One of the challenges of international mobility is that even familiar routines can come with unfamiliar price tags. From grocery runs to commuting costs, the day-to-day experience of living abroad can look very different — which is why COLA continues to play such an important role in assignment policy.
At its core, COLA is designed to help employees maintain their home-country purchasing power when the cost of everyday goods and services is higher in the host location. Rather than being a one-time payment, it is typically provided as an ongoing allowance throughout the assignment, helping to ensure that employees are not financially disadvantaged simply because they have relocated internationally.
COLA is most commonly provided to employees who remain on a home-based salary while working abroad. When an employee continues to be paid according to home-country salary structures, differences in local prices can have a significant impact on their day-to-day spending power. If the host location is more expensive than home, COLA helps protect the portion of salary typically spent on goods and services, often referred to as spendable income. This allows the employee to maintain a comparable standard of living and helps the assignment feel financially neutral rather than financially disruptive.
The allowance is based on a defined group of everyday expenses known as the market basket. This market basket represents the typical goods and services employees purchase in daily life, such as food, clothing, household supplies, personal care, transportation, medical care, and recreation. The cost of this basket is measured in both the home and host locations, and the difference between the two is what drives the COLA amount.
Importantly, COLA is generally focused on routine living costs and does not usually include larger assignment expenses such as housing, utilities, taxes, education, or vehicle purchases, which are often managed separately within the policy.
Two key components determine the COLA calculation: the employee’s spendable income and the Cost-of-Living Index. Spendable income represents the portion of salary allocated to everyday goods and services, while the Cost-of-Living Index reflects the relative cost difference between the host and home locations. An index of 100 indicates that costs are equivalent, an index below 100 suggests the host location is less expensive, and an index above 100 indicates the host is more expensive. By applying the index to the employee’s spendable income, companies can calculate the allowance needed to help the employee maintain purchasing power abroad
One of the major advantages of COLA is that it can be updated over time as economic conditions shift. Because it is paid separately from salary, it can be adjusted up or down in response to changes in exchange rates or inflation levels in either the home or host location. Exchange rate movements can quickly affect what a salary is worth abroad, while inflation or deflation can change the underlying cost of the market basket. Regular updates ensure the allowance remains accurate and continues to serve its intended purpose.
At the same time, mobility teams should be prepared for the fact that COLA amounts can decrease as well as increase. While these adjustments help keep employees financially balanced, decreases can sometimes prompt questions or concern, making clear communication especially important.
Ultimately, COLA is a foundational element of many international assignment programs. When applied appropriately, it helps employees transition smoothly across borders by ensuring that higher everyday costs do not become a burden. For mobility teams, COLA is more than just a financial calculation — it is a practical way to support employee wellbeing, maintain program consistency, and respond to changing economic realities worldwide.
When COLA changes, mobility teams often need a clear, employee-friendly way to explain why the allowance has increased or decreased. That’s where the AIRINC COLA Change Report comes in. This transparent, personalized report breaks down the reasons behind a specific assignee’s COLA change — including the impact of exchange rate movements, inflation in both home and host locations, the time period being measured, and any other relevant factors — in a visual and easy-to-understand format.
Because it is included with the International Assignment Calculator and designed to answer common assignee questions directly, this report helps mobility teams communicate changes confidently and efficiently. Best of all, it does not come with an additional charge, freeing up your time for more strategic priorities while giving employees confidence that their on-assignment compensation is appropriate and transparent.
We make it easy for you to access and receive COLA data according to your needs.
You can receive COLA Tables via:
API connections
The format required by your technology system
Excel workbooks
You can receive individualized calculations through AIRINC’s International Assignment Calculator (IAC). Options include:
One Individual Calculation for specific assignee by salary and family size
A batch of individual calculations for a group of assignees.
Employees on international assignment who continue to receive a home-based salary are typically eligible for COLA. The allowance is intended to ensure they are not financially disadvantaged when the host location has higher everyday living costs than their home location.
COLA should be used when an employee is relocating internationally and there is a meaningful cost difference between the home and host locations. It is especially important in high-cost destinations where groceries, transportation, or personal services are significantly more expensive.
No. COLA is designed to cover day-to-day goods and services, such as food, transportation, and personal care. Housing costs, utilities, and other major expenses are usually handled separately through different policy benefits.
COLA can change over time due to exchange rate movements and inflation or deflation in either the home or host location. Because these economic conditions fluctuate, COLA amounts may increase or decrease during an assignment.
Most organizations review COLA regularly to ensure it remains accurate and reflects current market conditions. Frequent updates help maintain fairness and protect employee purchasing power.
COLA decreases can be challenging for employees, even when they reflect real economic shifts. Mobility teams should clearly explain that COLA is designed to keep employees balanced over time, not to provide a fixed bonus, and that adjustments ensure the allowance remains aligned with actual living costs. Tools like the AIRINC COLA Change Report can make these conversations more transparent and easier to understand.
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