Minimum Wage in Arizona for 2026: Everything You Need to Know

Last Updated: January 1, 2026

In accordance with Proposition 206, known as the Fair Wages and Healthy Families Act, the minimum wage in Arizona increased to $15.15 per hour on January 1st, 2026, and will remain so through December 31, 2026.

Each year on January 1, the Industrial Commission of Arizona (ICA) determines and enforces updates to the state minimum wage using the Consumer Price Index (CPI).

Minimum Wage in Arizona

Arizona’s minimum wage is currently $15.15 per hour in areas outside of Flagstaff and Tucson.

For tipped employees, the minimum wage in Arizona is $12.15 per hour. Employers may claim a tip credit of up to $3.00 per hour if an employee’s combined tips and cash wages are greater than or equal to $15.15 per hour.

Arizona Minimum Wage - Historical Rates Table

Exceptions to the Arizona Minimum Wage

In accordance with the Fair Wages and Healthy Families Act, certain individuals are exempt from receiving the state minimum wage rate.

These individuals include individuals who are:

• Employed by their parent or sibling
• Perform babysitting services in the employer's home on a casual basis
• Arizona state or US federal government employees
• Employees working for a small business that grosses less than $500,000 in annual revenue

Local Minimum Wage in Arizona

The cities of Flagstaff and Tucson follow their own set of minimum wage rates separate from the statewide rate. Each year on January 1, local minimum wage rates are adjusted using the CPI.

Flagstaff Minimum Wage

During the 2016 General Election, the city of Flagstaff voted to pass Proposition 414, otherwise known as "The Minimum Wage Act". The law was designed to grant Flagstaff workers a livable wage, gradually increasing the minimum wage to $15.00 per hour by 2021.

Beginning in 2022 and thereafter, the Flagstaff minimum wage is determined and adjusted each year using the greater of:

• The calculated rate is based on the Consumer Price Index (CPI), or
• $2.00 above the established statewide rate

Effective January 1st, 2026, the Flagstaff minimum wage is $18.35 per hour. This applies to all employees who work or are expected to work at least 25 hours or more in any given calendar year within the Flagstaff city limits.

The Flagstaff minimum wage for tipped employees is also $18.35 per hour. As of January 1, 2026, all employees in Flagstaff are now required to make the full minimum wage, regardless of whether they regularly earn tips.

Flagstaff Minimum Wage - Historical Rates Table

Tucson Minimum Wage

Established at the November 2021 General Election, the city of Tucson passed Proposition 206 into law, otherwise known as "The Tucson Minimum Wage Act". The minimum wage rate for Tucson was then set to $13.00, effective on April 1, 2022.

Effective January 1st, 2026, the Tucson minimum wage is $15.45 per hour. This applies to all full-time, part-time, or temporary employees who work for at least 5 hours per pay cycle within Tucson city limits, with some exceptions.

The Tucson minimum wage is exempt for the following individuals:

• Casual employees, such as a babysitting service at an employer’s home
• Employees of the United States or the State of Arizona
• Employees of tribal entities

The Tucson minimum wage for tipped employees in 2026 is $12.45 per hour with a tip credit of $3.00. An employee’s combined tips and cash wages must be greater than or equal to the city's minimum wage rate.

Tucson Minimum Wage - Historical Rates Table

NOTE: The minimum wage rate in Tucson for 2022 began on April 1st and was in effect until December 31, 2022

What is the Consumer Price Index (CPI) and How Does it Relate to Arizona Minimum Wage

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. To account for inflation, Arizona has tied the minimum wage to the Consumer Price Index.

For consumers, this means that the purchasing power of the dollar should remain strong. For Arizona employers, this means that they need to account for an annually updated minimum wage, which can drastically change labor practices and employment numbers.

How Business Owners Can Prepare for the Minimum Wage Change in Arizona

As labor laws change, business owners must prepare themselves and their employees for the changes. Here are some ways to get ahead of the curve:

• Clearly Document Policies - It is important to review the employee handbook to ensure policies and procedures are up-to-date and consistent. Whether it's employee scheduling, employee disciplinary action policies, or paid time off rules, reviewing the organization's policies and procedures and keeping them up to date and consistent is important anytime there's a key labor law change, such as the minimum wage, Arizona Sick Time Law, or Arizona Mini COBRA.
• Keep Your Technology Up To Date - Technology plays a crucial role in managing payroll and wage rates. It's important to choose a payroll solution that is flexible, customizable, and well-integrated into the rest of the organization's human capital management (HCM) suite. From automatic tax withholding calculations to calculating commissions and tips, to simple direct deposit setup, a payroll solution should work for the company, not the other way around.
• Implement Best Practices for Compensation Management - With a major change to minimum wage, it's important to review the organization's compensation management process and search for best practices that will determine the proper pay for each employee. This ranges from an employee's base pay all the way through their benefits and paid time off. Compensation management plays a critical role in attracting, retaining, and motivating employees. There's never a better time to review employee compensation than a major change to the minimum wage in the new year.
• Review Budgets - This goes hand-in-hand with reviewing compensation management practices. For instance, it might be a better time to hire more seasonal workers to supplement staff during busy times or to adjust schedules with existing staff to reduce overtime costs. It's important to review the upcoming year's budget, cash flow, and hiring plans to ensure they work with the change in the Arizona minimum wage.

Get Help Managing Arizona Minimum Wage and State Labor Law Compliance

As year-end payroll wraps up, Arizona employers are already looking ahead to ensure compliance with the latest labor laws taking effect next year. Employers unprepared for the changes ahead can expect to see challenges with payroll accuracy, budgeting, and overall labor law compliance, which can result in hefty penalty costs.

It's always important to make sure your organization is prepared and remains in compliance with labor and wage laws. Contact us if you would like to discuss Arizona's minimum wage laws or any other labor laws for the upcoming calendar year.