Businesses that employ one or more individuals may be subject to the state unemployment tax. In 2007, new employers pay 2.7% on the first $9,000 of wages per employee. A minimum of six quarters is required to obtain an experience rating in order to determine an employer's revised rate. The Texas Workforce Commission indicates that the effective tax rate in 2007 ranges from a minimum of 0.29% to a maximum of 7.7% for experienced-rated accounts.

Texas' workers' compensation is managed by the Division of Workers Compensation of the the Texas Department of Insurance. Workers compensation is not mandatory in Texas.

The Texas Workers' Compensation Act limits a business' liability for job-related injuries if the employer has a workers' compensation policy from a licensed insurance carrier or has been certified to self-insure by the Texas Workers' Compensation Commission. Only companies specifically licensed to sell workers' compensation in Texas may legally offer such insurance. They may sell only the standard policy adopted by the Commissioner of Insurance.

Businesses without workers' compensation coverage—including those with alternative coverage—face unlimited liability if an employee is injured and can prove in court that the employer was negligent in any way.

The TDI publishes a rate guide to assist employers in comparison shopping for workers' compensation and employers' liability insurance in Texas. It identifies the rates filed by insurance carriers for Texas.

Legislation that became effective in 1992 requires insurance carriers to develop and file their own rates which has resulted in rates and rating plans varying from one insurance carrier to another. It is now to an employer's benefit to shop around for the most affordable coverage.

Texas employers are assigned one or more classifications based on the type of business. Each employee's payroll is then assigned to the appropriate classification. The total payroll for each classification is then multiplied by the insurer's filed rate for that classification (rate per $100 payroll) to determine premium. The employer's basic premium is the sum of the individual classification premiums.

There are other factors that may be utilized to increase or decrease the employer's premium. An experience rating modifier that reflects the employer's past loss history may be applied to the premium. (The employer may be able to negotiate the experience modifier downward if they have improved loss ratios or implemented improved safety programs.) A schedule rating debit or credit may be applied to the premium depending on individual characteristics of the employer's business that may not be reflected in the rate. In addition, there are several optional rating plans such as deductibles or retrospective rating that are available to insureds that may reduce premiums.

Texas has adopted a classification system for workers' compensation and employers' liability insurance which specifies approximately 400 classifications. All insurers must use the classifications contained in the Texas classification system. The Texas classifications may differ significantly from those used in other states. Insurance companies must use Texas classifications, but the rates for the individual classifications may differ from one company to another.

Texas publishes basis of rate tables which set out the relativities by classification which are the base rates for a majority of insurance carriers.