What does a Cost of Living Adjustment (COLA) aim to address?

The Cost of Living Adjustment (COLA) is specifically designed to address the impact of inflation and the rising cost of living on an individual's purchasing power. As the prices of goods and services increase, a COLA ensures that wages or benefits keep pace with these increases, allowing individuals to maintain their standard of living.

By tying salary adjustments to inflation, organizations provide employees with financial relief when the cost of everyday essentials rises. This adjustment helps employees manage their expenses more effectively, ensuring that they can afford the same goods and services as before inflation occurred.

Other options, while related to employee compensation and benefits, do not focus on the specific purpose of a COLA. Increasing minimum wage standards, enhancing productivity through bonuses, and rewarding employee tenure address different aspects of employment and compensation but do not directly relate to compensating employees for the loss of purchasing power due to inflation.