In today’s volatile global economy, the U.S. dollar is weakening against many major currencies. This shift poses a direct challenge for companies managing U.S. outbound assignees, especially when it comes to maintaining accurate and fair cost-of-living allowances (COLA).
If COLA policies aren’t updated to reflect currency fluctuations and inflation changes, assignees may experience a significant loss in purchasing power, leading to dissatisfaction or even assignment failure.
When the US dollar weakens compared to the host country’s currency, the assignee’s goods and services (G&S) spendable income—the portion of their base salary meant for everyday living—loses value when converted to local currency.
This means that their standard of living in the host location suffers unless COLA is adjusted.
Assignees with frozen or outdated allowances may face:
While COLA is designed to protect the assignee from cost-of-living differences between home and host, it must be regularly updated to reflect:
Most companies use the balance sheet approach to structure expatriate compensation. This method ensures the assignee maintains equivalent purchasing power abroad by:
The balance sheet calculates what the assignee would spend on core categories at home (e.g., housing, goods & services, taxes) and adjusts each component based on host location cost and tax differentials.
When the U.S. dollar weakens, this model flags a discrepancy between the assignee’s intended purchasing power and actual spendable income abroad. If the COLA portion is not updated, the balance sheet no longer works as intended — leaving the assignee potentially out of pocket.
By updating the COLA, companies realign the balance sheet, ensuring fair treatment and consistent compensation, regardless of currency shifts.
Most assignment letters include provisions for COLA reviews during the assignment. These are often overlooked during stable times but become critical when currency volatility spikes.
When the USD weakens, it's not unusual for the first alert to come from assignees themselves, who notice the impact on their wallets. Many of them will request COLA adjustments, especially if the discrepancy becomes noticeable in day-to-day spending.
Being proactive rather than reactive builds trust and shows your company’s commitment to supporting employees abroad.
At AIRINC, we recommend immediate review and update of cost-of-living allowances for US outbound assignees to reflect:
Ignoring these factors puts assignees at risk and may jeopardize the success of their international assignments.
To simplify and streamline the update process, AIRINC offers the COLA Change Report. This easy-to-use tool provides:
With the COLA Change Report, global mobility teams can quickly spot where adjustments are needed and ensure that assignees remain fairly compensated — even in rapidly shifting economies.
Want to dig deeper into how to support your assignees through economic shifts? AIRINC offers several helpful resources:
Download: The Balance Sheet for Expatriates
Understand how the balance sheet method works, what each component includes, and how to apply it effectively to protect assignee purchasing power.
Watch: Our Latest Webinar on COLA and FX Rates
Explore expert insights on how fluctuating exchange rates are impacting global mobility compensation — and what you can do about it.
Explore: AIRINC's COLA Change Report
A fast, visual tool that highlights which assignments may require COLA updates based on the latest FX, inflation, and salary trends.
These tools are designed to help HR professionals and mobility teams make informed, confident decisions — keeping your programs competitive and your employees supported.
Global mobility teams play a critical role in ensuring assignees are fairly compensated despite economic shifts. By staying ahead of exchange rate changes and inflation trends, you can maintain assignment success and employee satisfaction.
Stay current. Stay competitive. Support your assignees.
Need help updating COLA? Contact AIRINC or explore our tools for managing cost-of-living allowances.