The state’s capital and largest city is Phoenix, which is also the fifth most populous city in the United States.
Payroll and Benefits Guide - United States - Arizona
Fun Facts
Arizona is known as the “Grand Canyon State”.
Arizona is home to the Saguaro cactus, which is the largest cactus species in the United States.
Arizona is the sixth largest state in terms of land area.
The city of Sedona is known for its stunning red rock formations.
The state has a strong cowboy and ranching heritage.
Contributions
Employee Payroll Tax
| Contribution Type | Rate |
| FICA Social Security | 6.20% |
| FICA Medicare | 1.45% |
| Additional tax | 0.90% |
Employer Payroll Tax
| Contribution Type | Rate |
| Unemployment Insurance | 0.08% – 20.06% |
| Unemployment – New Employer | 2.00% |
| FICA Social Security | 6.20% |
| FICA Medicare | 1.45% |
| FUTA | 0.60% -6.00% |
Payroll
Payroll Cycle
Employees are generally paid monthly or semi-monthly.
13th Salary
There are no legal provisions in the law regarding 13th salaries.
Work Hours and Week
A maximum of 40 hours per workweek or 8 hours per day.
Overtime
Arizona adheres to the Fair Labor Standards Act (FLSA), and work in excess of 40 hours per week is considered overtime and paid at the rate of 150% of the regular pay. If employees are scheduled to work on weekends or rest days, no additional payment is required. However, should an employer request an employee to work in exceptional circumstances on these days, then overtime is paid at the rate of 150% of the regular pay.
Leave
Paid Time Off
Arizona does not have any state laws that govern paid time off. However, it is common for employers to decide whether to offer paid or unpaid vacation leave. This must comply with employment law and must be stipulated in the collective bargaining agreements.
Public Holidays
There are 12 official paid public holidays. If an employee works during these days, they receive 150% of the regular wages as compensation.
Sick Days
It is common for an employer to follow the Family and Medical Leave Act (FMLA) which provides certain employees with up to 12 weeks of unpaid, job-protected leave per year for certain family and medical reasons (maternity leave, serious illnesses, or if the employee needs to care for a spouse or child).
Employees are eligible for FMLA if they have worked for their employer for at least one year, completed a minimum of 1,250 hours over the past year, and worked at a location where the company employs 50 or more employees within 75 miles.
FMLA eligible employees are entitled to:
- 12 working weeks of leave in any one year for a child’s birth and to care for the newborn child within one year of birth.
- Leave for the adoption or foster care of a child and care for the newly placed child within one year of placement.
- Care for the employee’s spouse, child, or parent who has a severe health condition.
- Leave in the event of a serious health condition that makes the employee unable to perform the essential functions of their job.
- Any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty.”
Or
- 26 working weeks of leave during a single one-year period to care for a covered service member with a serious injury or illness if the eligible employee is the service member’s spouse, son, daughter, parent, or next of kin (military caregiver leave).
In addition to the FMLA, Arizona state law requires employers to allow employees to accrue and use paid sick leave for a wide range of reasons, including the employee’s need for medical care, managing a mental or physical illness, injury, etc. or to care for a family member (biological, foster or adopted child, spouse, partner, parent, grandparent or grandchild, sibling, or family member equivalent).
The Arizona Sick Leave Accrual scheme entitles employees to accrue 1 hour of paid sick leave for every 30 hours worked, up to a maximum number of hours per year. This limit can be higher if stated by the employer in the contract, and sick accrual hours start from the first day at work. Employers with 15 or more employees must allow their employees to a maximum of 40 hours per year accrued. In contrast, employers with less than 15 employees must enable their employees to an accrued maximum of 24 hours per year.
Arizona also has a law applicable to all employees that provides quarantine and isolation leave to be treated and managed in the same way as sick leave.
Maternity Leave
Maternity leave falls under the FMLA (see Sick Leave).
Paternity Leave
Paternity leave falls under the FMLA (see Sick Leave).
Parental Leave
Parental leave falls under the FMLA (see Sick Leave).
Termination
Termination Process
Except in mass dismissals or as provided for in an employment contract or a collective bargaining agreement, U.S. law does not impose a formal notice period to terminate an individual employment relationship, and employment is stipulated “at will.” This means that either the employer or the employee may end the employment relationship without giving either notice or reason, provided it is not illegal, notable discrimination on the grounds of a category protected by law, and as per the Federal Worker Adjustment and Retraining Notification Act (WARN).
The employment contracts of executives and other highly skilled individuals often incorporate a “just cause termination” clause which mandates that the employer may only terminate the employee for “cause” and lists the permissible grounds. In such cases, the parties negotiate the foundations for “just cause” termination.
Notice Period
In Arizona, most employees are employed “at-will,” and either party can terminate the employment relationship without notice. In Arizona, payout of unused vacation time is not required by law. Still, generally, employers will pay an employee for unused vacation days, provided the employee gave some advanced notice of resignation; there is no official notice period. Still, in general practice, two weeks’ notice is a minimum requirement.
In mass dismissal cases the Worker Adjustment and Retraining Notification Act (WARN Act) must be followed, and employers must give 60 days’ notice to impacted employees.
Severance Pay
Except as otherwise provided in an employment contract or collective bargaining agreement, employers are not required to pay severance. Many employers choose to offer severance based on the length of employment.
Probation Period
Probation Period
There are no provisions in the law regarding probation or trial periods. However, it is common practice for employers to set a performance evaluation after an initially stated period of employment of 90 days.
Immigration
Foreign nationals without permanent resident status or a work visa are not permitted to work in the United States. An employer seeking to hire a foreign national may file a petition with the United States Department of Homeland Security or the United States Citizenship and Immigration Services (USCIS) for an employment visa on behalf of the prospective employee. If the petition is approved, the prospective employee must obtain a visa stamp from a United States embassy or consulate (Canadian citizens are exempt from this requirement). To get a temporary U.S. work visa, an employer must file a petition with U.S. Citizenship and Immigration Services (USCIS). An approved petition must be part of the visa request.
VAT
Arizona has a minimum combined sales tax rate of up to 11.20% (state tax is 5.60% and local tax is 0% to 5.60%).