Communicating Value and Support:
Proactive communication about COLA (Cost of Living Allowances) to international assignees and other stakeholders within the organization can simplify the process of administering and supporting this compensation element, and make it clear how COLA provides value to the assignee and your organization’s mobility program.
COLA is the allowance or balancing payment intended to offset increased costs in the host location and protect the assignee’s home purchasing power.
Although the actual computation is complex, the premise of COLA is quite straightforward. Simply stated, COLA is the allowance or balancing payment intended to offset increased costs in the host location and protect the assignee’s home purchasing power. It is an important element of the balance sheet approach to compensation.
A common misunderstanding is that COLA is provided to protect income, but in fact it is only intended to protect the portion of income typically spent on goods and services. This is done by calculating a Cost-Of-Living index, which represents the difference between host and home costs, and adjusting typical home goods and services spending by this index.
It’s a simple concept, and confirming that the COLA is just a supplement to the assignee’s own contribution from pay is an important aspect of most communications about COLA.
Our 2019 Mobility Outlook Survey confirms that 58% of firms are seeking ways to improve employee communications regarding the potential financial impacts of assignments/transfers
The Home-based Balance Sheet Approach
AIRINC’s 2018 Mobility Outlook Survey confirms that 82% of companies continue to leverage the home-based balance sheet for some or most of their expatriate populations. This is a trend we have seen year over year. Assignees paid on the basis of the balance sheet are reassured their home purchase power and benefits are protected while on assignment, and this facilitates recruitment and retention for assignments from any home to any host.
For COLA to be effective, the allowance must be reviewed periodically for changes in exchange rate and inflation. These complex economic factors change over time, often in unpredictable ways. Assignees require support to understand the purpose of COLA, and why it moves over time.
Mobility stakeholders, including the business leaders and HR, require education on how this benefit helps to enable mobility to achieve business goals.
So, in a mobility world trending toward program simplification and transparency, how do you achieve this within your own program? The key is targeted and proactive communication. Deploying a comprehensive suite of communication materials for stakeholders can help build credibility and bring clarity to your mobility program. Although most firms provide assignees with a thorough description of the mobility policy and benefits at assignment initiation, it’s not surprising that assignees focused on relocation and settling in can easily forget the details about COLA.
How can I most effectively communicate the value of a cost of living allowance to my international assignees?
Regular, ongoing communications throughout the assignment can help you educate assignees about the purpose of COLA and pre-empt many routine assignee questions. For example, by adopting a simple COLA time to time change summary report that is distributed with each update cycle, assignees can see why their allowance has changed. Likewise, a proactive communication about a major COLA change associated with a significant economic event, such as a currency devaluation, can help prepare assignees for the change and reinforce the message that the update will continue to protect home purchase power. These types of supports, particularly when they are delivered on-line, are particularly important to firms that are seeking to enhance the employee experience with more transparent and easily-accessed information.
With the understanding that building such a communication suite can take time and administrative resources are often scarce, we have partnered with a number of clients to develop a set of tools that address the concerns of each mobility stakeholder perspective.
These targeted tools include:
- Basic Education about COLA – what is it? How is it calculated? When does it change?
- COLA Time to Time Summaries – taking into account currency volatility, inflation and so on
- Policy at a Glance Summaries for the Assignee and Business
- HR and Stakeholder Communications
- PowerPoint Training Decks
- Personal, one-on-one support
The Support that will Enhance your Mobility Success!
A successful communication campaign can foster a greater understanding of COLA, but more importantly, it can build credibility for your program, enhance the assignee experience and promote a more collaborative relationship between Mobility and the business.
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