What is the difference between a COLA and a Per Diem?
Per diems and COL differentials are very different due to the following reasons. The per diem is designed to cover the average daily expenditure for assignees on short-term assignments with temporary residence in a given location. The assignee will continue to have ongoing costs at home (i.e. bills from telephone, electric, and his/her family may be at home).
On a long-term assignment, in which a COLA is provided, it is expected that the assignee will no longer have ongoing costs at home and the family is accompanying the assignee in the host location. The COLA paid ensures that the assignee is still able to purchase the same market basket of goods and services while on assignment, as they would have if they remained at home. Therefore, it is expected that the assignee will continue to dedicate the same portion of his/her income to goods and services that he/ she would have at home in the host location. The COLA covers any difference between what goods and services cost at home versus what they cost in the host location.