Arizona Payroll Compliance
Every rate, wage base, and threshold Arizona employers need for 2026 — sourced from AZDOR and DES, with the Flagstaff and Tucson ordinances that override the state rate.
Minimum Wage & Hours
Arizona’s statewide minimum wage rose to $15.15/hour on January 1, 2026 — a 45-cent CPI adjustment under Proposition 206, and the first time above $15. The Industrial Commission of Arizona announces the new rate each September. Arizona has no state overtime law; the federal FLSA governs overtime.
| Item | 2026 Value | Notes |
|---|---|---|
| Statewide minimum wage | $15.15/hr | All employer sizes; CPI-adjusted annually |
| Tipped cash wage | $12.15/hr | Up to $3.00 tip credit; total must reach $15.15 |
| Overtime | Federal FLSA | No state OT law; 1.5x after 40 hrs/week |
| Pay frequency | 2x monthly | Two paydays, no more than 16 days apart |
| Next increase | Jan 1, 2027 | Announced by ICA each September |
Local Minimum Wage Exceptions
Two Arizona cities set their own minimum wages above the state rate. The applicable rate is determined by where the employee physically performs work — not where the employer is based.
State Income Tax Withholding
Arizona uses a uniquely employee-elected withholding system. While the state income tax is a flat 2.5%, employees choose their withholding percentage on Form A-4 from a set list. If no A-4 is filed within five days of hire, the default rate is 2.0%.
| Item | 2026 Value | Notes |
|---|---|---|
| State income tax rate | 2.5% | Flat rate since 2023 |
| A-4 elective rates | 0.0%–3.5% | 0.0, 0.5, 1.0, 1.5, 2.0, 2.5, 3.0, 3.5% |
| Default (no A-4) | 2.0% | Applied until employee elects a rate |
| Supplemental rate | 2.5% | Flat, on bonuses and supplemental wages |
| Required certificate | Form A-4 | Within 5 days of hire |
| Local income tax | None | Arizona has no local income taxes |
Unemployment Insurance (SUI)
Arizona’s UI program is administered by the Department of Economic Security (DES). The taxable wage base is $8,000 per employee. New employers pay a standard 2.0% rate; experience-rated employers receive an annual rate on their rate notice.
| Item | 2026 Value | Notes |
|---|---|---|
| UI taxable wage base | $8,000 | Per employee, per year |
| New employer rate | 2.0% | Standard; until experience-rated |
| Quarterly report | UC-018 | Due Apr 30, Jul 31, Oct 31, Jan 31 |
| Late report penalty | 0.1% | Of total wages; $35 min, $200 max |
| Administering agency | DES | Department of Economic Security |
Disability & Paid Leave
Arizona does not have a state disability insurance (SDI) program or a state paid family & medical leave (PFML) program — so there are no related payroll deductions to configure. Arizona does mandate paid sick leave under Proposition 206.
| Program | Status | Notes |
|---|---|---|
| State Disability (SDI) | None | No employer/employee SDI tax |
| Paid Family Leave (PFML) | None | No state program or payroll deduction |
| Paid Sick Leave | Required | 1 hr per 30 hrs worked (Prop 206) |
Official Arizona .gov Resources
Verify every figure and register for accounts at the source. These are the agencies Arizona employers interact with for payroll.