Easily manage employment in Arizona

Payroll management in Arizona

Arizona’s economy is diverse, with key industries including technology, manufacturing, tourism, and agriculture. As a business-friendly state with moderate taxes and a growing workforce, Arizona offers advantages for employers. However, businesses must navigate specific payroll regulations, tax requirements, and compliance obligations to ensure proper payroll operations. Understanding Arizona’s payroll system is crucial for avoiding penalties and maintaining compliance.

Payroll breakdown in Arizona

Employers in Arizona must adhere to state and federal payroll regulations when processing employee wages, taxes, and benefits. Below is an overview of the key payroll components in Arizona:

Minimum wage and overtime

• Minimum Wage: Arizona’s minimum wage is $14.35 per hour, and it is adjusted annually based on inflation.
• Overtime Rules: Arizona follows federal overtime laws, requiring employers to pay 1.5 times an employee’s regular rate for hours worked beyond 40 hours in a workweek.

State income tax

• Arizona has a flat income tax rate of 2.5% for all income levels as of 2024.
• Employers are responsible for withholding Arizona state income tax from employee wages and remitting it to the Arizona Department of Revenue.

Unemployment insurance (UI) tax

• Employers must pay Arizona unemployment insurance (UI) tax to the Arizona Department of Economic Security (DES).
• The wage base for UI tax in Arizona is $8,000.
• New employer UI tax rates generally start at 2.0%, but rates vary based on an employer’s experience rating.

Workers’ compensation

• Arizona law requires nearly all employers to carry workers’ compensation insurance to cover medical expenses and lost wages for employees injured on the job.

Payroll tax filing and payment deadlines

• Employers must register for an Arizona Employer Account Number with the Arizona Department of Revenue for state withholding tax.
• State withholding tax returns are filed quarterly or annually depending on employer classification.
• UI tax reports must be submitted quarterly to the Arizona DES.
• Payroll tax payments can be made electronically through Arizona’s online tax portal.

Quick Facts: Important considerations for employers

• State Minimum Wage Indexing: Arizona’s minimum wage is adjusted annually based on inflation.
• Final Paycheck Rules: When an employee is terminated, employers must provide the final paycheck within seven working days or by the next payday, whichever comes first.
• New Hire Reporting: Employers must report new hires to the Arizona New Hire Reporting Center within 20 days of the hire date to assist with child support enforcement.
• Paid Sick Leave: Arizona mandates paid sick leave under the Fair Wages and Healthy Families Act, requiring employers to provide 24 to 40 hours of paid sick leave annually, depending on company size.
• Payroll Recordkeeping: Employers must maintain payroll records for four years to comply with state and federal laws.
• Right-to-Work State: Arizona is a right-to-work state, meaning employees cannot be required to join or pay dues to a labor union as a condition of employment.

Run payroll in Arizona with Remote

Managing payroll in Arizona requires compliance with state-specific tax and wage regulations. Employers must stay informed about tax rates, wage laws, and reporting requirements to ensure smooth payroll processing and avoid penalties.

For businesses looking to simplify payroll management, Remote’s payroll solutions provide automated payroll processing, tax filing, and compliance support tailored to Arizona’s requirements. With Remote, employers can focus on business growth while ensuring accurate and hassle-free payroll operations.

To see just how easy global payroll can be, book a demo today.