COLA, Currency, Comp: How TR Leaders Are Handling the New World Order

The intertwined challenges of cost-of-living allowances (COLA), currency instability, supply-demand gap, political events and compensation design have elevated total rewards (TR) into one of the most strategic functions in global organizations. A patchwork of emergency allowances, foreign-currency payrolls and rapid-cycle salary reviews is emerging as organizations confront a globally uneven economic landscape.

Across markets from Africa, Asia, Eastern Europe, the Middle East and Latin America, a set of global scenarios illustrates the extent of disruption:

Argentina: Salary reviews have increased to as many as four times a year.
Ethiopia: Employers have adopted biannual reviews.
Sri Lanka: An inflation crisis forced employers to think on their feet as prices soared and talent was depleted.
Sudan: Food-specific allowances were introduced to match food inflation.
Turkey: Constant inflation is sending salary increases into a spiral, causing government minimum-wage adjustments and high budgets (25% to 30%) while limiting real wage increases.
Ukraine: A surge in inflation and currency volatility has pushed employers to adopt monthly allowances.
Zimbabwe: Hyperinflation occurred within a short period, triggering emergency monthly allowances.

From interviews, forums and discussions across global TR communities, several common issues are emerging:

Extreme inflation cycles. Even if global inflation moderates, country-specific crises continue to erupt unpredictably. Inflation is increasingly sector-agnostic and industries with dollarized revenue streams are facing local-currency wage challenges.
Volatile foreign-exchange (FX) markets. These have become the primary driver of pay erosion and real wage increases, particularly in emerging economies where official rates diverge sharply from market realities.
Growing regulatory intervention. From currency controls to limits on foreign reserve outflows, governments are becoming more restrictive.
Pay planning. Global compensation planning cycles rely on predictability that many markets can no longer offer. Rapid allowances and mid-cycle adjustments distort internal equity structures and merit differentiation.
Employee sentiments. Employees are acutely sensitive to affordability, pushing employers to respond faster and more transparently. Poorly managed COLA and FX policies can create perceptions of inequity and inconsistency.

A new operating model for compensation is taking shape, though — one that prioritizes agility, legal precision and scenario-based risk planning.

Accounting for a High-Volatility Environment

For TR professionals, managing disruptive forces has become as much an economic and geopolitical strategy as it is a pay philosophy issue, involving adoption of a more holistic diagnostic approach. This represents a shift from reactive interventions toward a disciplined, scenario-based governance model that accounts for:

Economic signals (political stability, inflation trendlines, and the credibility and availability of official data)
Banking constraints (the central bank’s stance on foreign-currency payments and the feasibility of payrolls in U.S. dollar [USD] denominations)
Legal risks (clawback enforceability, labor-code treatment of temporary allowances and time limits that may convert allowances into permanent pay)
Market norms (insights from formal surveys and agencies as well as spot data to understand competitive moves)
Business model impact (revenue streams, margins, profit-and-loss structure, and cash flow implications of shifting to hard currency pay)

A Toolkit of Emerging Compensation Responses

In response to sustained volatility, TR leaders are deploying a mix of short-term and structural solutions. Each comes with material cost, legal and employee experience considerations.

1. Foreign-Currency Payroll

This approach is resurfacing in markets where local currency instability severely erodes take-home value. Many organizations frame payroll on USD as a temporary stabilization tool rather than a permanent shift. Most countries only allow payroll in local currencies; however, some recognize USD as a possible alternative (especially for foreign residents), considering:

Balance-sheet risk in procuring foreign currency and the implications for customer collections in local currency;
Legal feasibility, including whether employees may hold USD bank accounts;
FX conversion assumptions and who bears the cost of rate fluctuations;
Central bank law changes; and,
Short-term usage with clawback arrangements, subject to local labor-law constraints.

2. COLA

These allowances remain the most common response to inflation shocks. COLA is often the fastest mechanism to implement but carries reputational risks if withdrawn abruptly. The new challenge is designing them with rigor by:

Pegging allowances to credible inflation indices, typically central bank data or market driven adjustments;
Embedding time limits and clawbacks to prevent unintended permanency; and,
Budgeting for additional cost exposure — or conversely, leveraging USD revenue inflows to neutralize exposure.

3. Frequent Salary Reviews

Where inflation shows no signs of returning to historical norms, some markets are shifting to biannual or quarterly salary reviews. This approach is reported in parts of the Middle East and Latin America. In general, this approach:

Provides the best employee experience due to permanency;
Requires significant budget expansion and long-term financial planning; and,
May accelerate wage-price spirals in hyperinflationary economies.

4. Lump-Sum Payments

These are being used as temporary cushions during short-lived inflation spikes or regulatory delays. In general, such payments:

Avoid permanent fixed-pay increases;
Can be costly and may create expectations of recurrence; and,
Are most effective when used sparingly and with clear communication.

The Shift from Annual Cycles to Dynamic Governance

The compensation landscape is moving toward a more continuous-review model. Salary budget estimates should be validated both at the global and local level and on a quarterly basis. For many TR leaders, this represents a philosophical pivot from treating pay as stable to treating it as inherently dynamic.

Dynamic governance components include:

Real-time market monitoring with a “finger on the pulse” understanding of current situations, when lacking formal sources;
Scenario planning and periodic stress-testing of salary budgets;
Clear frameworks on when to trigger COLA, USD pay or salary reviews; and,
Cross-functional collaboration between TR and its colleagues in legal, finance and treasury.

Organizations that navigate this well are emphasizing transparency, data-backed decision-making and legal defensibility.

Volatility Response Rests with You

As the examples across Argentina, Turkey, Sri Lanka and others demonstrate, volatility is no longer sporadic — it’s structural. For TR leaders, the mandate is clear: Build compensation systems that can bend without breaking. The tools exist, but the discipline, governance and foresight to deploy them effectively will define the next generation of global pay strategy.

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