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Cost of Living Adjustments: When to Ask
44%
Of employers gave COLA raises in 2024
Source: Salary.com
3.9%
Average salary increase in 2024 (including COLA)
Source: WTW Survey
What Is a Cost of Living Adjustment (COLA)?
A Cost of Living Adjustment (COLA) is a salary increase designed to offset inflation and rising living expenses—not a merit raise for performance.
Key facts:
Key facts:
- Social Security automatically applies COLA annually (2.8% in 2026, based on inflation data)
- 44% of private employers provided COLA raises in 2024
- Average salary increase in 2024 was 3.9%, often combining merit and COLA
- COLA is not guaranteed in most private sector jobs (unlike federal/government roles)
The challenge: Most companies bundle COLA into annual raises without separating it from performance-based increases. This means if inflation is 3% and you get a 4% raise, you're only getting a 1% real increase in purchasing power.
If you're in a high-cost city, relocated for work, or experiencing significant inflation, you may need to proactively ask for a COLA—especially if your company doesn't offer automatic adjustments.
When You SHOULD Ask for a COLA
1. You relocated to a more expensive city for work
If your company asked you to move from Austin (cost of living index: 100) to San Francisco (cost of living index: 183), your salary should reflect that.
What to ask for: A raise that matches the cost difference.
Example: If you made $80K in Austin and move to SF, you'd need ~$146K to maintain the same standard of living.
Use online calculators (NerdWallet, Bankrate) to calculate the difference and present the data.
Script:
"I'm excited about this relocation, and I want to discuss a cost of living adjustment. Based on [data source], the cost of living in San Francisco is 83% higher than Austin. To maintain my current standard of living, I'd need a salary of approximately $146K. Can we discuss an adjustment to reflect this?"
2. Your company didn't give raises during high inflation
If inflation was 4-7% (as it was in 2021-2023) and your company froze salaries, you effectively took a pay cut.
When to ask: During your annual review or when the company's financial situation stabilizes.
Script:
"I understand the company faced budget constraints over the past [timeframe], and I appreciate the transparency. Now that we're in a stronger position, I'd like to discuss a cost of living adjustment to reflect the inflation that occurred during that period. My salary has lost approximately [X%] in purchasing power."
3. You've been in the same role for 3+ years with no adjustment
Even small annual inflation (2-3%) compounds. If you haven't received a raise in 3 years, you're earning less in real dollars.
What to ask for: A catch-up adjustment based on cumulative inflation.
Script:
"I've been in this role for 3 years, and while I value the stability, my salary hasn't been adjusted for inflation. Over that period, inflation totaled approximately [X%], which means my purchasing power has decreased. I'd like to discuss a cost of living adjustment to bring my compensation in line with the market."
4. Remote workers relocating to lower-cost areas (reverse COLA)
This is tricky. Some companies reduce salaries when remote workers move to cheaper cities. Others don't.
If your company has a location-based pay policy: They may cut your salary.
If they don't: You keep your salary (best case).
How to handle it: Before moving, ask HR about their policy. If they plan to reduce your pay, negotiate:
"I understand the policy, but my role is fully remote and my output hasn't changed. I'd like to discuss keeping my current salary, especially since I'm delivering the same value regardless of location."
If your company asked you to move from Austin (cost of living index: 100) to San Francisco (cost of living index: 183), your salary should reflect that.
What to ask for: A raise that matches the cost difference.
Example: If you made $80K in Austin and move to SF, you'd need ~$146K to maintain the same standard of living.
Use online calculators (NerdWallet, Bankrate) to calculate the difference and present the data.
Script:
"I'm excited about this relocation, and I want to discuss a cost of living adjustment. Based on [data source], the cost of living in San Francisco is 83% higher than Austin. To maintain my current standard of living, I'd need a salary of approximately $146K. Can we discuss an adjustment to reflect this?"
2. Your company didn't give raises during high inflation
If inflation was 4-7% (as it was in 2021-2023) and your company froze salaries, you effectively took a pay cut.
When to ask: During your annual review or when the company's financial situation stabilizes.
Script:
"I understand the company faced budget constraints over the past [timeframe], and I appreciate the transparency. Now that we're in a stronger position, I'd like to discuss a cost of living adjustment to reflect the inflation that occurred during that period. My salary has lost approximately [X%] in purchasing power."
3. You've been in the same role for 3+ years with no adjustment
Even small annual inflation (2-3%) compounds. If you haven't received a raise in 3 years, you're earning less in real dollars.
What to ask for: A catch-up adjustment based on cumulative inflation.
Script:
"I've been in this role for 3 years, and while I value the stability, my salary hasn't been adjusted for inflation. Over that period, inflation totaled approximately [X%], which means my purchasing power has decreased. I'd like to discuss a cost of living adjustment to bring my compensation in line with the market."
4. Remote workers relocating to lower-cost areas (reverse COLA)
This is tricky. Some companies reduce salaries when remote workers move to cheaper cities. Others don't.
If your company has a location-based pay policy: They may cut your salary.
If they don't: You keep your salary (best case).
How to handle it: Before moving, ask HR about their policy. If they plan to reduce your pay, negotiate:
"I understand the policy, but my role is fully remote and my output hasn't changed. I'd like to discuss keeping my current salary, especially since I'm delivering the same value regardless of location."
When You Should NOT Ask for a COLA
1. You just got a merit raise
If you received a performance-based raise recently (within 6 months), asking for an additional COLA will likely be declined—and may come off as tone-deaf.
Exception: If inflation spikes dramatically (like in 2022) and your merit raise was below the inflation rate.
2. Your company is in financial trouble
Layoffs, hiring freezes, or public financial struggles mean this isn't the time to ask for more money.
Better move: Wait until the company stabilizes, then ask for a retroactive adjustment.
3. You're underperforming
COLA requests are easier to justify when you're a strong performer. If you're on a performance improvement plan or received negative feedback, focus on improving first.
4. You're paid above market rate
If your salary already exceeds the market rate for your role and location, a COLA request is unlikely to succeed.
Check your market rate: Use Glassdoor, Levels.fyi, Payscale, or Salary.com to see where you stand.
If you received a performance-based raise recently (within 6 months), asking for an additional COLA will likely be declined—and may come off as tone-deaf.
Exception: If inflation spikes dramatically (like in 2022) and your merit raise was below the inflation rate.
2. Your company is in financial trouble
Layoffs, hiring freezes, or public financial struggles mean this isn't the time to ask for more money.
Better move: Wait until the company stabilizes, then ask for a retroactive adjustment.
3. You're underperforming
COLA requests are easier to justify when you're a strong performer. If you're on a performance improvement plan or received negative feedback, focus on improving first.
4. You're paid above market rate
If your salary already exceeds the market rate for your role and location, a COLA request is unlikely to succeed.
Check your market rate: Use Glassdoor, Levels.fyi, Payscale, or Salary.com to see where you stand.
How to Ask for a COLA (Step-by-Step)
Step 1: Do your research
Gather data to support your request:
Gather data to support your request:
- Inflation rates: Use the Bureau of Labor Statistics CPI data
- Cost of living differences: Use calculators (NerdWallet, Bankrate, PayScale)
- Market rates for your role: Check Glassdoor, Levels.fyi, LinkedIn Salary
- Company performance: If the company is profitable, it strengthens your case
Step 2: Time it right
Best times to ask: - During your annual review
- After a major company success (profitable quarter, funding round, big contract win)
- When you've just completed a high-impact project
- During a formal compensation discussion (not randomly on a Tuesday)
Avoid: - Right after layoffs or budget cuts
- During company-wide financial struggles
- In the middle of your probation period
Step 3: Frame it as a business discussion, not a complaint
Don't say: "Everything is so expensive now, and I can't afford rent."
Do say: "I'd like to discuss a cost of living adjustment to ensure my compensation reflects current market conditions."
Email template:
Subject: Request to Discuss Compensation Adjustment
Hi [Manager's Name],
I'd like to schedule time to discuss a cost of living adjustment to my salary. Over the past [timeframe], inflation has increased by [X%], and I've been researching market rates for my role in [location].
I've consistently delivered strong results, including [1-2 recent accomplishments]. I believe a salary adjustment would align my compensation with both market conditions and my contributions.
Would you have 30 minutes this week or next to discuss?
Thank you,
[Your Name]
Step 4: Present your case with data
In the meeting:
1. State your request clearly: "I'm asking for a [X%] cost of living adjustment, which would bring my salary to [new amount]."
2. Support it with data: "Based on BLS data, inflation over the past [timeframe] has been [X%]. Additionally, the cost of living in [location] has increased by [Y%]."
3. Highlight your value: "I've consistently exceeded expectations in [specific areas], and I'm committed to continuing to deliver strong results."
4. Be open to negotiation: "I'm flexible and open to discussing what works for both of us."
Step 5: Handle objections
"We don't have budget for this right now."
Response: "I understand. Can we revisit this conversation in [3 months/next quarter] when budgets are reassessed?"
"Your salary is already competitive."
Response: "I appreciate that. Can we look at the data together? Based on [source], the market rate for my role in this location is [range]. I'd like to ensure my compensation reflects that."
"We already gave you a raise this year."
Response: "I appreciate the merit raise. However, that was for performance. I'm discussing a separate cost of living adjustment to offset inflation, which has been [X%] over the past year."
"Everyone is dealing with inflation."
Response: "I understand, and I'm not asking for special treatment. I'm asking for a market-based adjustment that reflects the true cost of living in [location] for someone in my role."
What's a Reasonable COLA to Request?
General guideline: 2-4% annually for standard inflation.
Scenarios:
Standard inflation (2-3% annually):
Request: 2-3% COLA
High inflation period (2021-2023):
Request: 4-7% COLA (based on actual CPI data)
Relocation to expensive city:
Request: 10-50%+ depending on cost difference (use calculators)
Multi-year catch-up (no raises for 3+ years):
Request: Cumulative inflation over that period (e.g., 3 years x 3% = 9%)
Important: COLA is not a merit raise. If you're asking for both performance-based and cost-of-living increases, separate them in your request.
