COLA in time
The index and the allowance are regularly calculated; this should be indicated in your relocation policy. This will explain that your pay might change from one month to the other as the Cost of Living allowance will have been modified. Make sure that the timing of regular assessment of the COLA is indicated.
COLA is not always offered for the full duration of the relocation contract as some hiring company will feel that the employee will adapt to the local standard of living and do not need to be paid an allowance for more than the first year for example.
Some companies will offer a longer period of Cost of Living Allowances for high-cost areas. The Allowance payout can also be adapted to yearly plans and the actual payout follows a decrease as per example:
Year 1: Paid out at 100% of the increase
Year 2: Paid out at 60% of the increase
Year 3: Paid out at 30% of the increase
All this depends on your company’s relocation policies.
The cost of living allowance is most of the time subject to payback in the relocation agreement, meaning that the employee will have to repay the company if the employee terminates employment. Make sure to get an explanation on this from your HR department.
Remember there are other important contract negotiation aspects that we cover in our Work global guides, such as tax equalisation, currency exposure and relocation compensation.