Everything’s Bigger in Texas, Including HR Challenges: Why Your Business Needs a PEO

Quick look: Texas is known for its employer-friendly climate, pro-growth policies, and tax and legal flexibilities. Despite these advantages, businesses must be aware of and adhere to several state-specific HR considerations. Here are five key HR challenges Texas-based companies face, and how a PEO empowers them to stay compliant and focused on growth while navigating a unique employment landscape.

As an employer-friendly state, Texas is a powerhouse for business, with a booming economy, no state income tax, and a diverse workforce.

However, managing human resources (HR) in Texas can present challenges that may overwhelm business owners. While the Lone Star State offers employers flexibility, clear policies and documentation are necessary to avoid legal risks. Further, being home to several fast-paced markets means Texas organizations need appealing total rewards packages and fine-tuned recruiting processes to compete.

These factors can strain any company’s resources. Luckily, partnering with a professional employer organization (PEO) like ExtensisHR can help business leaders navigate these nuances.

5 major HR challenges in Texas and how a PEO can solve them

With its diverse economy and soaring population, Texas presents both valuable opportunities and unique hurdles for business leaders. From navigating workers’ compensation complexities to competing for talent in fast-paced industries, explore the top Texas HR hurdles and how a PEO can simplify it all.

1. Complex labor laws and compliance risks

In some cases, Texas employment laws differ from federal or other states’ regulations, and compliance may vary by city.

For example, the state’s unique Payday Law ensures employees are paid on time and allows them to file claims for unpaid wages. This is more specific than federal wage claim processes. The Texas Workforce Commission (TWC) plays a key role in helping employers understand and comply with this and other state-specific regulations.

Texas doesn’t require employers to carry workers’ compensation insurance, unlike other states. However, organizations that choose not to provide coverage may face lawsuits, are responsible for paying benefits to injured employees, must post notices in their workplace, inform new staff in writing that they’re not covered, and file annual notices with the state’s Division of Workers’ Compensation (DWC).

Compliance may also vary by city. For instance, Austin’s Fair Chance Hiring Ordinance prohibits employers with 15 or more employees from asking about criminal history on a job application or before making a conditional offer.

Additionally, Texas employers must adhere to federal requirements, such as the Fair Labor Standards Act (FLSA), and verify all staff’s identity and employment authorization using Form I-9. This is an especially relevant rule for Texas, where businesses may attract talent from a wide range of geographic regions due to the state’s proximity to international borders.

✓ How a PEO helps: A PEO like ExtensisHR enables Texas employers to maintain compliance with federal and state regulations, including FLSA requirements and Form I-9 verification, by offering expert guidance and up-to-date documentation support. This helps mitigate legal risks, prevent costly penalties, and protect businesses.

2. Rapid business growth and workforce management

As the fourth largest state for venture capital funding and the home to over 60,000 franchises, Texas is a magnet for startups and expanding companies. Naturally, this explosive growth leads to a high demand for talent and an increasingly complex HR infrastructure.

To succeed during expansion, businesses must scale every aspect of their HR operations, from hiring and onboarding to benefits administration and performance management. This additional workload can be overwhelming, but luckily, PEOs specialize in making it manageable for their customers.

✓ How a PEO helps: An ideal PEO solution is flexible and designed to let businesses experience the benefits of expansion without the growing pains by providing:

• Scalable benefits packages
• Thorough payroll compliance processes
• Expertise in multistate workforce operations
• Recruiting services
• Onboarding support
• Training resources

3. Competitive talent market and employee retention

The Texas job market is highly competitive, with industries like technology, energy, and healthcare vying for top talent. To successfully attract and retain employees, companies must stand out—and one way to do so is by offering an appealing benefits package.

Some small- and medium-sized businesses (SMBs) may struggle to offer Fortune 500-level benefits. However, with their large-group purchasing power, PEOs enable these employers to tap into the most enticing plans.

✓ How a PEO helps: PEOs provide access to and administration of various premium benefits, from health insurance and retirement savings plans to pet insurance and family-forming support. Additionally, some PEOs like ExtensisHR offer expanded services like complimentary recruiting to find top talent and performance management to retain them.

4. High workers’ compensation and safety concerns

As mentioned above, Texas does not require businesses to carry workers’ compensation insurance, leading to unique liability challenges.

Certain prominent Texas industries, like manufacturing and oil and gas, face elevated workplace safety risks. Companies must meet Occupational Safety and Health Administration (OSHA) standards, whether or not they have a workers’ compensation policy, underscoring the importance of sound workplace safety protocols.

✓ How a PEO helps: A PEO well-versed in Texas employment strategies strives to keep your employees safe and your business protected, regardless of whether a workers’ compensation insurance exists. For example, ExtensisHR provides:

• Risk management strategies
• OSHA compliance support
• Cost-effective workers’ compensation plans
• Workplace safety management

5. Payroll, taxes, and multistate employment issues

Texas’ payroll tax regulations, including franchise tax requirements, can be difficult for growing companies to keep up with.

And Texas employment laws aren’t the only ones businesses must pay close attention to. Many Texas-based entities operate in multiple states due to a wave of corporate relocations to Texas and the overall growth of remote work. This spread causes many multistate considerations, from tax nuances to varying leave requirements.

✓ How a PEO helps: A national PEO, like ExtensisHR, has teams of experts dedicated to managing payroll processing, handling tax filings, and maintaining compliance across multiple jurisdictions on behalf of their customers. Additionally, through global Employer of Record (EOR) partnerships, ExtensisHR supports businesses with international operations, helping them easily navigate cross-border employment complexities.

With ExtensisHR, you’re not alone in the Lone Star State

Running a business in Texas takes grit, determination, and the right support. Managing HR and administrative tasks shouldn’t slow you down; you need a partner who understands your SMB’s challenges.

With a boutique level of service and enterprise-level offerings, ExtensisHR is a standout partner for SMBs across Texas. Here’s what differentiates us from the rest:

• White-glove support: From dedicated HR Managers and Payroll Specialists to a customer service team that answers the phone in 10 seconds or less, we’re always there when you need us.
• Complimentary recruiting services: Our full-cycle talent acquisition solution is included in our PEO offering at no additional cost and helps you find and hire the best.
• Customizable solutions: Sometimes big-box PEOs box you in. That’s not the case here; simply choose which services suit you best at each stage of your growth journey.
• Proven reliability: As an IRS Certified PEO (CPEO) with Employer Services Assurance Corporation (ESAC) and Certification Institute accreditation (something only 1% of PEOs achieve), as well as SOC 1 Type 2 certification, we have an industry-leading track record.

Whether you’re scaling a startup, running a family business, or managing a growing company, a PEO like ExtensisHR provides best-in-class customer service, compliance support, recruiting assistance, and scalable HR solutions to fuel your success: because everything’s bigger in Texas!

How can ExtensisHR take your Texas-based business to the next level? Explore what makes us different, or contact us today to start a conversation.