Arizona Minimum Wage 2024

Whether you are a human resources expert or a small business owner, knowing the Arizona minimum wage is crucial for building a work environment that values its employees. Arizona is one of the few states in the US that implemented the Fair Wages and Healthy Family Act (FWHFA) to help its residents cope with the increasing cost of living and to raise the minimum wage in January 2017.

This article will explore the details of Arizona’s minimum wage laws, clarifying the obligations of employers within the state. We summarize the incremental raises in Arizona’s minimum wage and offer suggestions on managing these expenses.

What Is the Minimum Wage in Arizona in 2024?

In 2024, Arizona’s minimum wage for employers is $14.35 per hour, $7.10 higher than the federal minimum wage of $7.25. This rate was increased from $13.85 at the start of the year, marking a $0.50 rise. This adjustment was made in response to inflation measured from August 2021 to August 2022. Since 2021, Arizona has implemented annual increases to the minimum wage each January 1st, calculated based on the Consumer Price Index’s year-over-year change from August.

This change reflects a broader trend in Arizona, which has seen yearly increases in minimum wage for eight consecutive years, making it one of the top ten states in the U.S. with the highest minimum wages.

Complying with Arizona’s minimum wage laws is crucial for employers. Failure to do so can lead to significant legal repercussions.

While the U.S. federal minimum wage remains at $7.25 per hour, states like Louisiana, Alabama, South Carolina, Mississippi, and Tennessee adhere to this federal rate as they do not set their minimum wages. Conversely, 15 states, including Georgia, North Dakota, and North Carolina, have established their state minimum wages but have opted to maintain them at the federal minimum of $7.25 per hour.

A Brief History of Minimum Wage in Arizona

Let’s understand the background of the Arizona minimum wage to grasp how the current rules came to be.

• Early Development of the Arizona Minimum Wage Act (2006)

In the early 2000s, the push for fair wages became prominent across the United States, and Arizona responded by creating the Arizona Minimum Wage Act in 2006. Driven by a voter-approved initiative, Proposition 202, this legislation was crucial in Arizona’s commitment to guarantee wages matching living costs.

• Initial Increase (2007)

With the Arizona Minimum Wage Act in place, the state saw its first minimum wage increase in 2007. This initial rise marked a change from fixed wage structures and laid the groundwork for future incremental increases.

• Proposition 206 and the Goal of $12 (2016)

In 2016, another pivotal moment came with the approval of Proposition 206 by Arizona voters. This initiative raised the Arizona minimum wage and provided a clear plan to reach a $12 per hour minimum wage by 2020. The plan addressed income inequality by tying wage increases to the cost of living.

• Steady Increases and the $12 Target (2017-2020)

From the enactment of Proposition 206 until 2020, Arizona implemented yearly increases in the minimum wage. These regular increases were crucial in achieving the $12 per hour goal by 2020, reflecting Arizona’s commitment to fair worker compensation.

• Reaching the $12 per Hour Target (2020)

The $12 per hour goal was met in 2020, demonstrating Arizona’s dedication to promoting an economically fair environment for workers.

• Adjustments for Inflation (2021 – Current)

To maintain the minimum wage’s relevance against living costs, Arizona started making annual adjustments based on inflation from 2021 onwards. This method ensures that the minimum wage adapts to economic changes, protecting workers from the diminishing value of money.

Here’s a brief overview of the minimum wage rates throughout the years:

Year	Minimum Wage
2018	$10.50
2019	$11.00
2020	$12.00
2021	$12.15
2022	$12.80
2023	$13.85
2024	$14.35

Understanding CPI and Its Relation to Arizona Minimum Wage

The Consumer Price Index (CPI) tracks changes in the cost of a fixed set of products and services bought by urban consumers. In Arizona, the minimum wage is adjusted according to the CPI to account for inflation, aiming to maintain the dollar’s value for consumers.

Arizona has connected its minimum wage to the CPI to counteract inflation effects. This ensures that the dollar maintains its buying power over time. For employers in Arizona, this connection means they must adapt to changes in the minimum wage each year, which can significantly alter labor practices and the number of employees they can afford to hire.

Variations in Local Minimum Wages in Arizona

In Arizona, the state minimum wage is increased by specific city regulations, such as those in Tucson and Flagstaff, which have established higher local minimum wages.

In Tucson, the Minimum Wage Act, passed by voters in November 2021 as Proposition 206, outlines a schedule for increasing the local minimum hourly wage. It began at $13.00 on April 1, 2022, will rise to $14.35 in 2024, and reach $15.00 by January 1, 2025. Future annual increases may occur based on the Consumer Price Index or if state or federal minimum wages are higher. This law applies to employees working at least 5 hours per pay cycle in Tucson, excluding workers employed by the State of Arizona, the federal government, and tribal governments.

