A Cost of Living Adjustment (COLA) is an increase in income or benefits to counteract the effects of inflation, ensuring that the purchasing power of individuals, particularly employees and retirees, remains consistent over time. COLA is typically applied to wages, salaries, and pensions, helping individuals keep up with the rising costs of goods and services in their area. The adjustment is often determined based on changes in the Consumer Price Index (CPI), which tracks the average change in prices over time for a basket of goods and services.
Example of Use:
“To help employees manage the rising expenses due to inflation, the company implemented a 2% Cost of Living Adjustment (COLA) to their annual salaries.”
Related Terms:
