Last Updated: March 26, 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 the state's minimum rate.
Arizona Minimum Wage - Historical Rates Table
| Year | Arizona Minimum Wage | Arizona Tipped Minimum Wage |
| 2026 | $15.15 | $12.15 |
| 2025 | $14.70 | $11.70 |
| 2024 | $14.35 | $11.35 |
| 2023 | $13.85 | $10.85 |
| 2022 | $12.80 | $9.80 |
| 2021 | $12.15 | $9.15 |
| 2020 | $12.00 | $9.00 |
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
Arizona has two localities that adhere to their own local ordinances separate from the statewide law:
Because of this, Arizona employers with employees working in either Flagstaff or Tucson city limits must understand the unique regulations associated with them. Both Flagstaff and Tucson require employers to display their respective cities' minimum wage posters.
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:
- Stay Current With Labor Law Updates - To remain compliant, Arizona employers should proactively track minimum wage updates or related laws that may affect minimum wage, such as the Arizona Sick Time Law, to help ensure timely payroll and adjustments are made before the effective date. Keeping up with state or even local labor laws is made easier when utilizing an HR Compliance Solution that provides businesses with timely notifications on affecting regulation changes, plus best practices to manage them.
- 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 a key labor law change occurs.
- 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
When 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. If you have any other compliance questions related to labor laws, schedule a compliance check-up with us today.
