Cost-of-living adjustments (COLA) are not generally included in federal minimum wage laws, as the federal rate is not automatically adjusted for inflation. However, some state or local laws (e.g., California 2026 and Maine) incorporate annual COLA increases into their minimum wage calculations.
In the Philippines, COLA is mandated by law and is included in the computation of an employee's minimum wage. It is designed to ensure that workers can meet their daily needs despite economic fluctuations. COLA is non-taxable and is separate from the basic salary.
For private-sector employers, there is no obligation under federal law to provide automatic annual COLA increases to wages or salaries. The 2.8% figure does not impose a regulatory mandate on private businesses.
Most retirees are eligible for COLA starting at the age of 62 under one of these federal retirement programs: Federal Employees Retirement System (FERS) FERS Special. Civil Service Retirement System (CSRS)
Millions of Americans received a 2.5% cost-of-living adjustment (COLA) to their Social Security benefits in January 2025, helping retirees and beneficiaries keep pace—at least in theory—with rising prices.
Some people receive both SSI and Social Security benefits. The 2.8 percent COLA increase is a small uptick from the 2.5 percent COLA increase for 2025. In dollar terms, the average retired worker's monthly benefit is expected to rise by about $56 per month, to about $2,064.
Unless it's required by law, each company can decide whether to offer this benefit and how much to change salaries for COLA. In 2023, 80% of employers planned to provide base pay increases to cover inflation. Employers must offer a cost-of-living salary adjustment for every employee.
Key Takeaways
Social Security COLAs are automatic and begin in January. The Consumer Price Index for Urban Wage Earners and Clerical Workers tracks inflation and determines the annual COLA rate. Everyone receiving SSDI or SSI benefits gets the COLA.
Companies aren't legally required to offer COLA, but many use it as a retention and fairness tool.
In instances where it's not mandated, COLA raises and how often they are given are at an employer's discretion. Cost-of-living raises may not be needed every year. For example, in years when inflation remains flat, employers may choose not to give a cost-of-living raise.
Some state minimum wage adjustments are tied to the consumer price index, but otherwise, cost-of-living raises are not required by state or federal law.
A raise is typically merit-based and reflects an employee's performance or contribution to the company. On the other hand, a cost of living adjustment (COLA) is an increase in an employee's salary or hourly wage designed to keep their spending power consistent with inflation or other economic factors.
Consumer Price Index (CPI)
CPI is determined by the BLS and, by law, it's the official measure used by CalPERS to calculate COLA.
"Minimum Wage" is a fair day's-wage for a fair day's work. It is the lowest remuneration that an employer legally ought to pay the wage earners for the work performed during a given period as permitted by law. This page will publish the minimum wages which have been notified by the Appropriate Government.
No, COLA raises are not mandatory, and not every year has seen a COLA. COLA raises happen only in relation to changes in the CPI-W, based on certain levels.
'Base Salary' is a mandatory field in the Workplace Profile. It refers to an employee's actual annual earnings before tax in full-time and full year equivalent amounts, minus compulsory superannuation and other employee payments and benefits.
To get the full COLA, a retiree or survivor annuitant must have been in receipt of payment for a full year. If not, the increase is prorated under both plans. Prorated accounts receive one-twelfth of the increase for each month they received benefits. Cost-of-Living Adjustments were first prorated in April 1982.
Frequency of Cost-of-Living Raises. Almost all cost-of-living raises are made annually.
It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.
You will receive the COLA if you are a retired LACERS Member or an eligible surviving spouse/domestic partner who receives a continuance benefit. The amount of COLA you receive depends on your Tier and retirement date.
Do employers have to give cost of living adjustments? Employers generally do not have to adjust wages or benefits for inflation unless they contractually agree to do so. Some voluntarily offer COLA during periods of high inflation to show they care about their employees, potentially improving engagement and retention.
No. COLAs are not one-time payments.
For 2025, the Social Security Cost-of-Living Adjustment (COLA) was a 2.5% increase, meaning most beneficiaries received about $50 more per month to help offset inflation, though it was considered a modest rise compared to recent years, impacting retirees and those on fixed incomes as prices remained high. This adjustment was based on the Consumer Price Index from 2023 to 2024 and applied to Social Security and Supplemental Security Income (SSI) payments starting in January 2025, with specific changes to maximum taxable earnings and earnings limits also taking effect.