SPECIAL NOTICE FOR POST ALLOWANCE (COLA) CHANGES EFFECTIVE OCTOBER 11, 2020 WITH TL:SR 1005
“The majority of the Post Allowance (COLA) changes effective 10/11/2020 are the result of a revised COLA process that was an outcome of a GAO audit, Congressional inquiries, and a 2017 OIG recommendation that the Department develop an objective method of generating COLA rates.
The major change in the process from the prior method is with respect to collection of market data. Rather than task posts with collecting the data, the Department’s contractor now obtains it for 210 locations, including Washington, D.C. suburbs, from Mercer, AirInc, and ECA International. These three companies provide similar support to major U.S. multinational enterprises with worldwide presence. The contractor then used a uniform methodology, adjusting for costs of housing and utilities since these are provided by USG agencies for their employees assigned to foreign posts, to calculate an index that assigned a base score of 100 to the Washington, D.C. suburbs and compared other locations to that base. The rate for each post is based on how the post index compares to the base index.
The data for the foreign post’s expat basket of goods and services is compared to that of the Washington, D.C. suburbs. The contractor will provide updated index information to the Department of State’s Office of Allowances every August. New COLA rates based on that data will be implemented in the first full pay period of each Fiscal Year. Post indexes will be reviewed on a biweekly basis for exchange rate fluctuations and post allowances will be adjusted when necessary. Posts determined to have hyperinflation will be adjusted biannually. More information about how COLA levels are determined is available in DSSR 228.”
The announcement says that the contractor now obtains data for 210 locations including Washington, D.C. suburbs. We should note that posts identified by the Office of Allowances include over 700 locations overseas.
According to the Office of Allowances, post allowance, commonly referred to as the “cost-of-living” allowance is an allowance based on a percentage of “spendable income,” i.e. money you can really put your hands on to spend on goods and services. The amount varies depending on salary level and family size. The post allowance is calculated by comparing costs for goods and services in 11 categories – including food (consumed at home or in restaurants), tobacco/alcohol, clothing, personal care items, furnishings, household goods, medical services, recreation, public transportation, vehicle-related expenses, and household help – to the cost of those same goods and services in Washington, D.C.
The Office of Allowances notes that if the overall cost of goods and services at a foreign post, taking into account expenditure patterns, is at least 3% above the cost of the same goods and services in the Washington, D.C. area, a post allowance is established. See DSSR section 220 for more information.
The State Department announcement does not identify the contractor but one of its sources is Mercer. Hong Kong listed by Mercer as the most expensive city for expatriates in its 2020 Cost of Living ranking is up from 42% to 60% in the new State Department post allowance listing.
Ashgabat, Turkmenistan listed by Mercer as the second most expensive place for expatriates for 2020 went from a COLA of 30% to 50% as of October 11.
Tokyo and Zurich were ranked by Mercer at #3 and #4 . Tokyo’s allowance went from 50% to 70% while Zurich (other) went from 80% to 100%.
Singapore ranked by Mercer as 5th most expensive in its 2020 cost of living ranking is up from 20% to 42%.
We understand that the COLA changes are affecting a host of posts, with some losing allowances in double digits and others ending up with zero for their cost of living allowance.
Zimbabwe went from 70% to 50%. Angola went from 50% to 30%. Benin went from 20% to 5%. Port-au-Prince from 25% to 5%; Bulgaria from 15% to zero. Ethiopia from 15% to zero. El Salvador went from 10% to zero.
Burkina Faso went from 20% COLA last month to zero post allowance effective October 11. Other posts which previously received similar post allowance of 20% but are now reduced to zero are: Havana, Cuba; Amman, Jordan, Lilongwe, Malawi; Casablanca, Morocco; Kigali, Rwanda; Paramaribo, Suriname; Chiang Mai, Thailand; Tashkent, Uzbekistan; Bujumbura, Burundi; Lusaka, Zambia.
UK posts like London and Edinburgh went from 50% to 42%. Canadian posts like Toronto and Vancouver went from 42% to 25%. Some Australian posts went from 30% to 10% while others like Darwin and Adelaide went from 25% to 5%.
According to the Mercer survey, the world’s least expensive cities for expatriates are Tunis (#209), Windhoek (#208), and Tashkent and Bishkek, which tied for the #206 spot.
Tunis and Bishkek both have zero COLA in the old and new State Department allowances listing but Tashkent has now gone from 20% to zero and Windhoek from 15% to zero effective October 11.
Meanwhile, other posts saw double digit increases: Posts in China went from 5-25% to 15-42%. Bangui in the Central African Republic is now up to 50% from 25%. Finland went from 35% to 50%. Libreville, Gabon is now 50% from 30%. Posts in Israel went from 30% to 50%. Increases for posts in Japan range from 7% to 20%. South Sudan went from 42% to 70%.
Post allowances remained unchanged for some posts: Greenland (60%), Denmark (50%), Bahrain (20%), Barbados (35%), Bermuda (60%), Chad (42%), Qatar (25%), Djibouti (30%), Iceland (10%), Kuwait (15%).
Below are the most expensive Foreign Service assignments based on the new cost of living allowances effective October 11, 2020:
#1. SWITZERLAND (Geneva, Other) — 100%
#2. SWITZERLAND (Bern) —————- 80%
#3. JAPAN (Tokyo, Fukuoka) ————— 70%
#4. SOUTH SUDAN (Juba, Other).——- 70%
#5. AUSTRIA (Vienna, Other).————- 60%
#6. BERMUDA (Bermuda).—————– 60%
#7. GREENLAND (Nuuk).——————- 60%
#8. HONG KONG —————————- 60%
#9. JAPAN (Kyota, Nagoya Sapporo
(Osaka-Kobe, Yokohama).—————— 60%
#10. ZIMBABWE (Harare, Other).——- 50%
#11. CENTRAL AFRICAN REPUBLIC
(Bangui). ————————————- 50%
(Copenhagen, Other).———————— 50%
#13. FINLAND (Helsinki).—————— 50%
#14. GABON (Libreville, Other).———- 50%
(Tel Aviv, Jerusalem).———————– 50%
(Florence, Milan, Turin).——————- 50%
(Ashgabat, Other). ————————– 50%