Income Benefits: Certain employees who meet statutory eligibility requirements may qualify for supplemental income benefits.
- Lifetime Income Benefits: Certain qualifying catastrophic injuries may result in lifetime income benefits.
- Death Benefits: Eligible beneficiaries may receive workers' compensation death benefits following a compensable work-related death.
- Medical Benefits: Workers' compensation coverage can provide medical benefits for compensable work-related injuries and illnesses.
Texas Workers' Compensation
Workers' compensation insurance rates are separate from employee benefit amounts. Texas insurance rates can vary according to the employer's classification, carrier, loss costs, and other applicable rating factors. Employers should verify current insurance rates rather than relying on prior-year information.
Texas Workers' Compensation Medical Care
Workers' compensation medical benefits can cover appropriate medical treatment for compensable work-related injuries and illnesses. Payroll generally does not administer medical care, but payroll information can become relevant when an employee's medical status affects work hours, wages, modified duty, or return-to-work arrangements.
Payroll should coordinate with HR and the claims administrator when medical restrictions result in changes to an employee's schedule, duties, earnings, or employment status.
Texas Workers' Compensation And Modified Duty
An injured employee may return to work with restrictions when medically authorized. The employee may return to the regular position, a modified-duty position, or another position that complies with applicable work restrictions.
Payroll should accurately record regular wages, reduced hours, modified-duty earnings, overtime, bonuses, and other compensation after an employee returns to work. Accurate post-injury earnings can be important when determining whether the employee continues to experience a loss of earning capacity.
- Document the employee's return-to-work date
- Track work restrictions through the employer's HR and workers' compensation process
- Track regular and modified-duty hours
- Track post-injury wages
- Track overtime and additional compensation
- Document changes in pay or work schedule
- Provide post-injury wage information when requested by the claims administrator
- Update payroll records when the employee returns to regular duty
Payroll Training Resources
Recommended Workers' Compensation Training
Additional Info
Other States | FAQs | Blog | Glossary | Checklist | Courses
Additional Texas Workers' Compensation Resources
Difficult Administrative Areas
Texas workers' compensation administration can become complicated when payroll, human resources, management, medical providers, insurance carriers, third-party administrators, and the Texas Division of Workers' Compensation must coordinate information across different parts of an employee's claim.
- Determining The Correct Wage Information: Payroll should maintain accurate historical wage and hours-worked information and provide the information requested by the insurance carrier or claims administrator.
- Preparing The Employer's Wage Statement: Payroll should carefully review DWC Form-003 and verify that the applicable pre-injury wages, hours, and other required information are complete and accurate.
- Handling Employees With Multiple Jobs Or Pay Rates: Employees may work different positions, shifts, or jobs with different compensation arrangements. Payroll should maintain clear records showing the employee's wages, hours, duties, and applicable pay rates.
- Tracking Modified-Duty Employees: Payroll should separately document regular wages, reduced hours, modified-duty earnings, overtime, and other compensation after an injured employee returns to work.
- Coordinating Workers' Compensation And Paid Leave: Payroll should maintain clear records of vacation, sick leave, PTO, salary continuation, and other employer-paid compensation during a workers' compensation claim.
- Handling Return-To-Work Changes: Payroll should promptly update records when an employee returns to work, changes hours, performs modified duties, changes compensation, or returns to regular duty.
- Maintaining Accurate Injury And Employment Records: Payroll records should be consistent with HR, timekeeping, employment, and workers' compensation records.
- Managing Non-Subscriber Requirements: Employers that do not carry workers' compensation coverage have separate Texas notice and reporting requirements. Payroll should coordinate with HR and management to ensure that responsibilities are assigned appropriately.
- Multistate Employees: Employers with workers performing services in multiple states should maintain accurate work-location records and coordinate workers' compensation requirements with HR and the appropriate administrator.
- Responding To Payroll Information Requests: Claims administrators may request detailed wage and hours-worked information. Payroll should establish a standardized process for gathering, reviewing, and transmitting accurate information.
- Protecting Confidential Employee Information: Payroll departments should limit access to employee medical, wage, and workers' compensation information to authorized personnel with a legitimate business need.
- Keeping Procedures And Rates Current: Texas workers' compensation laws, rules, benefit amounts, forms, reporting requirements, and insurance rates can change. Payroll and HR departments should periodically review their procedures and verify current Texas requirements.
Common Errors
Texas workers' compensation mistakes often occur when payroll, HR, safety, and management do not have a consistent process for identifying, reporting, documenting, and administering workplace injuries.
- Failing To Determine Whether The Employer Is A Subscriber Or Non-Subscriber: Employers should understand whether they provide workers' compensation coverage and maintain the appropriate procedures for their coverage status.
