Cost of Living Adjustments Unpopular Among
U.S. Employers
September 14, 2010 09:04 AM Eastern Daylight Time
WASHINGTON--(EON: Enhanced Online News)--A new WorldatWork study, Compensation Programs and
Practices, found that only a small percentage (11%) of U.S. employers award cost of living adjustments (COLA) to
employees. The more prevalent types of pay increases are promotional (94%), merit (92%) and market adjustments
(76%). See table below.
Table: “What types of salary increases and/or adjustments does your organization award to some or all
employees?” (Please select all that apply.) (n=1,306)
Source: WorldatWork Compensation Programs and Practices
COLA refers to an across-the-board wage and salary increase designed to bring pay in line with increases in the
cost of living to maintain real purchasing power. Cost of living still dominates many workers' perception of their
raises, believing that these are given to cover a cost of living increase, rather than to reward them for job
performance.
“From a rewards perspective, it doesn’t make sense to base pay raises solely on the Consumer Price Index,” said
Kerry Chou, CCP, compensation practice leader at WorldatWork. “Pay raises are a tool to motivate and retain
employees. How motivating can it be for a top performer to receive the same base pay increase as a low or average
performer?”
When asked how base salary increases are determined, a vast majority (89%) of respondents selected individual
performance against job standards and/or Management By Objectives (MBO) without selecting general increase
(where everyone receives the same increase regardless of job performance).
“Eight out of 10 employers assess performance either formally (65%) or informally (15%),” said Alison Avalos,
research manager for WorldatWork. “Given the prevalence of tying pay to performance, we expect the number of
employers awarding COLA to stay flat if not dwindle in the coming years.”
About the Survey
Option
Percent
Promotional increases (result of h