What is the minimum wage in Arizona?
As of 2021, the minimum wage in Arizona fornonexempt employees is $12.15 per hour, which equates to earnings of $486 for a 40-hour workweek. This is $4.90 per hour higher than the federal minimum wage of $7.25.
Arizona minimum wage laws
The purpose of minimum wage laws in the United States is to ensure that workers are protected and paid fairly at a wage they agree to prior to starting employment. Earning a minimum wage helps provide workers with the means to afford food, housing and basic necessities. Employers may choose to pay workers more than the minimum, but minimum wage laws prevent them from being paid less.
Some types of workers are exempt from minimum wage laws in Arizona, including salaried employees, state and federal government employees, those employed by family members and employees who work for small businesses with under $500,000 in gross annual revenue.
Following the passing of Arizona’s Fair Wages and Healthy Families Act in 2016, the state’s minimum wage was raised to $10 per hour in 2017, and increased yearly until it reached $12 per hour in 2020. The most recent increase to $12.15 occurred on January 1, 2021. This and future annual increases are based on the cost of living reported in the Consumer Price Index. In 2016, the city of Flagstaff raised its minimum wage to $15 per hour following the passing of Proposition 414, The Minimum Wage Act.
Arizona employers are required to display posters in their workplaces that detail the state’s minimum wage regulations. The consequences of minimum wage violations by employers in Arizona include civil financial penalties, business monitoring and sanctions.
Arizona minimum wage laws for servers and other tipped employees
A tipped employee is a worker who regularly and customarily receives tips or gratuities as part of their job. Arizona’s minimum wage legislationallows employers to pay tipped employees $3 per hour less than the current state minimum wage of $12.15 per hour, or $15 per hour in Flagstaff, as long as employees earn the difference in tips for all hours worked in a given week. The $3 less per hour is referred to as a tip credit.
Tip credits can only be put toward an employee’s minimum wage for the specific hours an employee works in a tipped occupation. For example, if a server works seven hours in their tipped occupation and one hour as a host or in the kitchen during a shift, the tip credit of $3 can only be applied to the seven hours. The employer must pay the full minimum wage for the hour spent performing non-tipped duties.
Tip pooling is a practice in which all tips earned by servers, bartenders and other tipped employees are pooled together at the end of each shift and divided equally among all the workers. Per the Industrial Commission of Arizona, the practice of tip pooling is allowed.
If an employer practices tip pooling, tips may be shared and split with workers who do not customarily receive tips, such as kitchen staff and bussers. However, while these employees can receive a portion of a server’s tips, their share cannot be credited toward their minimum wage or used as a tip credit when their employer prepares payroll.
In certain establishments, a compulsory or service charge is automatically added to customer checks on top of the standard charges for food and beverages. In Arizona, compulsory charges can only be considered as tips if the full amount of the charge is provided directly to the server during the specific pay period in which the establishment applied the service charge. If the service charge goes directly to the establishment and is added to its gross receipts, it cannot be considered a tip, and the employer cannot utilize the tip credit formula when calculating payroll.
Employers must keep records of employee tips combined with wages paid to ensure the minimum requirements are met.All Arizona employers who claim tip credits must report all tips earned by employees to the IRS via the workers’ W2 forms.
Arizona minimum wage overtime pay
Per the Department of Administration, Arizona follows the regulations in the Fair Labor Standards Act (FLSA) regarding overtime pay, as the state does not have its own laws governing overtime. Per the FLSA, nonexempt employees in Arizona are entitled to 1.5 times their regular hourly wage once they exceed 40 hours in any given workweek.
In Arizona, employers are not required to pay employees overtime for working evenings and weekends, and private employees cannot be offered comp time in lieu of overtime. Comp time refers to hours that would normally be paid as overtime being converted into paid time off.
