Hiring Employees in Arizona

Classifying Your Workers Correctly

Your company must distinguish properly between employees and independent contractors using federal IRS common law tests and Arizona’s definitions in wage and unemployment laws. You should look at behavioral control, financial control, and the overall relationship to decide if a worker is truly independent. Arizona can assess back wages, unpaid unemployment insurance, interest, and civil penalties if you misclassify workers, and the IRS may also levy federal penalties.

To reduce risk, document each role’s duties, level of supervision, and payment structure, and align them with the IRS guidance and Arizona Department of Economic Security rules. If you are unsure, you should review the IRS 20‑factor test and resources like https://www.playroll.com/blog/employee-misclassification-guide and consider legal advice before treating someone as a contractor.

Verify Employee Work Eligibility

For every new Arizona hire, you must complete federal Form I‑9 within 3 business days of the employee’s start date to verify identity and work authorization. You must review original acceptable documents from List A, or a combination of List B and List C, and record the details on the form without keeping expired documents. Arizona law requires all employers to use E‑Verify to confirm new employees’ work eligibility, and you must retain I‑9s for at least 3 years after hire or 1 year after termination, whichever is later.

You should store I‑9s and E‑Verify confirmations separately from personnel files and be prepared to produce them during a government audit. Avoid discriminatory practices by applying the same verification process to all new hires, regardless of citizenship or national origin.

Create an Employee Onboarding Process

When you hire in Arizona, your onboarding process should include a written offer letter, federal Form W‑4, and Arizona Form A‑4 for state income tax withholding. You should also collect direct deposit details if the employee opts in, provide your employee handbook, obtain signed acknowledgments, and issue any required state notices such as wage rate and pay frequency information.

Make sure you report new hires to the Arizona New Hire Reporting Center within 20 days and set up timekeeping and benefits enrollment promptly. Clear documentation of pay, benefits, and policies will help you control hiring costs and give you better visibility into your total employment spend in Arizona.

Pay Frequency & Methods

Arizona requires you to pay employees at least twice per month, with no more than 16 days between paydays, unless you have a valid exception for certain exempt roles. If you terminate an employee, you must issue final wages within 7 working days or by the next regular payday, whichever comes first, while employees who resign must be paid by the next regular payday; late payment can trigger wage claims and potential penalties.

Payment Methods (How You Can Pay)

Your company can choose among several payment methods in Arizona, but you must always ensure employees receive full wages on time and have clear access to their pay information.

• Payroll Check: You can pay by check as long as it is payable at full face value in cash at a bank without fees to the employee.
• Cash: You may pay wages in cash, but you must provide a written wage statement showing hours worked, pay rate, deductions, and pay period dates.
• Direct Deposit (EFT): You can use direct deposit if the employee voluntarily authorizes it in writing and can choose the financial institution receiving the funds.
• Paycards: You may pay via payroll cards if employees can access their full wages at least once per pay period without fees and you disclose terms and alternatives clearly.
• Outsourced Payroll: You can outsource payroll to a provider, but your company remains responsible for compliance with Arizona wage, tax, and recordkeeping rules.

When selecting payment methods, consider employees’ access to banking, your recordkeeping needs, and how quickly you can correct errors or issue final pay. Written policies and consistent practices will help you avoid wage disputes and administrative issues.

When you hire in Arizona, you must withhold and remit federal and state payroll taxes and pay several employer contributions. You will need to register with both the Arizona Department of Revenue and the Arizona Department of Economic Security before running payroll.

Employer Tax Contributions

As an Arizona employer, you are responsible for federal Social Security and Medicare contributions, federal unemployment tax, and state unemployment insurance. You must also withhold and remit Arizona state income tax from employee wages, even though there is no separate state disability or local payroll tax.

Employee Payroll Tax Contributions

Your company must withhold employee‑side federal and Arizona taxes from each paycheck and remit them on the required deposit schedule. You should base withholding on the employee’s Form W‑4 and Arizona Form A‑4 elections and keep accurate records for at least 4 years.

Minimum Wage in Arizona

Arizona’s statewide minimum wage is USD 14.35 per hour as of January 1, 2025, and it is adjusted annually based on inflation. You must pay at least this rate to most non‑exempt employees, while tipped employees may be paid up to USD 3.00 less per hour if tips bring them to at least the full minimum wage.

Working Hours in Arizona

Arizona generally follows federal rules for working hours and does not cap the number of hours adults can work in a day or week, as long as you pay required overtime. You must track hours accurately for non‑exempt employees and comply with youth employment restrictions for minors under 18.

