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Payson staff recommends using Employment Cost Index, not COLA, for FY26 pay adjustments; no recommended salary increases tonight
Summary
Human resources presented the town—s compensation philosophy April 1, explaining use of the Employment Cost Index (ECI) and a market analysis to set pay grades and describing a separate step-plan approach for police and fire; staff did not present a recommendation for FY26 salary increases and asked council for input ahead of open enrollment.
Human resources presented Payson—s compensation philosophy and pay-plan process at the April 1 budget work study, explaining how the town uses a market comparison and the federal Employment Cost Index to set periodic adjustments to town pay grades.
Key points: - Method: The town performs a market analysis (most recently in 2024) comparing Payson—s pay grades with a set of similarly sized Arizona agencies and uses the midpoint of the market as the benchmark. Where no direct market comparable exists, staff uses internal equity to place unique positions. - ECI vs. COLA: Human resources recommended adjusting the pay plan using the Employment Cost Index (ECI) for local government wages rather than a cost-of-living adjustment (COLA) tied to the Consumer Price Index. The ECI tracks wage and compensation changes across employers and is specific to labor costs; recent five-year averages shown in the presentation had ECI around 3.12% versus COLA about 4.14%. - Police and fire step plans: Public-safety positions use step-advancement systems (steps by years-in-rank) and separation rules between rank midpoints to avoid pay overlap between ranks. Staff proposed applying the ECI adjustment to step plan starting ranks and then using smaller separations between ranks so promotions remain meaningful without excessive overlap. - Targeting public safety above market: To address recruitment and retention problems in police and fire, Payson has been targeting pay above the market midpoint for certain public-safety positions; HR said that strategy helped attract laterals.
No salary increase recommendation: Staff emphasized the presentation was informational and that no formal recommendation for a townwide salary increase was being made at the session. Council members asked for more detail on personnel-cost trends and asked staff to return with analyses showing personnel costs as a share of operating expenses over multiple years.
Why it matters: Payson faces market competition for finance, IT, engineering and public-safety roles; the compensation approach affects recruitment, retention, overtime and the overall personnel cost that drives operating budgets.
Next steps: Human resources will continue the market-analysis process, provide additional staffing/cost trend data requested by council, and coordinate recommended ECI adjustments, step-plan updates and other compensation actions as part of the FY26 budget preparation cycle.
