Last Updated: January 3, 2025
In accordance with Proposition 206, known as the Fair Wages and Healthy Families Act, Arizona's minimum wage in 2025 increased to $14.70 on January 1st, 2025, and will remain so through December 31, 2025.
Arizona Minimum Wage
Arizona’s minimum wage in 2025 is $14.70 per hour in areas outside of Flagstaff and Tucson.
Arizona’s minimum wage in 2025 for tipped employees is $11.70 per hour in areas outside of Flagstaff and Tucson. 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 $14.70 per hour.
Arizona Minimum Wage - Historical Rates Table
| Year | Arizona Minimum Wage | Arizona Tipped Minimum Wage |
| 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 |
| 2019 | $11.00 | $8.00 |
| 2018 | $10.50 | $7.50 |
Local Arizona Minimum Wage Rates
The cities of Flagstaff and Tucson currently have their own minimum wage rates.
Flagstaff Minimum Wage
Effective January 1st, 2025, the Flagstaff minimum wage is $17.85 per hour. This applies to all employees who work or are expected to work at least 25 hours or more in any given calendar year within the Flagstaff city limits.
Flagstaff’s minimum wage for tipped employees in 2025 is $16.85 with a tip credit of $1.00. An employee’s combined tips and cash wages must be greater than or equal to $17.85 per hour.
Tucson Minimum Wage
Effective January 1st, 2025, the Tucson minimum wage is $15.00 per hour. This applies to all full-time, part-time, or temporary employees who work for at least 5 hours per pay cycle within Tucson city limits. However, casual employees, such as babysitting work at an employer’s home, are exempt from Tucson’s minimum wage requirements.
Tucson’s minimum wage for tipped employees in 2025 will also be $15.00 per hour with a tip credit of $3.00. An employee’s combined tips and cash wages must be greater than or equal to $15.00 per hour.
What is the Consumer Price Index (CPI) and Why is it Relevant to the Arizona Minimum Wage
According to the US Bureau of Labor and Statistics, 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. In order 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 AZ Minimum Wage Change
As labor laws change, it's important that business owners prepare themselves and their employees for the changes. Here are some ways to get ahead of the curve.
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 employee performance reviews, reviewing the organization's policies and procedures and keeping them up to date and consistent is important anytime there's a key labor law change, such as minimum wage or AZ sick leave.
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 easy-to-implement direct deposit, the 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, maybe it's 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, and ensure that it fits with the change in the Arizona minimum wage.
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 or any other labor laws for the upcoming calendar year.
