The beginning of the year is always a time for governments and organizations to decide how to handle cost of living adjustments (COLA). Some COLAs are negotiated in advance as part of union agreements, and some are changed legislatively. No matter the method, it is always a source of concern for employees—especially in a year like our current one of high increases in costs for goods and services.
One gauge for our organization’s COLA has always been Social Security’s COLA. This year it was quite high at 5.9 percent. This number reflects the changes to the broader economy, but specifically the need for those on fixed or lower incomes. Many organizations felt they couldn’t go this high, and most were aiming for something much lower.
This decision about COLAs for our organization is made by the Board of Directors that supervises our organization’s finances. Normally, this would be an internal decision that is not publicized, but this year PRA made some strides in thinking about COLAs that I wish other companies would follow.
The bottom-line decision was to administer a COLA that was a fixed dollar amount rather than a percentage of the employee’s salary. The premise for this decision was the knowledge that everyone has the same higher gas and grocery expenses due to inflation. Why not distribute a flat COLA amount instead of a salary percentage, where those making more benefit more?
Let’s assume under our old COLA formula, the designated increase is 2.5 percent. Someone making $50,000 would get a $1,250 increase, and someone making $100,000 would get double that—a $2,500 increase.
With this new method of a fixed dollar increase, each person receives the same amount. The person making $50,000 gets a $2,500 COLA increase (5 percent of their salary), and the person making $100,000 gets a $2,500 COLA (2.5 percent of their salary). We will decide on the fixed amount each year, but we have committed to keeping this method.
Doesn’t this seem like a more equitable approach to how we think about cost-of-living increases? It did to us, so we did it, and we hope it catches on with other organizations. Paying attention to paying a living wage for all, incorporating pay-equity principles and reviews into our salary decisions, and using a more equitable approach to COLA are some of the ways we strive to continue to do the right thing and lead the way for other businesses to do the same.