Arizona Minimum Wage: 2023 and Beyond

Arizona minimum wage has been increasing via indexing since 2021 and is now $13.85, effective Jan. 1, 2023.

It’s one of a growing number of jurisdictions that have moved from scheduled rate increases — which employers can more easily plan for — to cost-of-living adjustments, sometimes announced only months or even weeks before a new effective date.

Minimum Wage Management. Simplified.

Arizona Minimum Wage

Arizona’s minimum wage law initially went into effect in 2017. The state saw modest scheduled increases until 2021.

Now, it will increase from its current level of $13.85 to a new number beginning Jan. 1, 2024. Under the law, the increase will be tied to the applicable Consumer Price Index. Unlike some other jurisdictions, Arizona’s minimum wage law says the amount of the increase each year is rounded to the nearest multiple of five cents.

Also of note for employers who have tipped workers, the law does allow employers to take a tip credit of $3, so the current tipped wage is $10.85.

Small employers, however, those with less than $500,000 in gross annual revenue, are exempt from the Arizona minimum wage law, as well as the state and federal government.

Other Notes Under Arizona’s Minimum Wage Law

• Tip pooling is allowed; employers are allowed to require or permit employees to pool, share, or split tips
• There are job-related exceptions to Arizona minimum wage, including independent contractors, volunteers and casual babysitters
• The state has no industry-specific rates
• Employers have several minimum wage recordkeeping requirements
• Federal exempt salary threshold requirements apply under the Fair Labor Standards Act
• Subminimum wage rates may be paid in certain instances, including minors or trainees
• The law requires employers to display the associated labor law poster

Meanwhile, there are two cities within Arizona with their own minimum wage rate.

Flagstaff Minimum Wage

Also on a Jan. 1 update schedule, the city of Flagstaff, Ariz., has a rate above the state level. Currently, the rates are:

• $16.80 (standard rate)
• $14.80 (tipped rate)

Flagstaff’s rate has been indexed since Jan. 1, 2023.

Lastly, the tip credit will continue to decrease in the coming years in Flagstaff, eventually reaching $1 in 2025.

Tucson Minimum Wage

Tucson, Ariz., passed its minimum wage law more recently through a ballot initiative.

The current rates are:

• $13.85 (standard rate)
• $10.85 (tipped rate)

Tucson’s minimum wage initially increased to $13 in April 2022, but has since moved to a Jan. 1 schedule.

How Many States Have a $15 Minimum Wage?

Minimum Wage Compliance

The minimum wage in Arizona highlights the challenges for large employers in managing minimum wage rates.

Add in ballot measures, adjustments to existing laws (as was the case recently with Maryland minimum wage), industry-specific rates and more, and compliance becomes even more complex.

Meanwhile, the “Fight for $15” appears to be shifting to the Fight for $20 as a new minimum wage push. Since the Fight for $15 started in 2012, dozens of jurisdictions have passed new minimum wage laws. Many of these are at the city level, where several rates have long since passed the $15 threshold (check out California minimum wage, for example).

With little movement on a federal rate increase, some advocates and lawmakers are pushing for a Fight for $20, as evidenced by bills under consideration in New York, Massachusetts and elsewhere. (New York Minimum Wage Update.)

Plus, new rates often require updated labor law posters. For examples, look to the July 1, 2023, rate updates that required new posters.

Taken together, managing minimum wage rates will only grow more difficult in the future.

County and City Minimum Wage Rate Guide

Conclusion

Employers with locations in Arizona should be aware of the multiple rates in the state.

With 2024 planning likely on the horizon, minimum wage management should be at the top of the list for compliance and HR teams.

This Employment Law News blog is intended for market awareness only, it is not to be used for legal advice or counsel.