Arizona Minimum Wage and Paid Sick Time for Employers: 2026 Rates, Local Rates and Prop 206
Arizona Minimum Wage and Paid Sick Time for Employers: 2026 Rates, Local Rates and Prop 206
If you have employees in Arizona, two rules set your payroll floor: the state minimum wage and the earned paid sick time requirement that voters approved under Proposition 206. This guide covers the arizona minimum wage 2026 rate, the tipped employee exception, the local rates in Flagstaff and Tucson, and what you have to track under the arizona earned paid sick time law. Rates below were checked against Arizona statutes and agency pages as of October 14, 2026.
Informational content, not legal or tax advice. This guide explains Arizona rules in general terms and does not account for your specific facts. For wage, leave, or tax decisions for a particular business, consult an Arizona employment attorney or a qualified CPA.
The 2026 Arizona Minimum Wage
The arizona minimum wage 2026 rate is $15.15 per hour. The state adjusts this figure each January 1 based on inflation under ARS 23-363(B). The amount you pay next year is set by that index, so there is no separate vote to watch for. Build the increase into your budget before the first of the year.
Employers who pay tipped workers have one exception. Under ARS 23-363(C), you may pay a tipped employee up to $3.00 per hour less than the minimum wage, but only when tips bring that employee up to the full minimum. At the 2026 rate, the cash wage is $12.15 per hour. If tips fall short of the full $15.15 in a given pay period, you are responsible for making up the difference. Do not treat the $3.00 credit as a flat discount.
| Category | 2026 Hourly Rate |
|---|---|
| Arizona state minimum wage | $15.15 |
| Tipped employee cash wage (maximum $3.00 tip credit) | $12.15 |
| Flagstaff local minimum wage | $18.35 |
| Tucson local minimum wage | $15.45 |
The 2027 State Rate
The 2027 state rate is reported at $15.65 per hour, an adjustment of about 3.4 percent based on CPI. Treat this as a reported figure until you confirm it. Check the Industrial Commission of Arizona at azica.gov, which publishes the minimum wage poster, before you set 2027 pay rates.
Local Minimum Wages: Flagstaff and Tucson
Arizona cities can set minimum wages above the state floor, and the local rate controls for employees who work inside that city. Two cities matter most for this guide:
- Flagstaff: $18.35 per hour in 2026, rising to $18.95 per hour on January 1, 2027, according to the City of Flagstaff's announcement in September 2026.
- Tucson: $15.45 per hour in 2026. Confirm the 2027 figure on the City of Tucson's website before you rely on any number for next year.
This list is not a complete survey of every Arizona city. If you have locations or employees in other cities, check each city's official website before you set pay. Where a local rate is higher than the state rate, the higher rate is the one you must pay to employees working there.
Arizona Earned Paid Sick Time Under Prop 206
Proposition 206 created the arizona earned paid sick time requirement, which is codified in ARS 23-372. The rule is built on two numbers: how fast employees accrue time, and how much they can accrue in a year. The cap depends on your headcount.
| Employer Size | Accrual Rate | Annual Cap |
|---|---|---|
| Fewer than 15 employees | 1 hour per 30 hours worked | 24 hours per year |
| 15 or more employees | 1 hour per 30 hours worked | 40 hours per year |
Two practical points follow from the table. First, accrual is tied to hours actually worked, so you need timekeeping that is accurate enough to calculate it. Second, the 15-employee line determines which cap applies to your business. Before you rely on your headcount, confirm with the Industrial Commission how employees are counted for that threshold, especially if you use part-time, seasonal, or multi-location staff.
Who Enforces the Law
The Industrial Commission of Arizona enforces earned paid sick time and publishes a poster each year. Display the current year's poster where employees can read it, and do not keep an older version up after the new one is released. The poster is the simplest way to show you have met the notice requirement, but it does not replace the individual records described below.
Records and Notice
Under Prop 206, employers need two things in working order: records and notice. Records should show hours worked, sick time accrued, and sick time used for each employee, so you can answer a question about any pay period without reconstructing it from memory. Notice means informing employees of their rights under the law, using the Commission's materials where applicable. Keep both in a form you could produce quickly if the Commission asks for them.
Steps to Take Before Your Next Payroll
- Check every hourly rate. No employee should be paid below $15.15 per hour, and employees in Flagstaff and Tucson must be paid at least the local rate for those cities ($18.35 and $15.45 in 2026).
- Document tipped pay. If you use the tip credit, record the cash wage, the tips reported, and any make-up payment made when tips fell short of $15.15.
- Track sick time by hours worked. Calculate accrual at 1 hour per 30 hours worked and compare the total against your 24-hour or 40-hour annual cap.
- Post the current poster and give notice. Confirm you have the current Industrial Commission poster and that employees have received the required notice.
- Calendar January 1, 2027. The state rate, the Flagstaff increase to $18.95, and the Tucson figure all change on or around that date. Confirm each one on the official site before you update payroll.
Other Registrations Worth Checking
Wage and sick time rules are only part of setting up an Arizona business. These items are often confused with one another:
- No general state business license. Arizona does not issue one. Most businesses that sell taxable goods or services need a Transaction Privilege Tax (TPT) license from the Arizona Department of Revenue, which costs $12 per location. Apply through the Department of Revenue's TPT license page.
- City licenses. Many cities require their own business license or local TPT license on top of the state license. Counties issue no general business license.
- Contractors. The Registrar of Contractors licenses contractors. The Corporation Commission does not.
- Entity filings. The Arizona Corporation Commission files LLC and corporation documents. LLCs file no annual report, but for-profit corporations must file one each year, at a fee of $45. An LLC must publish notice unless its statutory agent's county is Maricopa or Pima.
- Trade names. Trade names are registered with the Arizona Secretary of State through its trade name registration page, not with the Corporation Commission.
- Income tax. Arizona's individual income tax is a flat 2.5 percent. Confirm withholding requirements for your payroll with the Department of Revenue.
Where to Confirm Current Figures
- Industrial Commission of Arizona (azica.gov): state minimum wage, the 2027 rate, and the annual earned paid sick time poster.
- Arizona Department of Revenue (azdor.gov): TPT licensing and income tax questions.
- City of Flagstaff and City of Tucson websites: local minimum wage schedules. Search for each city's official site and confirm the rate published there.
Arizona wage and sick time rules change on a predictable schedule, but the amounts change each year. Re-check the official sources every January before you update your payroll system. For questions about how these rules apply to your workforce, talk with an Arizona employment attorney or CPA before making decisions based on this guide.