Texas SUI Rates 2026: What Employers Pay for Unemployment Insurance

State Unemployment Insurance (SUI) is the only state-level payroll tax that Texas employers must pay. Since Texas has no state income tax, no state disability insurance, and no paid family leave tax, your SUI obligation to the Texas Workforce Commission (TWC) is your entire state payroll tax bill.

Understanding how Texas SUI rates are calculated, what drives them up or down, and what additional surcharges may apply can save your business real money. This guide covers everything Texas employers need to know about SUI rates in 2026, including the experience rating system, the replenishment tax, and practical strategies for keeping your rate as low as possible.

SUI at a Glance

New Employer Rates

When you first register with TWC, you are assigned a new employer SUI rate. For most businesses, this is 2.7%, which is the general industry new employer rate. However, TWC assigns different initial rates to certain industries based on historical claims data for that industry classification. Your NAICS code (selected during registration) determines which initial rate you receive.

Initial Rate by Industry Examples

At the general new employer rate of 2.7% on a $9,000 wage base, your annual SUI cost per employee is:

$9,000 x 2.7% = $243 per employee per year

For a business with 10 employees, that is $2,430 per year in Texas SUI. For 25 employees, it is $6,075 per year. The new employer rate applies until TWC has enough data to compute your experience-based rate — typically after three complete fiscal years of chargeable experience.

Experienced Employer Rates: 0.23%–6.23%

After you have been registered with TWC long enough to build a claims history, TWC transitions you to an experience-rated SUI rate. This rate is recalculated annually and communicated to you via your Tax Rate Notice, typically mailed in November or December for the upcoming calendar year.

The experienced employer rate range in Texas is:

• Minimum rate: 0.23%
• Maximum rate: 6.23%

Here is what the annual cost per employee looks like across the rate spectrum:

The difference between the minimum and maximum rate is $540 per employee per year. For a company with 25 employees, that is a difference of $13,500 annually — a significant sum for any small or mid-size business. Keeping your rate low should be a priority.

How Experience Rating Works in Texas

Texas uses a benefit ratio (also called a "chargeback ratio") system to determine your experience-based SUI rate. This system differs from the "reserve ratio" method used by states like California. Here is how it works:

The Benefit Ratio Calculation

TWC calculates your benefit ratio using this formula:

Benefit Ratio = Total Benefits Charged to Your Account / Total Taxable Wages Paid

Both figures are calculated over a multi-year period (generally the most recent three fiscal years of chargeable history). The fiscal year for TWC purposes runs from October 1 through September 30.

How the Ratio Becomes a Rate

TWC publishes a rate table each year that maps benefit ratios to specific SUI rates. Your computed benefit ratio is matched to the appropriate row in the table to determine your rate. A lower benefit ratio (fewer benefits charged relative to wages paid) results in a lower SUI rate. A higher benefit ratio results in a higher rate.

When Experience Rating Kicks In

You become eligible for an experience-based rate after you have been a liable employer for approximately three complete fiscal years of chargeable experience (October 1 through September 30). For example, if you registered with TWC in January 2024, your first experience-rated rate would typically take effect in January 2028, after the fiscal years ending September 2025, 2026, and 2027 are computed.

Until then, you pay the new employer rate assigned at registration.

The $9,000 Wage Base

Texas SUI applies only to the first $9,000 in wages paid to each employee during the calendar year. Once an employee's year-to-date wages exceed $9,000, you stop paying SUI for that employee for the rest of the year.

Key points about the wage base:

• The $9,000 wage base applies per employee, per calendar year. It resets on January 1.
• Whether an employee earns $20,000 or $200,000 annually, the maximum SUI cost is the same: your rate multiplied by $9,000.
• For most full-time employees, you will have paid all SUI for the year within the first quarter, since $9,000 is reached quickly at typical wage levels.
• Part-time or seasonal workers who earn less than $9,000 in the year will have SUI applied to their total wages.

Total Annual Cost Per Employee

Combining Texas SUI with your federal unemployment tax (FUTA), here is the complete employer-side unemployment insurance cost per employee:

For a typical new employer with 15 employees, the combined SUI + FUTA cost is approximately $4,275 per year. At the minimum experienced rate, that drops to just $940.50 per year for 15 employees — a significant savings achievable through stable employment and low claims.

Replenishment Tax

Texas law authorizes a Replenishment Tax that TWC can impose on top of your regular SUI rate when the state's Unemployment Compensation Trust Fund balance falls below certain thresholds. The replenishment tax is designed to help refill the fund after periods of high unemployment claims (such as recessions or natural disasters).

How the Replenishment Tax Works

• Rate range: 0.0% to 0.2%
• Applied to: The same $9,000 taxable wage base as regular SUI
• When it applies: Only when the UI trust fund balance falls below the "floor" computed by TWC. In years when the fund is healthy, the replenishment tax is 0.0%.
• Maximum additional cost: $18 per employee per year (0.2% x $9,000)

The replenishment tax is added to your regular experience-rated SUI tax and appears as a separate line item on your Tax Rate Notice. You do not need to calculate it yourself — TWC includes it in your total effective rate.

Obligation Assessment

In addition to the replenishment tax, TWC may impose an Obligation Assessment to cover outstanding interest on federal loans to the UI trust fund. If Texas borrows from the federal government to cover unemployment benefits and pays interest on those loans, that interest cost can be passed through to employers via the obligation assessment.

• The obligation assessment applies to all liable employers.
• It is calculated as a percentage of taxable wages and added to your total rate.
• Like the replenishment tax, it only applies when triggered by specific fund conditions.
• When no federal loans are outstanding, the obligation assessment is 0.0%.

