How to counter outsourcers’ cost of living adjustments
For years, most large outsourcing contracts have included standard provisions for annual pricing adjustments based on consumer price indices and other economic indicators. These cost of living adjustments are intended to normalize services fees with economic conditions over the life of long-term deals. The impact on pricing can be significant—in the millions of dollars for a large deal. A $50 million annual services contract with a 2.75 percent cost of living adjustment could mean a $1.375 million increase in annual fees. In theory, cost of living adjustments help service providers reduce attrition by ensuring that employee salaries keep up with market trends. Staff retention benefits providers and allows clients to avoid the disruption of employee turnover.To read this article in full or to leave a comment, please click here

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