Will You See A COLA This year?
Ernie Neve, CPA
August 12, 2021
For a lot of employees in more traditional industries and for those who receive Social Security benefits, a lot of people expect to see a cost-of-living adjustment (COLA) either annually or every other year. Is this year any different?
In a lot of ways, 2020 screwed up COLA for a bunch of people.
Not only is the data that businesses and the government rely on skewed considerably based on the economic shutdown, but this year, rising prices – creating inflation numbers we haven’t seen in years – will mean money simply doesn’t go as far as it did before.
The worst part of this is the simplest – inflation likely won’t go away anytime in the near future, and by the time employees and those on Social Security do see COLA increases, the ship, so to speak, may have sailed. In all my research, it appears the earliest we’ll see effective relief in terms of cost of living adjustments that accurately reflect the real inflationary challenges is early 2022.
Now, that’s not a bad thing, because the data right now also shows those increases will be a robust 3%, far more than the 1.3% from this year.
As much as I hate it, there’s very little I can do to address the shortages for Social Security recipients, but if you’re an employee who didn’t see any changes in their pay (or limited changes), there are some things you can do right now that might help you out.
For starters, document it! Seriously. If your boss pegged your raise at less than the inflation rates we’re seeing this year, make sure you note it and track the “real world” costs of living. It’s especially true as inflation ticks up to 5-6% and then subsides right before your annual review. (Which you know is going to happen – Murphy’s Law being what it is!)
Being armed with the real data to defend a larger raise – and not just on the basis of costs of living, but also, on your performance and longevity – is one of the keys.
…And don’t forget, as I mentioned in an email earlier this month, even if your company doesn’t give out raises except at certain specific times of the year, there’s nothing wrong with asking now and at least getting a specific list of goals your employer expects out of you for performance.
What do you do if the answer’s “no?” Simple – keep doing your job and bettering yourself. Note the things you’re doing to increase performance and don’t be afraid to ask for testimonials and referrals from your customers. Sure, it might seem like you’re going above and beyond for no real incentive, but sitting down to your next performance review with 30 glowing testimonials lends a lot of credibility to the raise you’re asking for. (And, if you didn’t get the raise, remember, those testimonials are about you, not just about your company. A future employer might make a far more lucrative offer based on your personal skills when you share those types of customer interactions with them.)
COLA raises are nice, and they have a real place in the world of business, but they are never timely. By documenting your actions and the “real” data of how inflation is impacting you, you can build a far more successful case for the raise you deserve, not the obligatory one your company thinks you should have.