Management Notes

Reference Notes for Management

Scale Plus Cost Of Living Allowance (SCOLA) – Concept, Features, Examples, Advantages and Disadvantages | Methods of Employee Compensation

Scale Plus Cost Of Living Allowance (SCOLA)

Scale plus cost of living allowance (SCOLA)

The SCOLA method is based on two main components: the salary scale and the cost of living allowance (COLA). Salary scales are a range of pay rates for each job position, based on factors such as education, experience, skills, and job duties. Companies may set the scales themselves or use industry standards as a guideline.

In the context of economic conditions in the area where the employee works, a cost of living allowance (COLA) is added to the salary scale. In most cases, the COLA is calculated using the Consumer Price Index (CPI), which measures the change in the price of goods and services over time. An increase in the CPI results in an increase in the COLA, whereas a decrease in the CPI results in a decrease in the COLA.

A SCOLA method ensures that employees receive fair pay based on the value of their work and the economic conditions of the neighborhood where they work. By offering employees the opportunity to earn higher salaries based on their performance and experience, it promotes fairness and transparency in the compensation process and can motivate them to perform at a higher level.

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