Companies often request that employees move to a new city to grow their business. However, one reason employees decline a transfer relates to living and or housing expense increases in the new city. For that reason, formalized Cost of Living Assistance (COLA) and Cost of Housing Assistance (COHA) benefits were created and continue to become an important part of some companies’ relocation programs.
Understanding the financial impact for both the company and the relocating employee, knowing how to calculate the benefits, and being up to date with competitive practices are critical elements to creating a solid program.
Cost of LIVING Assistance (COLA)
Cost of Living Assistance is a comprehensive benefit offered to employees who are facing an increase in costs of housing, state and local taxes, transportation, goods and services, and other “living” expenses. Most companies use data resource tools, like ERI or Runzheimer, to compare how expensive it is to live in the new location versus the old.
Cost of HOUSING Assistance (COHA)
COHA is based on a cost differential that only focuses on the cost of housing in the destination location. This benefit helps relocating employees maintain a similar standard of housing in the new location and gradually adjust to the new reality of increased home values, property taxes, and insurance.
Staying abreast of trending best practices are as important as understanding them. Benchmarking your programs against the most recent trends is vital to effectively incentivize your employees to relocate.
In the ©2015 NEI U.S. Domestic COLA and COHA Survey, NEI obtained data from 229 different companies, representing more than a dozen industries. Twenty-four percent of the respondents indicated that they provide these types of benefits.
Of the 24 percent of companies that offer an offset benefit such as a COLA or COHA:
70 percent provide Cost of LIVING Assistance
70 percent provide COLA benefits to Manager and Executive employee levels
88 percent use a data resource such as ERI or Runzheimer to calculate the benefit
73 percent apply a minimum threshold differential as part of the eligibility to receive it
47 percent do NOT cap this benefit
The majority of companies provide this type of benefit for a maximum of three years
48 percent provide an annual payment; 19 percent provide it monthly; 10 percent provide it as a one-time payment; and only 3 percent provide it quarterly
34 percent provide tax gross-up assistance for this benefit
30 percent provide a Cost of HOUSING Allowance
COHAs are most frequently offered to Executive level homeowners (44%)
The top three factors used in calculating the COHA amount include data resources such as ERI or Runzheimer; Homeowner or Renter Status; and variances between the old and new locations
Unlike the COLA benefit, 82 percent DO set a maximum dollar amount for the COHA benefit
Generally, the payment is paid on a Monthly basis (42%) with Annually and Other both ranking at 25% and a One-Time Payment of 8%
The most common duration for assistance is three years for Executive and Manager Homeowners; two years for Non-Managers and Entry Level employees; and one year for all Renters except Entry Level employees where 75 percent do NOT receive any COHA
Unlike the COLA, 55 percent of the respondents said that Tax Gross-Up Assistance is provided for this benefit
It is important for organizations to understand the sentiments that drive an employee’s decision to relocate his family--especially to a more expensive city. Equally important is to benchmark your program against others to remain competitive in attracting critical talent to your organization.
NEI would like to thank each of the respondents to our survey for taking time to offer details and information regarding their company policies. A valid survey sample such as this helps to accurately define benefit parameters and reflect the value of these types of assistance programs.
For complete details of the ©2015 NEI Cost of Living and Housing Assistance Survey, please contact your NEI representative.