The Cost of Living Adjustment (COLA) is a business term used to refer to a wage adjustment for employees based on changes in the cost of living. COLA is generally calculated using an index such as the Consumer Price Index (CPI) or an index specific to the employee’s area, and typically factored into salary annually or semi-annually. COLA adjustments are designed to help keep salaries competitive as costs rise or fall over time, providing a level of economic stability for employers and employees alike.