5 Tips to Help Make Your Payroll Prop 206 Compliant

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The deadline to make sure that your business and its payroll are compliant with Proposition 206 regulations has already passed. But if you are like many other business owners in Arizona, you may still have lots of questions or anxiety about whether or not you are doing it right. While Prop 206 compliance seems like a simple thing for people who aren’t in the thick of it, actually implementing it correctly can be daunting for organizations managing payrolls of varying sizes and complexities. Here are five quick tips to implement to make sure that all of your processes are following the letter of the law (Prop 206 compliant) and that you won’t have any unpleasant surprises months or years down the road.

Prop 206 Compliance

Formally known as The Fair Wages and Healthy Families Act, with the passage of Prop 206, Arizona’s minimum wage increased from $8.05 to $10 per hour in January 2017. Over the next three years, the minimum wage will continue to increase incrementally, to $10.50 per hour next year, $11 per hour in 2019 and, ultimately, to $12 per hour in 2020. After that, businesses will be left with the uncertainty of potential minimum wage increases on an annual basis, depending on changes in cost of living. If you run a business where employees earn tips (restaurants and the like), your employees can still be paid a full $3 less than the minimum hourly wage, provided that the additional earnings they get in tips put their total pay in line with the statewide minimum wage (or local minimum wage, if it applies to your municipality).

Prop 206 compliance also dictates that employees are provided with paid sick time, depending on the size of the company: those with fewer than 15 workers must let workers earn at least 24 paid sick leave hours per year while those with 15 or more employees must provide at least 40 hours of paid sick time per year.

Prop. 206 compliance tip #1

The first step to ensuring Prop. 206 compliance is to think through all of the variables. Can you afford to comply with Prop 206 regulations concerning pay, or do you need to make adjustments to ensure your business remains profitable? Are there adjustments you can make to employee schedules, certain times of the year that you can cut back on full time help or vendor contracts that you can reassess to maximize your budget? How will your workers accrue sick time? What will the process be for them to report their sick time? even more complicated depending on variables like whether or not you offer employees paid vacation, whether senior staff earns vacation at a different rate than other employees or if you have a mix of full time, part time and independent contract workers.

Prop 206 compliance tip #2

In addition to the larger Prop 206 regulations dictating pay and sick time requirements, many business owners have not heard much about the new record-keeping requirements of the law (above and beyond federal requirements).

Either on your employees’ pay stubs or on an attached file accompanying their checks, you must include line items detailing how much paid sick leave they have used, how much paid sick leave they have available to them at that point and how much money they have been paid for their sick leave to date this year. Depending on how exactly you are processing payroll, this could be really difficult or really simple. For salaried employees, the process will be more simple by virtue of their sick leave accrual being predictable — you will only need to account for variable amounts of sick leave used over each pay period. On the other hand, hourly employees will necessitate an accurate method of timekeeping and reporting. From there, in an ideal scenario, your payroll system will accurately make all of the other calculations that you need. However, if you are doing payroll yourself using a system like Quickbooks and want to ensure Prop. 206 compliance, the process may be tedious if you have hourly employees and Quickbooks is not properly synced with your time-tracking software. If you are using Quickbooks and have salaried employees, to ensure Prop. 206 compliance, set up the sick time parameters to automatically accrue each pay period, or by selected the “Each year” option in the “Hours are Accrued” window of the sick time setup screen on Quickbooks.

Prop 206 compliance tip #3

Speaking of timekeeping, during this time of transition for many Arizona business owners who are adapting to Prop 206 regulations, it may be the right opportunity to assess what time tracking system you are using and whether or not it is fulfilling all of your needs. Do your employees constantly forget to use it? Would life be easier if you had a mobile app so that your workers could clock in and out when they are handling off-site projects? Does it sync with your payroll software? There are a ton of options on the market. Give us a call if you want to chat about the pros and cons of some time tracking solutions you have been considering, or tell us a little about your company and let us make some recommendations!

payroll compliance

Prop 206 compliance tip #4

Similarly, this may also be a good time to reconsider who is responsible for processing your payroll. Whether you are currently outsourcing and are dissatisfied with your current provider or you are just sick of dealing with it yourself, finding the right outsourced payroll provider can make it feel like you have had a huge weight removed from your shoulders. And any qualified payroll provider will be able to deliver any necessary data on pay stubs in a highly accurate manner to ensure that you are in compliance with the reporting element and other aspects of Prop 206 regulations, while keeping abreast of future changes that may impact your organization.

Prop. 206 compliance tip #5

Call us. When it comes to payroll processing, we’re one of the best in the business. And one of the reasons is that we do much more than payroll processing. Even if that’s the only aspect we’re working on for you, you can rest assured that you are partnered with a company that understands business and that has your back.

Whether you would like advice for how to set up a system that empowers you to efficiently and precisely do your payroll yourself, or if you would like to explore how we can manage payroll for you to let you focus on other aspects of your business, we’re happy to chat.


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