Cost-of-Living Adjustment for corporate relocation.
Cost-of-living adjustment (COLA) compensates relocating employees for the differential in everyday-purchase costs between their origin and destination metros. The most-used industry methodology is Mercer's home-based balance sheet approach. WHR Global 2025: 46% of organisations provide COLA portfolio-wide; 75% for long-term international assignments.
1.The formula
Mercer 'home-based balance sheet' approach. Host spendable income = Home spendable income + COLA differential.
2.Spendable income — what's in scope
Portion of salary covering everyday needs: food, clothing, transportation, recreation. Excludes housing (handled separately as housing allowance) and savings. The exclusion of housing is structural: housing costs vary so dramatically by destination (Manhattan vs Charlotte, London vs Mumbai) that index-based blending would produce noise. Housing is handled as a separate allowance keyed to the destination metro's rental market.
3.Index sources
- Mercer Cost of Living Survey — 226 cities, market-basket vs New York base
- ECA International — quarterly Cost of Living Survey
- AIRINC — assignment management data
- Numbeo — crowd-sourced (cross-check only, not primary)
Mercer is the most-used by HR mobility teams for international assignments because the 226-city dataset has the broadest market-basket coverage. ECA International is the strongest competitor; AIRINC is used by larger global-mobility programs. Numbeo is crowd-sourced — useful as a cross-check, not as the primary index source.
4.Adjustment ranges
Domestic US: 5-25% salary uplift moving to NYC/SF/DC/Boston from a mid-cost metro.
International: -10% to +40% depending on origin/destination pair. The international range is wider because origin/destination pairs include both low-to-high (e.g. Mumbai to London, +40%) and high-to-low (London to Manila, -10%).
5.WHR adoption data
WHR Global 2025 Mobility Benchmark reports COLA adoption rates by assignment type:
| Assignment type | % providing COLA |
|---|---|
| Portfolio-wide (all assignments) | 46% |
| Short-term assignments | 67% |
| Long-term assignments | 75% |
| Permanent international transfers | 7% |
Note the dramatic drop for permanent international transfers (7%) vs long-term assignments (75%). Permanent transfers are typically structured to absorb the destination cost-of-living into the new base salary (rather than as a separate allowance), so explicit COLA disappears from the package.
6.Social Security COLA 2026
For HR mobility teams cross-referencing federal cost-of-living adjustment indicators: the Social Security 2026 COLA is 2.5%. This is a separate adjustment used for Social Security benefits, not a recommended index for corporate relocation COLA calculation. Mercer / ECA / AIRINC indices are the appropriate sources.
Sources: Mercer COLA methodology · WHR Global COLA primer · Verified 2026-06-03.