How to determine cost of living raises.

Knowing how to determine cost of living raises for employees in your company or your organization is a difficult skill for any manager or employer to grasp.By following these simple tips and guidelines, you can know how to determine the amount of money necessary for a cost of living raise that will be fair to your employees and also is kind to your accounting department.

It is a well known and undeniable fact that the cost of living rises every single year.Rent gets higher.Fuel prices go up.Car prices go up.Food costs more, clothes cost more, and all other services equally increase in price.

This natural increase in the price of all material products and services is unavoidable.However, the increase in the cost of living requires that salaries be equally adjusted so that purchasing power and ability remain the same in proportion to the price of commodities and services.Otherwise your employees simply will not be able to afford to live in your area any longer.

If you promise your employees raises based on performance, then you must follow through on that guarantee.However, even if you do have performance based raises, you should also consider providing cost of living raises in order to allow your employees to stay competitive and to provide a competitive edge to your own company.

When you are determining the cost of living in your area, you should keep in consideration the fact that the cost of living generally increases about 2-3% per year.Your employees' salaries should increase similarly.

The cost of living changes at a different rate depending on where you happen to live.The cost of living increases more rapidly and is higher in major metropolitan areas, such as New York City or San Francisco.There are many online guides to the cost of living in a particular area based on the zip code.Use this information to determine what the cost of living is in your area; ensure that your employees' salaries are high enough to allow them to be able to afford to live.

Another reference that you can consult in order to determine how you can keep salaries in line with the cost of living is the federal government's wage grade schedule for blue collar jobs and the general scale for white collar jobs.The federal government increases its pay each year depending on the performance of the employees and the cost of living in particular areas.By consulting the general scale, you can get an overall idea of the general situation of the relationship between salaries and cost of living for people in a variety of job levels.

There are several other indices that you should consult when you determine the cost of living raises.The federal government consults the Employment Cost Index (ECI) which is published by the Department of Labor.You also will want to consult the more popular and the better known Consumer Price Index, or CPI.The Consumer Price Index will track and determine consumer prices for various localities.By consulting the Consumer Price Index, you can more accurately determine the cost of living in your area and the appropriate adjustment in salaries and raises.
Of course, you might prefer to base your raises entirely on performance, rather than cost of living.However, if you go this route, you should ensure that all employees have a yearly review of their salaries to determine whether or not the salary is high enough to count as a living wage.Cost of living raises should be implemented across the board, but particularly in your lower level employees who are more prone to being affected by the increases in the costs of living.