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Arizona PEO Laws: Registration, Bonding and Payroll Requirements

Arizona repealed PEO registration in 2024 via HB 2252, though A.R.S. 23-569 still requires PEOs located in the state to hold $100,000 net worth or bond. SUI applies to the first $8,000 of wages at 2.0% for new employers. Minimum wage is $15.15 (2026), earned paid sick time is mandated, and no state workers' compensation fund exists.

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Arizona: PEO regulatory and payroll facts. Each populated field links to the statute, agency page or filing it came from.
PEO registration or licensing requiredNo - PEO registration repealed by HB 2252 (approved April 2, 2024), which repealed A.R.S. 23-563 through 23-568 and 23-575 through 23-576 source (opens in new window)
Regulating agencyNone - registration repealed in 2024; the former regulator was the Arizona Secretary of State source (opens in new window)
Bond or security requirement$100,000 minimum net worth, or a bond, irrevocable letter of credit, or securities with a minimum market value of $100,000 held by an insured depository institution, required for PEOs located in Arizona (A.R.S. 23-569, as amended by HB 2252) source (opens in new window)
Registration renewal cycleN/A - PEO registration and renewal cycle eliminated by HB 2252 (2024) source (opens in new window)
SUI taxable wage base$8,000 per employee per calendar year (raised from $7,000 effective January 1, 2023) source (opens in new window)
New-employer SUI rate2.0% for a minimum of two calendar years for new employers source (opens in new window)
State workers' comp fundNo - the State Compensation Fund board terminated July 1, 2012 and Title 23, chapter 6, article 5 was repealed January 1, 2013; the successor mutual insurer is a private carrier, not a state agency source (opens in new window)
State paid leave mandateYes - earned paid sick time under Proposition 206 (A.R.S. 23-371 et seq.), administered by the Industrial Commission of Arizona source (opens in new window)
State minimum wage$15.15 per hour (2026) source (opens in new window)
PEO SUI reporting basisPEO-level - a PEO is the employer of workers it supplies and must report and pay all required contributions using the state employer account number and contribution rate of the PEO (A.R.S. 23-614) source (opens in new window)

Sources

What we know about Arizona

Arizona repealed its professional employer organization registration program in 2024. House Bill 2252, approved by the governor on April 2, 2024, repealed sections 23-563 through 23-568 and 23-575 through 23-576 of the Arizona Revised Statutes, which had required PEOs to register with the Secretary of State, and amended section 23-569 so that a professional employer organization located in the state must still maintain either a minimum net worth of $100,000 or a bond, irrevocable letter of credit, or securities with a minimum market value of $100,000, with the bond held by an insured depository institution. The Senate fact sheet for the bill summarizes the effect as removing the requirement for a PEO to register with the Secretary of State, repealing registration fees, criminal penalties, and the PEO Fund, while specifying that a bond required to be maintained by a PEO must be held by an insured depository institution rather than a depository designated by the Secretary of State.

Arizona's unemployment insurance program applies to the first $8,000 of gross wages paid to each employee in a calendar year. The Department of Economic Security explains that the taxable wage base was raised from $7,000 to $8,000 effective January 1, 2023, under Senate Bill 1828, and that a new employer, other than a successor to a liable employer, is assigned a tax rate of 2.0 percent for a minimum of two calendar years before the reserve ratio experience rating system applies. Under section 23-614 of the Arizona Revised Statutes, a professional employer organization is the employer of workers it contracts to supply to a client, and it must report and pay all required contributions to the unemployment compensation fund using the state employer account number and the contribution rate of the professional employer organization.

Arizona's minimum wage is $15.15 per hour in 2026, adjusted annually under Proposition 206, the Fair Wages and Healthy Families Act, as reflected in the U.S. Department of Labor's consolidated minimum wage table. The same voter initiative created earned paid sick time, codified at A.R.S. 23-371 et seq., under which employees accrue one hour of earned paid sick time for every thirty hours worked, with annual accrual caps of 40 hours for employers of fifteen or more employees and 24 hours for smaller employers, as compiled in the Congressional Research Service report on paid sick leave. Arizona has no state workers' compensation fund: the State Compensation Fund board terminated on July 1, 2012, Title 23, chapter 6, article 5 was repealed on January 1, 2013, and the successor mutual insurer corporation operates as a private carrier that is not an agency of the state, according to the legislation and the Arizona Senate's issue brief on the fund.

The result is a state in which PEOs face no registration or renewal obligations at all, yet continue to carry a statutory financial capability requirement of $100,000 in net worth or security, and in which the PEO, rather than the client, holds the unemployment compensation account and contribution rate for covered employees.

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