Define: Cola

COLA, short for Cost-of-Living Adjustment, is a method used to increase salaries or benefits in order to match the rising cost of goods and services. When the cost of living rises by a certain percentage, such as 3%, a corresponding COLA of 3% is applied to an individual’s salary or benefits to assist them in coping with the heightened expenses.

COLA, short for Cost-of-Living Adjustment, is a term used to describe a raise in wages or benefits that is given to employees to match the rising cost of living. For instance, many companies provide their employees with a COLA every year to assist them in coping with inflation. To illustrate, if the cost of living rises by 3%, an employee earning $50,000 annually might receive a COLA of $1,500 to counterbalance the increased expenses of goods and services. This example demonstrates how a COLA operates in real-life situations. When the cost of living increases, wages and benefits may not be sufficient to cover the additional costs. A COLA serves as a bridge by offering extra income to employees, enabling them to maintain their standard of living and avoid financial setbacks.

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This glossary post was last updated: 16th April 2024.