In Flagstaff, the current minimum wage as of 2023 is $16.80 per hour, with a tipped minimum wage of $14.80 per hour. This rate was gradually introduced following the approval of Proposition 414, titled “The Minimum Wage Act,” during the 2016 General Election. The goal was to elevate the minimum wage in Flagstaff to $15.00 per hour by 2021.

Flagstaff’s legislation, detailed in Title 15 of the City Code, applies to all workers expected to work at least 25 hours within the city over the course of a year. Minimum wage rates in Flagstaff are updated annually on January 1st.

What Are the Exceptions Under Arizona Minimum Wage?

In Arizona, the minimum wage law includes exemptions for certain types of employees and employers:

• Family Business: Employees working in family-owned businesses employed by immediate family members, such as parents or siblings, are exempt.
• Tipped Employees: Workers who earn a substantial portion of their income from tips, including taxi drivers, waiters, and bartenders, are not covered under the standard minimum wage rules.
• Small Business: Businesses that generate less than $500,000 in gross annual revenue are classified as small businesses whose employees are not subject to the state’s minimum wage.
• Babysitting: Casual babysitters are exempt from the minimum wage requirements, though this exemption does not apply to individuals employed as full-time nannies.
• Government Employees: Employees working for state or federal government agencies are exempt from Arizona’s minimum wage laws and are governed by federal employment regulations.

Understanding Minimum Wage for Tipped Employees in Arizona

In Arizona, the minimum wage for tipped employees like restaurant staff is $11.35 per hour as of 2024. Restaurant owners should consider this rate because it influences payroll management and employee satisfaction.

Under Arizona law, employers may apply a tip credit of up to $3.00 per hour against the standard minimum wage. Therefore, employers can pay a base wage as low as $8.35 per hour, provided that the employee’s tips bring their total earnings up to or above the minimum total salary of $14.35 per hour. For instance, if a tipped employee earns $5.00 per hour in tips, the employer must top up their wage by $3.35 per hour to ensure they reach the minimum wage threshold of $8.35 per hour.

Moreover, while Arizona law does not mandate that employees retain all their tips, employers must ensure that any tip pooling practices or deductions do not result in earnings falling below the minimum wage. It is also crucial for employers to issue wages and applicable tip credits within each workweek. Delays or mishandling in this area can lead to legal complications and negatively impact employee morale.

What Are the Rules Regarding Employee Overtime?

Arizona adheres to the federal Fair Labor Standards Act (FLSA) for regulations on overtime pay, as the state itself does not have specific overtime laws. According to the FLSA, nonexempt employees in Arizona must be paid 1.5 times higher than their standard hourly rates for hours worked beyond 40 in a single workweek.

Additionally, Arizona employers are not obligated to pay extra for work done during evenings or weekends. Furthermore, unlike some public sector positions, private sector employees in Arizona are not allowed to receive compensatory time off, or “comp time,” instead of financial compensation for overtime. Comp time is when hours that qualify for overtime pay are converted into equivalent paid time off.

Tips to Prepare for Minimum Wage Change in Arizona

Here are some practical steps for new business owners to consider when adapting to changes in minimum wage:

• Stay Updated: Business owners must remain aware of minimum wage regulations. Consulting with local chambers of commerce or business liaisons at city hall can be helpful. Remember that regulations may vary by city, as places like Flagstaff have established higher local minimum wages.
• Plan and Budget Financial Aspects: Business owners should reevaluate their budgets to account for wage increases. It is advisable to develop hiring strategies that align with the business’s financial capabilities, including hiring seasonal workers during busy periods instead of adding more full-time staff.
• Utilize Technology: Implementing efficient technology solutions can significantly improve business operations. For example, timekeeping software can help track work hours accurately and maintain compliance with wage laws.
• Make Smart Hiring Decisions: Hiring the right people is crucial. The costs associated with employee turnover can be substantial in terms of time and money. A thorough hiring and training process can yield long-term savings and support business growth.

Conclusion

Understanding Arizona’s minimum wage laws is essential for employers to ensure compliance and foster a fair workplace. Arizona’s approach, particularly through the Fair Wages and Healthy Family Act, aims to align wages with living costs, helping employees manage inflation. The incremental increases, adjusted annually based on the Consumer Price Index, reflect a commitment to maintaining wage relevance. This ensures that workers’ earnings do not lose value over time.

Employers must stay informed about these changes and their implications. Non-compliance can lead to significant legal issues, impacting business operations and employee relations. Additionally, local variations, such as those in Tucson and Flagstaff, add complexity, requiring careful attention to specific regional regulations.

Businesses can better adjust these wage changes by planning and budgeting effectively and leveraging technology for efficiency. Ensuring fair compensation supports employees and contributes to a more stable and motivated workforce.

Frequently Asked Questions