Arizona PTO Laws: What Employers Must Know (2026)

Arizona has one genuinely distinctive feature in its leave law, and it is a number: 15.

Cross that headcount and your sick-time obligation rises from 24 hours a year to 40. Everything else — the accrual rate, the covered reasons, the carryover rule — stays identical.

For a company sitting at 13 or 14 employees, that threshold turns an ordinary hiring decision into a policy change. And because most HR systems are configured once and rarely revisited, it is exactly the kind of rule that goes stale quietly.

This is general information rather than legal advice — confirm current requirements with the Industrial Commission of Arizona or an employment attorney before finalizing a policy.

Earned paid sick time

Accrual is one hour per 30 hours worked, for every employer regardless of size.

The annual cap is tiered:

Use begins on day 90.

Carryover is required for unused hours, unless you pay them out at year end and front-load the following year's entitlement.

Documentation may be required only for absences of three or more consecutive workdays.

Covered reasons include the employee's own illness or preventive care, care for a family member, public health closures of a workplace or school, and absences related to domestic violence, sexual violence, abuse or stalking.

Vacation: entirely yours

Arizona has no statute requiring paid vacation and none converting accrued vacation into protected wages. That puts it alongside Texas and New Jersey rather than Colorado or Massachusetts.

Consequences:

• Use-it-or-lose-it is generally permitted for vacation with a clear written policy.
• Payout at separation is not required by statute.
• Your handbook is the obligation. A promise to pay out is enforceable as a contract.

Earned paid sick time specifically does not require payout at separation, which is stated in the statute rather than left to inference. That is a meaningful advantage for keeping sick time in its own bucket.

Combined bank or separate buckets

A single PTO bank can satisfy the sick-time requirement if it meets the accrual rate, the applicable cap, the covered reasons, carryover, and the documentation limits.

The trade-off is the usual one, sharpened by the payout rule:

Because Arizona sick time explicitly needs no payout, merging it into a bank you do pay out converts a no-liability entitlement into a payable one. That is a choice worth making deliberately rather than for administrative convenience. The PTO cost calculator will show the difference in real numbers.

Carryover, or pay-and-reload

Arizona gives you two compliant paths at year end.

Carry unused hours forward. Simple, and the employee keeps what they earned. You may still cap use at the annual maximum even where more has accumulated.

Pay out unused hours and front-load. Pay the unused balance, then grant the full annual entitlement at the start of the new year. This resets everyone to a clean number and removes carryover tracking entirely.

The second is materially easier to administer and costs real money. Most small teams carry over; teams that dislike year-end reconciliation buy their way out of it.

Front-loaded vs accrued PTO compares the two models generally, and PTO rollover and carryover covers the year-end mechanics.

How "hours worked" applies to salaried staff

Accrual at one hour per 30 worked is straightforward for hourly employees, where the timesheet supplies the number. For exempt salaried staff who do not record hours, Arizona lets you presume a 40-hour week — accruing on that basis rather than tracking actual time.

If someone genuinely works a shorter week, you accrue on their normal schedule instead. You cannot presume 40 hours for a half-time employee and under-provide.

The practical result is that most Arizona employers run two accrual mechanisms at once: real hours for hourly staff, and a presumed weekly figure for salaried staff. Both feed the same annual cap. Exempt vs non-exempt PTO covers where the two groups diverge more broadly.

An Arizona handbook audit

1. Does it state the right cap for your current headcount — 24 or 40?
2. Does it use a 90-day use gate?
3. Does it limit documentation to three or more consecutive days?
4. Does it say what happens to unused sick hours at year end — carry or pay-and-reload?
5. Does it accidentally promise a payout of sick time the statute does not require?
6. Does it promise a vacation payout you did not intend?

How to write a PTO policy covers the drafting, and the PTO policy generator will produce a draft from your answers.

Tracking

Hours-based accrual is the part that resists spreadsheets. One hour per 30 worked means the balance moves with timesheets rather than the calendar — overtime accrues faster, part-time accrues proportionally, and nothing updates on a predictable monthly cadence.

Add a tiered annual cap that depends on headcount, a 90-day use gate and a carryover decision each December, and you have four rules interacting. The sick leave accrual calculator handles the hours-worked conversion, and why spreadsheets break for PTO covers where multi-rule tracking usually fails — almost always at the annual reset, when last year's formula meets this year's headcount.