Cost of Living Allowance (COLA)
entry by Julie M. Marx, Global Family Expert at Expat Valley
A supplementary financial payment provided to internationally mobile employees to compensate for differences in the cost of living between their home country and their host country. COLA is a standard component of international assignment packages and is typically calculated using published cost of living indices comparing the two locations. It directly affects the financial wellbeing of the entire family and is a frequent source of tension when perceived as inadequate relative to actual host-country living costs.
Comparable terms
Cost of living adjustment (HR/mobility — equivalent; emphasizes the adjustable nature of the allowance) · Goods and services differential (HR/mobility — technical term for the component of COLA relating to everyday consumer costs) · Hardship allowance (HR/mobility — a related but distinct allowance: additional payment for postings in locations with difficult living conditions) · Location allowance (HR/mobility — broader; may encompass COLA and other location-specific payments)
Why this matters
If COLA is miscalculated or unclear, everyday financial stress rises quickly. This strain often lands most directly on the accompanying partner managing daily life. Transparent, adequate COLA is a core building block of feeling safe and settled.
Cross-references
Global Mobility Policy (Professional Support Roles); TA / Tax Equalization (Transitions & Mobility); Assignment Success (Transitions & Mobility); Assignment Failure (Transitions & Mobility); Spousal Adjustment (Family Dynamics). Assignment failure is a documented downstream risk of inadequate COLA — when families cannot meet actual host-country living costs on the allowance provided, financial stress compounds other adjustment pressures. Spousal adjustment is particularly vulnerable to COLA inadequacy because accompanying partners who are not working in the host country experience cost-of-living pressures most directly in daily household management.
Sources
COLA is standard global mobility industry terminology. The authoritative source for definition and calculation methodology is: WERC. Cost of Living Allowance Guidelines. Available at worldwideerc.org. For the family wellbeing implications of compensation adequacy, see: McNulty, Y. & Brewster, C. (2017). Working Internationally: Expatriation, Migration and Other Global Work. Edward Elgar Publishing.
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