AGS Worldwide Movers

How to communicate a decrease of the Cost of Living Allowance

The Cost of Living Allowance (COLA) is a common instrument. Influenced by inflation (in the home and the host country and factoring in the exchange rate), it aims to ensure employees have the same purchasing power in their host country as they’d have had in their home country.

Posted in: Corporate News, Global mobility & HR, Helpful Resources, Immigration news, News at a Glance
Published Date: 13 July 2023

The Cost of Living Allowance instrument

Unstable supply chains, the conflict in Ukraine and increasingly unstable global politics have led to high inflation and exchange rate movements at levels that we haven’t seen in sometime.

How this may affect your Cost of Living Allowance

Expats from countries like Germany, for example, which is facing its highest inflation in 30 years, are likely to receive a drastically reduced COLA this year. At the same time, employers may be under financial pressure to lower costs, meaning they can’t afford to pay the higher COLA.

Employers and employees alike are struggling to cope with rising costs and high uncertainty. This is why honest and clear communication is more important than ever. Particularly when it comes to salary components for expats, such as the COLA.


Communicate upfront about why and how the Cost of Living Allowance is decreasing

AGS Relocation ConsultantsIt is crucial to explain the logic behind your organisation’s COLA policy. No employee likes having less money in their account – especially when prices are already skyrocketing – so well-timed, comprehensive communication is key if you want to get employees on board.

While it might mean a greater investment in time and effort upfront, a coordinated and structured communication to any affected expats will mean less disruption and chaos than if unhappy and uninformed expats complain to their HR contact.


The consequences of poor communication

It cannot be underestimated how quickly and easily expat communities can get restless and start causing disruption, especially if their real terms pay decreases. This is why we recommend tackling this problem upfront by explaining both the logic of any possible reduction and the goal of an index like COLA.

If you’re concerned about how the changing economic environment might impact your global mobility policy and allowances, contact AGS Relocation.

We can help gather the information you need to make informed decisions on the issues affecting both your assignees and your bottom line.

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