- Failing To Maintain Accurate Wage Records: Incomplete or inaccurate payroll and timekeeping records can interfere with the calculation and administration of workers' compensation income benefits.
- Submitting An Incomplete Wage Statement: Payroll should verify that DWC Form-003 contains the required wage, hours, employment, and certification information.
- Using Incorrect Pre-Injury Wage Information: Payroll should use the applicable Texas wage-reporting period and follow special rules when an employee has not worked for the employer for the required period.
- Ignoring Post-Injury Earnings: Payroll should accurately record wages and hours after an employee returns to work, particularly when the employee works reduced hours or modified duties.
- Failing To Track Salary Continuation And Paid Leave: Payroll should separately document employer-paid compensation, salary continuation, vacation, sick leave, and other paid leave following an injury.
- Failing To Coordinate Multistate Employees: Employers should review workers' compensation requirements when employees regularly work in Texas and other states.
- Failing To Maintain Non-Subscriber Documentation: Employers that do not carry workers' compensation coverage should maintain required notices and reporting documentation.
- Using Outdated Benefit Information: Payroll and claims personnel should verify current Texas benefit amounts rather than relying on prior-year schedules.
- Failing To Maintain Confidentiality: Workers' compensation claims may involve sensitive medical, wage, and employment information. Access should be limited to authorized personnel.
Recent Texas Workers' Compensation Developments
Texas workers' compensation requirements, benefit amounts, administrative rules, forms, and insurance rating information can change over time. Employers and payroll professionals should verify current requirements with the Texas Department of Insurance, Division of Workers' Compensation when administering a claim or updating payroll procedures.
Frequently Asked Questions About Texas Workers' Compensation
- Does Texas require employers to carry workers' compensation insurance?: Texas generally does not require most private employers to carry workers' compensation insurance. Employers that do not provide coverage are generally considered non-subscribers and have separate legal and reporting requirements.
- What is a Texas non-subscriber?: A non-subscriber is generally an employer that does not provide workers' compensation insurance coverage to its employees.
- How long does an employee have to report a workplace injury in Texas?: Employees generally must notify their employer within 30 days after the date of injury or after they knew or should have known that the injury or illness was work-related.
- How long does an employee have to file a Texas workers' compensation claim?: An injured employee generally must file a DWC Form-041 with the Texas Division of Workers' Compensation within one year of the date of injury to protect the employee's rights.
- What is the Texas workers' compensation wage statement?: DWC Form-003 is the Employer's Wage Statement. It generally reports wages and hours for the 13 weeks before the employee's injury and is used to help determine applicable income benefits.
- What wages are included on a Texas workers' compensation wage statement?: Employers generally report applicable wages paid during the relevant pre-injury period, including required wage information such as money wages and applicable non-pecuniary wages.
- What happens if an employee has worked for less than 13 weeks?: Texas provides special rules for employees who have not worked for the employer for 13 weeks. Payroll may need to provide wage information for a similar employee or the wages actually earned by the injured employee, depending on the circumstances.
- What is the Texas workers' compensation waiting period?: Income benefits generally begin to accrue on the eighth day of disability, subject to Texas rules governing the initial waiting period and retroactive payment.
- Can an injured Texas employee return to work with restrictions?: Yes. An employee may return to work with medical restrictions when permitted under the applicable return-to-work and workers' compensation process.
- What payroll information is important for a Texas workers' compensation claim?: Important information can include wages, hours worked, overtime, bonuses, commissions, employment dates, wage changes, pre-injury earnings, post-injury earnings, modified-duty wages, and other compensation information relevant to the claim.
- What are the Texas workers' compensation rates for 2026?: For the 2026 fiscal year, the Texas state average weekly wage is $1,271.05. The maximum temporary income benefit is $1,271 per week and the minimum is $191 per week. Individual insurance rates are determined separately and can vary by employer.
- Does Texas provide medical benefits for workplace injuries?: Texas workers' compensation coverage can provide medical benefits for compensable work-related injuries and illnesses.
- Does Texas provide vocational rehabilitation or return-to-work assistance?: Texas provides programs and resources intended to help eligible injured employees return to work. Employers should coordinate with the claims administrator and applicable Texas programs when return-to-work assistance is appropriate.
- What are common Texas workers' compensation payroll mistakes?: Common mistakes include maintaining inaccurate wage information, failing to track hours worked, submitting incomplete wage statements, failing to document post-injury earnings, incorrectly recording salary continuation or paid leave, and failing to coordinate payroll information with HR and the claims administrator.
- Where can employers find official Texas workers' compensation information?: The Texas Department of Insurance, Division of Workers' Compensation provides official information concerning employer responsibilities, employee claims, benefits, forms, coverage, reporting, wage statements, and workers' compensation rules.
