Metro committee reviews Mercer pay-plan study, proposes FY26 pay-structure changes

Human Resources Director Shannon Hall told the Metro Council Budget & Finance Committee on Oct. 11 that the city is proposing a redesigned FY26 pay plan based on a Mercer compensation study that increases all pay ranges, expands step progression from 10 to 15 steps, and changes how employees are slotted when market adjustments are made. "Thanks for the opportunity to be here today and talk to you about the pay plan study that we had conducted with Mercer," Hall said.

The study and staff recommendations aim to improve recruitment and retention by moving many pay-range minimums higher, add steps so tenured employees have continued growth opportunities, and implement a new slotting method so employees keep the same step in a regraded range. Mercer consultant Leah Santos summarized a key communication point: "Market adjustments are a result of a detailed market assessment and should be communicated separately."

Why it matters: the redesign raises minimums and maximums across the classification structure so hiring is closer to market, and the city says every job covered by the plans will see higher pay under the proposal. Staff told the committee the average increase across the whole population covered by the plans is nearly 7% under the redesigned structure, with larger percentage increases for employees at the bottom of ranges and smaller increases for employees already near top steps.

What the proposal would change

- All pay ranges would be increased relative to market; minimums rise roughly 7–8% and maximums increase by larger amounts in some schedules, staff said. The presentation included examples showing employees at step 1 could see total pay movement near 9–10% in the first year (range regrade plus merit) while employees at the top of a range would see smaller percentage increases.

- Steps: plans move from 10 to 15 steps and the merit spacing is standardized to about 2% between steps; open-range merit budgets are recommended at 2%.

- Slotting: the new recommended practice is ‘‘step-for-step’’ slotting. Under the prior method, employees sometimes moved to a different-numbered step when a grade changed, producing compression. Staff said the new approach keeps an employee at the same step number in the newly regraded range so they maintain their relative position.

- Trades and labor: multiple trades charts are being consolidated into a single trades schedule; because many trades employees are low in their ranges, consolidation plus regrading produces larger percentage gains for that group in many cases.

Metrics and how future increases are set

Mercer and city HR recommended shifting the primary metric for across‑the‑board recommendations away from CPI (consumer price index) toward measures of wage growth and market pay, notably the Employment Cost Index (ECI) and compensation‑planning surveys. Leah Santos said ECI and planning surveys better reflect "the cost of labor" and the supply-and-demand dynamics that set competitive pay.

Staff proposed a two-part structure: a consistent merit budget (2%) plus a variable across‑the‑board amount tied to measured market wage growth. Mercer presented scenarios (for example, to match 4% market growth staff would pair 2% merit with 2% across the board). Leslie Shuster said the office will use blended ECI (public+private) and recent salary‑planning survey data to recommend the variable component.

Funding and where the money is in the mayor's proposal

Staff told the committee that the mayor's filed budget includes funding for the pay‑plan implementation, the 2% merit budget for eligible employees and a 1% across‑the‑board amount in the filed budget (the HR recommendation and Civil Service Commission recommendation were for a 2% across‑the‑board increase; committee members discussed whether the additional 1% could be added). Staff said the total cost of 1% across the board is approximately $10 million across all funds.

Questions and concerns from council members

Committee members requested more comparative detail (job‑by‑job peer city comparisons and side‑by‑side tables showing the old and new pay tables for representative police, fire and trades positions). Vice Chair Toombs and other council members pressed staff on the specific ECI numbers used (staff said the blended ECI used for the pay‑plan recommendation was about 4.3% and that salary‑planning surveys averaged about 3.7%, which informed a 4% recommendation). Several council members emphasized the need to avoid future compression and to restore step eligibility for long‑tenured employees who had reached prior top steps.

Implementation and employee communication

Human Resources said it has set up a SharePoint site for employees and distributed mailed notices explaining the likely impacts. Staff described the implementation rules for open ranges (behind‑the‑scenes segmentation to mirror step positions) and noted existing performance evaluation rules remain unchanged: step increases are performance‑contingent and a small number of employees historically do not receive an increment if they fail annual evaluation.

What was not decided

The presentation and Q&A did not include a committee vote on the pay plan; the mayor's budget proposal and any council adjustments determine final funding. Staff described the Civil Service Commission's recommendation and the HR recommendation but noted the filed budget funds a portion of the recommended across‑the‑board increase.

Ending

Staff said the redesigned pay plan is intended to be sustainable year‑to‑year, reduce compression, raise the lowest pay levels closer to local living‑wage measures, and provide predictable merit progression. Committee members asked for additional comparative tables and job‑level analyses to be posted to SharePoint before further action. "We will open it up for questions," Hall said at the conclusion of the presentation.

Votes at a glance: none (presentation and questions only).