We recently received an interesting FAQ that I wanted to share with you.
The question revolved around the Cost of Living Allowance Analysis and whether it took into account the differing levels of compensation that an expat can receive.
Essentially the Cost of Living Allowance (COLA) is a salary supplement paid to employees to cover differences in the cost of living, particularly as a result of international assignments.
It the cost of living difference is 30% then in order to have the same purchasing power the COLA would be the amount paid to compensate for the 30% higher cost of living. The salary amount should only be the salary that is exposed to the cost of living difference (typically 40% of home net salary.) For example if 60% of the salary remains in the home country and 40% is paid in the host country, then the COLA would only apply to the 40% salary in the host country.
The formula for calculating the cost of living allowance is as follows: (Net Spendable Salary x Cost of living Index x Hardship Index x Exchange Rate) LESS (Net Spendable Salary x Exchange Rate) = NET COLA
The COLA report calculates how much additional allowance (over and above your current salary) you need to earn in another location to compensate for a higher cost of living, hardship and the exchange rate, in order to have the same relative spending power and as a result have a similar standard of living as you have in your current location. Each new COLA report uses 1 credit ($99). Recommended for calculation of a cost of living allowance for short-term assignments.
1 credit costs $99. Register, then login using your email address and password, and buy your credits online. Please note that credit card verification time is usually a few minutes, but can take a few hours. Once you have your credits you can run the premium content calculators and receive your reports online within minutes.