Overtime in Arizona

Arizona relies on the federal Fair Labor Standards Act for overtime, so you must pay at least 1.5 times the regular rate for all hours worked over 40 in a workweek by non‑exempt employees. You should clearly define your workweek in writing and ensure bonuses, commissions, and certain differentials are included when calculating the regular rate.

In Arizona, you must comply with federal benefits laws such as the Affordable Care Act if you average 50 or more full‑time employees, which may require you to offer health coverage or face penalties. Beyond legal minimums, offering competitive benefits like health insurance, retirement plans, and paid time off can help your company attract and retain talent in a tight labor market.

Mandatory Leave Policies in Arizona

Paid Time Off in Arizona

Arizona does not mandate general vacation or PTO, but many employers offer it to stay competitive. If your company provides PTO, you should define accrual rates, carryover limits, and payout rules in a written policy, and follow it consistently to avoid wage claims.

Arizona law does not generally require payout of unused vacation at termination unless your policy or contract promises it, so clear language is important. You must still comply with the separate paid sick time rules, which have their own accrual and carryover requirements.

Maternity & Paternity Leave in Arizona

Arizona has no standalone paid maternity or paternity leave program, but eligible employees of covered employers may take up to 12 weeks of unpaid, job‑protected leave under the federal FMLA for birth, adoption, or foster placement. You must maintain group health benefits during FMLA leave on the same terms as if the employee were working.

Both federal and Arizona anti‑discrimination laws require you to treat pregnancy and childbirth‑related conditions like any other temporary disability and provide reasonable accommodations. Many Arizona employers supplement unpaid leave with PTO, short‑term disability insurance, or company‑paid parental leave to remain competitive.

Sick Leave in Arizona

Under Arizona’s Fair Wages and Healthy Families Act, you must provide earned paid sick time to employees, with accrual of at least 1 hour for every 30 hours worked. Employers with 15 or more employees must allow accrual and use of up to 40 hours per year, while smaller employers must allow at least 24 hours.

Employees can use earned sick time for their own illness, medical appointments, certain family members’ care, and specified public health or domestic violence situations. You must post required notices, track accrual and usage, and may set reasonable procedures for requesting leave that do not interfere with employees’ rights.

Military Leave in Arizona

Arizona employers must comply with federal USERRA protections, which require job‑protected leave and reinstatement rights for employees performing covered military service. Arizona law also provides protections for members of the National Guard called to state duty.

Your company should request and keep copies of military orders, maintain benefits as required, and restore returning employees to the same or an equivalent position. You may not discriminate or retaliate against employees because of their military obligations.

Jury Duty in Arizona

You must allow employees time off to serve on a jury in Arizona and cannot threaten, coerce, or fire them for complying with a jury summons. State law does not require you to pay employees for this time, but you must allow them to keep any juror fees they receive.

To minimize disruption, you can ask employees to provide a copy of the summons and coordinate schedules, but you cannot require them to use vacation or sick leave for jury service unless they choose to do so under your policy.

Voting Leave in Arizona

Arizona law requires you to provide paid time off to vote in a primary or general election if an employee does not have three consecutive hours outside working time when the polls are open. The amount of paid time off is limited to what is needed to reach three consecutive non‑working hours.

Employees must request voting leave before election day, and you may specify the hours when they can be absent. You cannot penalize or deduct from an employee’s wages for approved voting leave.

Bereavement Leave in Arizona

Arizona does not mandate bereavement leave, so whether time off is paid or unpaid depends on your company’s policy or employment contracts. Many employers offer a few days of paid bereavement leave for immediate family members to support employees during a loss.

Whatever policy you adopt, apply it consistently and document eligibility, duration, and any verification you may require. You should also consider how bereavement leave interacts with other leave types, such as PTO or unpaid personal leave.

Termination Process

Arizona is an at‑will employment state, so you or the employee may generally end the relationship at any time for any lawful reason, but you must still follow your own policies and avoid discriminatory or retaliatory motives. Document performance issues, policy violations, and prior warnings so you can show legitimate reasons if a claim arises.

Notice Period

Arizona law does not require advance notice of termination or resignation, unless you have agreed to a notice period in a contract or collective bargaining agreement. Even without a legal requirement, giving reasonable notice and a written termination letter can reduce disputes and clarify final pay, benefits, and return of company property.

Severance

Severance pay is not required under Arizona law, but you may choose to offer it under a company policy or individual agreement, often in exchange for a release of claims. If you provide severance, clearly document eligibility, calculation methods, and payment timing, and ensure any release complies with federal and state requirements, especially for older workers.