Deficit Tax Rate

Texas law also includes a provision for a Deficit Tax Rate, which can be imposed when the UI trust fund's balance-to-wages ratio falls below a specific threshold (the "floor ratio"). The deficit tax is another mechanism to replenish the fund during or after economic downturns.

• The deficit tax rate ranges from 0.0% to 0.2%.
• It applies to all employers and is added to the regular SUI rate.
• TWC determines annually whether the deficit tax is needed based on fund projections.

In practical terms, your total effective SUI rate is the sum of your experience-based rate (or new employer rate) plus any applicable replenishment tax, obligation assessment, and deficit tax. TWC consolidates all of these into a single rate on your annual Tax Rate Notice, so you do not need to track each component separately.

How to Lower Your SUI Rate

While you cannot directly set your SUI rate, you can take concrete actions that influence your benefit ratio and, ultimately, your rate. Here are the most effective strategies for Texas employers:

1. Maintain stable employment: Every unemployment claim charged to your account increases your benefit ratio and drives up your rate. Avoid unnecessary layoffs, and when business slows down, consider alternatives like reduced hours before resorting to layoffs.
2. Respond to every TWC claim notice promptly: When a former employee files for unemployment, TWC sends you a Notice of Application for Unemployment Benefits. You have 14 days to respond with information about the reason for separation. Always respond with detailed documentation. Failure to respond means TWC decides without your input, often resulting in benefits being approved and charged to your account.
3. Document performance issues and misconduct: If you terminate an employee for documented misconduct (theft, insubordination, repeated policy violations with written warnings), they are generally disqualified from UI benefits. Thorough documentation — written warnings, performance improvement plans, incident reports — gives you the evidence you need to successfully protest a claim.
4. Hire carefully and onboard thoroughly: High early-term turnover is one of the biggest drivers of UI claims for small businesses. A strong hiring process, clear job descriptions, and proper onboarding reduce the chance that new hires leave (or are let go) within their first few months.
5. Protest inaccurate benefit charges: If you believe a benefit charge was incorrectly assigned to your account — for example, an employee who quit voluntarily or was fired for misconduct — you have the right to protest the charge. File your protest within the time frame specified on the notice (typically 30 days).
6. Review your Tax Rate Notice annually: Each year when you receive your Tax Rate Notice, review the benefit charges and taxable wages used in the calculation. Errors can occur. If something looks wrong, contact TWC's Tax Department to request a review.
7. Consider voluntary contributions: Texas allows employers to make voluntary contributions to their UI account to improve their benefit ratio and lower their rate. This strategy makes sense when the additional contribution results in enough of a rate reduction to more than offset the cost of the contribution. TWC can help you calculate whether this is advantageous for your specific situation.

Multi-State Considerations

If your Texas-based business has employees in other states, you must understand how SUI works across state lines:

• SUI is state-specific: You pay Texas SUI only on wages paid to employees who work in Texas. For employees in other states, you register and pay SUI in those states under their rules and rates.
• Wage bases vary widely: While Texas uses a $9,000 wage base, other states range from $7,000 (California, Florida) to over $67,600 (Washington). Your per-employee cost in other states may be significantly higher.
• Rates vary too: Each state has its own rate schedule, new employer rate, and experience rating system. Your Texas rate does not transfer to other states.
• Multi-state payroll software is essential: Managing SUI across multiple states is complex. Services like PDS Payroll, , and handle multi-state SUI registration, rate tracking, and quarterly reporting automatically.

Frequently Asked Questions

When does my rate change from the new employer rate to an experience rate?

TWC transitions you to an experience-based rate after approximately three complete fiscal years of chargeable history (TWC's fiscal year runs October 1 through September 30). Your first experience-rated rate will appear on the Tax Rate Notice mailed in November or December following your qualifying period. Until then, you pay the initial rate assigned at registration (2.7% for most employers).

Can my SUI rate change mid-year?

No. Your SUI rate is set annually and remains fixed for the entire calendar year (January 1 through December 31). Changes to your benefit ratio or claim history during the year are reflected in the following year's rate, not the current year.

What if I think my rate is wrong?

You can request a review by contacting TWC's Tax Department or filing a written protest within 30 days of receiving your Tax Rate Notice. Common reasons for protests include benefit charges that were incorrectly assigned to your account, errors in your taxable wage data, or failure to account for successor status. If you miss the 30-day window, you may still be able to request an administrative review, but your options become more limited.

Do part-time employees count the same as full-time for SUI purposes?

Yes. SUI is based on wages paid, not hours worked. Every employee who earns wages in Texas is subject to SUI on their first $9,000 of annual earnings, whether they work full-time, part-time, temporary, or seasonal hours.

What is the minimum number of employees to trigger SUI liability?

There is no minimum employee count as such. You become liable when you pay $1,500 or more in total wages in any calendar quarter, or employ one or more workers for at least part of a day in 20 different calendar weeks in a year. Even a single employee can trigger liability if the wage or week threshold is met.

Does Texas SUI apply to corporate officers and LLC members?

Corporate officers who perform services for the corporation and receive compensation are generally considered employees subject to SUI. LLC members who are actively involved in the business and receive guaranteed payments may also be subject to SUI, depending on the LLC's structure and how compensation is classified. Consult with a tax professional to determine whether your specific officer or member compensation is subject to Texas SUI.

Can I pay SUI annually instead of quarterly?

No. Texas SUI taxes must be reported and paid quarterly on the Form C-3, due by the last day of the month following the end of each quarter. There is no option for annual payment. See our TWC Registration Guide for a full breakdown of quarterly deadlines.