Beyond the COLA Index: The Questions Global Mobility Teams Ask AIRINC

Cost-of-living allowances are a core part of international assignment policy and a major part of our work at AIRINC.

As an AIRINC Director, I speak with Global Mobility teams about cost-of-living allowances, or COLA, every day. Clients may be reviewing their policy, selecting a cost-of-living standard, responding to an assignee’s concerns or trying to understand why an allowance has changed.

Most already understand the basic purpose of COLA: to help protect an assignee’s purchasing power when relevant goods and services cost more in the host location than they do at home.

The more difficult questions begin after that. Should family size affect the calculation? What should happen when the host location is less expensive? How frequently should COLA be updated? Should a company respond to every exchange-rate movement? And how can Mobility teams explain an index that does not appear to match an assignee’s personal shopping experience?

These are not simply calculation questions. They are policy, communication and employee-experience decisions.

COLA at a glance

A cost-of-living allowance helps protect the purchasing power of an international assignee’s spendable income when everyday goods and services are more expensive in the host location than in the home location.

COLA is calculated by comparing a representative market basket in the two locations. The resulting index is applied to the assignee’s spendable income. Housing, tax, savings and certain other assignment costs are treated separately.

For an introduction to the methodology, read more here "What Is a Cost-of-Living Allowance and When Should You Use It?".

Two assignments, one COLA policy

Consider two friends leaving the United States for international assignments in August. One is moving to Durban, South Africa. The other is heading to The Hague in the Netherlands. They share the same home country and may have similar routines, but their host-location experiences will be very different.

The Durban assignee arrives during the South African winter. Yet Durban’s mild coastal climate can still mean sunny afternoons, outdoor dining and walks along the beachfront. Their friend in The Hague arrives during the European summer, with long days, busy cafés and visits to the North Sea coast. The weather, however, is famously changeable. Sunshine, wind and rain may all arrive in the same afternoon.

Their lifestyles may differ just as much as the weather. Life in Durban could involve beaches and warm-weather recreation, with the assignee driving between activities. In The Hague, the assignee may rely more heavily on bicycles, trams and trains to get to any activity locations. Neither experience is better. They are simply different. Their everyday costs will be different too. The price of food, restaurant meals, clothing, transport, communication, personal care and recreation will vary. So will the way each person shops and allocates their income.

For the Mobility team, the question is not which destination offers the better lifestyle. It is how one policy can support two employees consistently when their host-location costs are so different. That is where COLA data and the decisions surrounding it become important.

What does a COLA index tell us?

A cost-of-living index shows the relationship between relevant goods-and-services costs in the home and host locations.

An index of 100 represents parity. An index above 100 means the basket costs more in the host location. An index below 100 means the basket costs less.

Using AIRINC Mobility/Mid-Level data for this example:

• The USA-to-Durban index is 87.3.

• The USA-to-The Hague index is 119.5.

These indices are effective as of July 2026. The Durban basket is therefore approximately 12.7% less expensive than at home, while The Hague basket is approximately 19.5% more expensive. The calculation shows how the locations compare. It does not, by itself, determine what the company should do. That is where COLA policy begins.

What the Index Difference Means in Dollars

For illustration, assume both assignees have annual spendable income of USD 40,000.

For The Hague: USD 40,000 × 19.5% = USD 7,800. Subject to the employer’s policy and delivery method, the assignee would receive an annual COLA of USD 7,800.

For Durban, the calculation indicates that the comparable basket costs approximately USD 5,080 less than at home. What happens to that negative difference depends on company policy.

Why is the COLA index applied to spendable income?

COLA is not calculated on an assignee’s entire salary. Only part of total income is used to purchase goods and services included in the cost-of-living market basket. The rest of the total income is allocated to housing, tax and savings. The portion associated with goods and services is called spendable income.

AIRINC uses representative home-country expenditure patterns to determine spendable income. Spendable income differs based on home country, income level and family size. This matters because everyday spending does not necessarily increase at the same rate as salary. An employee earning twice as much as another employee will not automatically spend twice as much on groceries, clothing, personal care and recreation.

What should a company do when the index is below 100?

This is one of the most frequent policy questions clients ask us. A negative index means the host-location basket is less expensive than the equivalent basket at home. Employers may apply the full negative amount, apply only part of it or recognise the result but floor the actual allowance at zero.

AIRINC’s 2026 Long-Term Assignment Survey shows a clear trend towards the zero-floor approach. More than eight in ten participating companies do not apply a negative COLA when the host location is less expensive.

There is no universal rule. The right approach depends on the organisation’s compensation philosophy and the design of its assignment package.

Why can an assignee’s experience differ from the index?