Example: "I'm requesting a 5% increase total: 3% for cost of living and 2% for performance."
Scenarios:
Standard inflation (2-3% annually):
Request: 2-3% COLA
High inflation period (2021-2023):
Request: 4-7% COLA (based on actual CPI data)
Relocation to expensive city:
Request: 10-50%+ depending on cost difference (use calculators)
Multi-year catch-up (no raises for 3+ years):
Request: Cumulative inflation over that period (e.g., 3 years x 3% = 9%)
Important: COLA is not a merit raise. If you're asking for both performance-based and cost-of-living increases, separate them in your request.
Example: "I'm requesting a 5% increase total: 3% for cost of living and 2% for performance."
What If They Say No?
If your employer refuses a COLA and you believe it's justified:
Option 1: Negotiate other benefits
Option 1: Negotiate other benefits
- More PTO
- Remote work flexibility
- Professional development budget
- Better title (which helps future salary negotiations elsewhere)
- One-time bonus instead of salary increase
Option 2: Ask for a future commitment
"I understand budget constraints right now. Can we agree to revisit this in [3/6 months] with a plan to adjust my salary based on company performance?"
Option 3: Start job hunting
If your salary is falling behind market rates and your company won't budge, the fastest way to get a raise is to switch jobs.
Reality check: The average salary increase when switching jobs is 10-20%, compared to 3-5% for internal raises.
Template for negotiating a new offer:
When you get an external offer, you can leverage it:
"I've received an offer for [X amount], which is significantly higher than my current salary. I love working here and would prefer to stay, but I need my compensation to reflect market rates. Can we discuss an adjustment?"
COLA vs Merit Raise: Know the Difference
Many employees confuse the two. Here's how they differ:
Cost of Living Adjustment (COLA):
Cost of Living Adjustment (COLA):
- Purpose: Offset inflation and rising costs
- Based on: Economic data (CPI, location-based cost indices)
- Typical amount: 2-4% annually
- Frequency: Annual (or when relocating)
- Justification: "The dollar is worth less; my salary should reflect that."
Merit Raise: - Purpose: Reward performance and contribution
- Based on: Your work quality, achievements, impact
- Typical amount: 3-10% (or more for promotions)
- Frequency: Annual review or after major accomplishments
- Justification: "I delivered exceptional results and deserve recognition."
You can ask for both, but frame them separately:
"I'd like to discuss two things: a 3% cost of living adjustment based on inflation, and a 5% merit increase based on my performance this year."
Real-World COLA Scenarios
Case 1: Remote worker moves from NYC to Denver
Salary: $120K
NYC to Denver cost difference: ~30% cheaper in Denver
Company policy: Location-based pay
Outcome: Company proposed $84K. Employee negotiated to $100K by emphasizing consistent performance and offering to delay the move if salary couldn't be preserved.
Case 2: Employee asks for COLA after 2 years of frozen raises
Salary: $65K
Cumulative inflation over 2 years: 8%
Request: 8% adjustment ($70,200)
Outcome: Company approved 5% ($68,250) immediately and committed to another 3% in 6 months if performance remained strong.
Case 3: Relocation from Austin to San Francisco
Salary: $90K
Cost of living increase: ~83%
Request: $165K (market-rate calculation)
Outcome: Company offered $140K, citing budget constraints. Employee accepted after negotiating a sign-on bonus and annual review in 6 months instead of 12.
Salary: $120K
NYC to Denver cost difference: ~30% cheaper in Denver
Company policy: Location-based pay
Outcome: Company proposed $84K. Employee negotiated to $100K by emphasizing consistent performance and offering to delay the move if salary couldn't be preserved.
Case 2: Employee asks for COLA after 2 years of frozen raises
Salary: $65K
Cumulative inflation over 2 years: 8%
Request: 8% adjustment ($70,200)
Outcome: Company approved 5% ($68,250) immediately and committed to another 3% in 6 months if performance remained strong.
Case 3: Relocation from Austin to San Francisco
Salary: $90K
Cost of living increase: ~83%
Request: $165K (market-rate calculation)
Outcome: Company offered $140K, citing budget constraints. Employee accepted after negotiating a sign-on bonus and annual review in 6 months instead of 12.
Final Advice
Asking for a COLA is not greedy—it's smart.
Inflation is real. If your salary doesn't increase with it, you're effectively earning less each year.
Key takeaways:
Inflation is real. If your salary doesn't increase with it, you're effectively earning less each year.
Key takeaways:
- Do your research: Come armed with data (inflation rates, market rates, cost of living differences)
- Time it right: Ask during reviews, after wins, or when the company is doing well
- Be professional: Frame it as a business discussion, not a complaint
- Be flexible: If they can't do a raise, negotiate other benefits or future commitments
- Know your worth: If your employer won't adjust and you're underpaid, it may be time to explore other opportunities
Most importantly: Don't assume your employer will proactively adjust for cost of living. You have to advocate for yourself.