The minimum wage sets the baseline legal floor for employee compensation across the United States. In Texas, minimum wage regulations are tied directly to federal standards under the Texas Minimum Wage Act (codified in Chapter 62 of the Texas Labor Code).
Whether you are entering the workforce, managing a small business, or working in the hospitality and food service industry, understanding the legal wage requirements in Texas is crucial. In this guide, we explore the statutory baseline rate, tipped employee compensation, tip credit calculations, and how to project your net pay with our Texas Paycheck Calculator.
What Is the Current Minimum Wage in Texas?
The statutory minimum wage in Texas is $7.25 per hour.
Texas state law does not establish an independent state-level minimum wage rate. Instead, Chapter 62 of the Texas Labor Code stipulates that the Texas minimum wage matches the rate set by the federal Fair Labor Standards Act (FLSA). Because the federal minimum wage has remained at $7.25 per hour since July 24, 2009, the Texas state minimum wage remains set at $7.25.
What Does $7.25 an Hour Look Like After Taxes?
Working a standard 40-hour workweek (2,080 hours per year) at $7.25 per hour produces:
- Weekly Gross Pay: $290.00
- Bi-Weekly Gross Pay: $580.00
- Annual Gross Income: $15,080.00
Because the 2026 federal standard deduction for a single filer is $15,000, an employee earning the minimum wage pays virtually $0 in federal income taxes. However, they remain subject to mandatory FICA taxes:
- Social Security (6.2%): $934.96 annually ($35.96 per bi-weekly check)
- Medicare (1.45%): $218.66 annually ($8.41 per bi-weekly check)
- Texas State Tax: $0.00
- Net Annual Take-Home Pay: $13,926.38 ($535.63 per bi-weekly check)
Tipped Minimum Wage in Texas: The $2.13 Rule
Hospitality, restaurant, and service workers who customarily and regularly receive more than $30 a month in tips are subject to specialized “tipped employee” wage regulations.
The Direct Cash Wage & Tip Credit
Under both the FLSA and Texas Labor Code:
- Minimum Cash Wage: An employer must pay tipped employees a direct cash wage of at least $2.13 per hour.
- Maximum Tip Credit: The employer may claim a “tip credit” of up to $5.12 per hour against the $7.25 minimum wage requirement ($7.25 - $2.13 = $5.12).
$$\text{Direct Cash Wage ($2.13)} + \text{Tip Credit ($5.12)} = \text{Minimum Wage Floor ($7.25)}$$
The Employer “Make-Up” Requirement
The tip credit is not a free pass for employers. The law guarantees that every tipped employee must average at least $7.25 per hour across their workweek when direct cash wages and received tips are combined:
Critical Legal Rule: If an employee’s direct wage of $2.13 per hour plus tips fails to equal at least $7.25 per hour during any given workweek, the employer is legally obligated to pay the difference out of pocket to bring the worker’s average pay up to $7.25 per hour.
Texas Rules on Tip Pooling and Service Charges
Tip pooling arrangements in Texas restaurants and bars must adhere strictly to federal Department of Labor regulations:
- Valid Tip Pools (Front-of-House): Employers who claim the $5.12 tip credit can only require employees to pool tips with staff who customarily receive tips (servers, bussers, bartenders, and food runners).
- Back-of-House Inclusion (No Tip Credit): Employers who pay all staff the full $7.25 minimum wage in direct cash (claiming no tip credit) may include non-traditional staff (cooks, dishwashers) in the tip pool.
- Managers and Supervisors Are Disqualified: Under federal law, managers, shift supervisors, and business owners are strictly prohibited from participating in tip pools or keeping any portion of employee tips, regardless of whether the employer claims a tip credit.
- Mandatory Service Charges vs. Tips: Fixed gratuity surcharges (e.g., “18% automatic gratuity for parties of 6 or more”) are classified by the IRS as service charges, not voluntary tips. Service charges are treated as regular wage income subject to standard payroll tax withholding.
Can Cities in Texas Raise the Minimum Wage Locally?
Unlike states like California, Washington, or New York—where individual municipalities such as San Francisco, Seattle, or New York City mandate local minimum wages exceeding $16 to $20 per hour—Texas cities cannot raise the minimum wage.
Under Chapter 62 of the Texas Labor Code, the State of Texas exercises broad statutory preemption over local labor ordinances.
- Even if the city councils of Austin, Dallas, Houston, or San Antonio pass resolutions favoring higher municipal wage floors, state law prohibits them from enforcing a higher minimum wage on private-sector employers.
- Texas municipalities are only permitted to establish higher minimum wages for their own municipal government employees or city contractors, but not for the general private workforce.
The Reality of Market Wages in Texas
While the statutory minimum wage remains $7.25, the competitive Texas labor market has driven prevailing entry-level wages significantly higher. Major retailers, distribution centers, and food service chains across Dallas, Houston, and Austin frequently start entry-level workers at $15.00 to $20.00 per hour to attract talent.
| Pay Rate | Annual Full-Time Gross | Take-Home Pay (Single Filer) | Retained Percentage |
|---|---|---|---|
| $7.25 / hr (Statutory Minimum) | $15,080 | $13,926.38 | 92.35% |
| $12.00 / hr | $24,960 | $22,238.40 | 89.10% |
| $15.00 / hr (Market Entry Baseline) | $31,200 | $27,476.40 | 88.07% |
| $18.00 / hr | $37,440 | $32,462.40 | 86.71% |
Frequently Asked Questions (FAQs)
Are minors subject to a different minimum wage in Texas?
Under federal FLSA provisions, employers may pay workers under age 20 a training wage of $4.25 per hour for their first 90 consecutive calendar days of employment. After 90 days or upon turning 20 (whichever comes first), the employee must receive the full $7.25 rate.
Does an employer have to pay for mandatory uniforms if it reduces pay below $7.25?
No deduction for uniforms, nametags, or job equipment may reduce an employee’s effective hourly rate below $7.25 for that workweek. Any deduction that pushes earnings beneath the statutory floor violates both federal law and the Texas Payday Law.
Calculate your Texas take-home pay at any hourly wage rate.