The most common challenges I hear often begin with one visible purchase. An assignee may tell their Mobility team that their weekly supermarket shop feels much more expensive, a familiar imported product costs significantly more or public transport is more expensive than expected. These observations may be entirely accurate. However, no individual item or spending category determines the overall COLA result.

AIRINC’s cost-of-living market basket contains approximately 350 goods and services across 12 categories. We research multiple products and outlets because the same item can have different prices depending on where it is purchased. The categories include food at home, restaurants, furnishings and household equipment, household supplies, personal care, medical care, clothing, transportation, recreation, communication, domestic help, and alcohol and tobacco. Each category is weighted according to representative home-country spending patterns. This means higher costs in one part of the basket may be offset by lower costs elsewhere. A location can have expensive imported groceries but comparatively affordable transportation, domestic help or recreation.

When responding to an assignee, it is helpful to acknowledge their experience rather than dismiss it. Their personal basket may genuinely differ from the representative basket. The next step is to explain what the index measures, what it includes and why a broad weighted result may differ from a small number of highly visible purchases.

What makes a COLA policy effective?

The index is only one component of a successful COLA programme. A strong policy should answer six questions clearly:

1. Who is eligible for COLA?

2. Which lifestyle standard will the company support?

3. How will salary and family size affect the calculation?

4. How will negative indices be treated?

5. How often will COLA and exchange rates be reviewed?

6. How will results and changes be communicated?

The answers should align with the organisation’s wider compensation and mobility philosophy.

What should Mobility teams ask a cost-of-living provider?

Reliable cost-of-living support requires more than access to a table of indices. Mobility teams should understand:

• how prices are collected and validated;

• what products and services are included;

• which assignee purchasing patterns are assumed;

• how salary and family size affect spendable income;

• how inflation and exchange rates are incorporated; and

• what expert support is available when a result is questioned.

For AIRINC, providing the index is only one part of the support we offer. Our in-house research teams collect and validate the underlying data, while our methodology brings together home- and host-location costs, expenditure patterns, family circumstances and relevant purchasing assumptions.

Our client teams then help organisations interpret the results and translate them into practical policy decisions. This may include reviewing the selected COLA standard, considering how negative indices should be treated, assessing the update schedule or helping a Mobility team respond to an assignee’s concerns. The aim is not simply to deliver a number, but to help clients make well-informed, defensible mobility decisions.

Returning to Durban and The Hague

After a few weeks, the two friends compare notes. One sends a photo from Durban’s beachfront, joking that a South African winter can still mean sunshine and lunch outdoors. The other replies from beside a canal in The Hague, where a European summer may still require sunglasses, a raincoat and a backup plan.

They may compare the cost of coffee, a restaurant meal, public transport or a weekly supermarket shop. Each will find things that are more expensive than expected and others that are surprisingly affordable. But their individual purchases do not tell the whole story.

The USA to Durban index indicates that the full weighted basket is less expensive than at home. Based on the approach used by most companies in AIRINC’s survey, that would result in a zero COLA rather than a negative deduction.

The USA to The Hague index shows that the representative basket is more expensive than at home. A positive COLA tops up the employee’s spendable income, helping them purchase a comparable range of goods and services in the host location.

The objective of COLA is not to make the locations, lifestyles or experiences identical. It is to apply a consistent methodology to those differences and identify the support required to protect appropriate purchasing power. Whether an employee is moving towards Durban’s beaches, The Hague’s bike lanes or somewhere entirely different, the central question remains the same:

What support does this employee need, and how can the organisation provide it consistently, transparently and in line with its mobility philosophy?

Frequently asked questions about COLA policy

Is COLA calculated on an assignee’s full salary?

Usually not. The COLA index is applied to spendable income, which is the estimated portion of income used for everyday goods and services. Housing, taxes and savings are generally excluded.

What happens when a COLA index is below 100?

The host location is less expensive than the home location for the relevant basket. The employer may apply a negative deduction, apply part of it or floor the allowance at zero. A zero floor is the most common approach.

Can COLA decrease when host-location prices are rising?

Yes. COLA reflects the difference between home and host costs. The allowance may decrease if home-country prices rise faster than host-country prices or if the exchange rate moves in the assignee’s favour.

Why might an assignee disagree with their COLA?

An assignee’s personal purchases and preferred shops may differ from the representative market basket and purchasing assumptions used in the calculation. A COLA index reflects a broad weighted pattern rather than every individual household’s actual expenses.

Explore the survey highlights

The findings referenced in this article represent a selection of the cost-of-living insights from AIRINC’s 2026 Long-Term Assignment Survey.

Download the survey highlights for an overview of the trends shaping long-term assignment policy, including COLA, assignment compensation, benefits and programme design. 

Every organisation’s programme is different. To discuss any of the COLA questions raised in this article, or to explore how AIRINC’s data and advisory support could help your programme, contact AIRINC.