Legal Definitions - COLA

Definition: COLA is an abbreviation for Cost-of-Living Adjustment. It refers to an increase in wages or benefits that is made to keep up with the rising cost of living.

Example: Many companies offer their employees a COLA each year to help them keep up with inflation. For example, if the cost of living increases by 3%, an employee who earns $50,000 per year might receive a COLA of $1,500 to help offset the higher cost of goods and services.

Explanation: The example illustrates how a COLA works in practice. When the cost of living goes up, wages and benefits may not be enough to cover the increased expenses. A COLA helps to bridge that gap by providing additional income to employees. This can help them maintain their standard of living and avoid falling behind financially.