A cost-of-living adjustment, or simply, COLA, is a pay increase that is applied to all employees at the same time when the cost of living rises. Cost of living adjustments are often incorporated by government agencies and labor unions, but individual enterprises do so only on rare occasions. For example, a private-sector corporation may opt to implement a COLA for employees who relocate to a more costly locale. Private firms, on the other hand, often base wage increases on merit increases, promotions, and market value. When developing competitive remuneration, HR professionals should keep the regional cost of living in mind. Competitive compensation that allows an employee to enjoy a high-quality lifestyle may help recruit, engage, and retain top personnel.
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