Definition of Cost-of-Living Adjustment (COLA):
* A COLA is a pay adjustment made to account for changes in the cost of living, often tied to inflation or geographic economic differences.
* These adjustments ensure that employees' purchasing power remains stable in areas with varying living costs.
Why COLA is Correct:
* It is specifically designed to address economic changes in geographic locations, such as increases in housing, transportation, and utility costs.
Eliminating Incorrect Options:
* A. Market adjustment:Adjusts pay to align with external labor market trends, not economic conditions.
* C. Travel allowance:Refers to reimbursements for travel-related expenses.
* D. Hardship allowance:Applies to employees working in challenging or remote locations.
International HR References:
* ILO Guidelines on Wage Adjustments:Supports cost-of-living adjustments for fair compensation.