Forma Research: Food stipend cost-of-living adjustment guidelines
Understand how to offer equitable food stipend benefits and factor in cost-of-living best practices for your workforce.
In this piece
The benefit of offering employees food stipends
Among the various programs our customers provide to their employees, Forma has seen many of our clients providing a food benefits stipend. A food program offers stipends to employees to spend on food, grocery, and other related expenses. Some employers offer this program for employees to spend when working overtime to compensate them. While some employers (especially those remote-working companies) provide these programs for team-building purposes. Offering these benefits makes the employees feel that they’re taken care of. This creates a positive working environment, which thus increases employees’ satisfaction and engagement.
Why consider cost-of-living adjustments (COLA) for the food stipends?
The price levels of food and grocery expenses vary significantly across different countries. For example, a meal in the United States costs $10-$30 on average, whereas in Brazil it costs $3-$10. As such, providing the same amount of stipends to employees in different countries may result in inequity among employees, which diminishes the value of the benefits program. If you’re offering a food benefits program to your employees at Forma, we help you take care of the cost-of-living adjustment and take the burden off your plate. So you can focus on providing the benefits your employees need.
COLA guidelines for food stipend benefits
We found that the food-related price level can be reflected by the Purchasing Power Parity (PPP) index quite accurately1. Therefore, we’re applying the PPP conversion method here. The International Monetary Fund (IMF) has a comprehensive dataset with the PPP conversion rates. Applying the data from a trusted institute like IMF ensures the legitimation of our cost-of-living adjustment.
In Table 1, we list out the most common countries administered at Forma. In the second column, we list the PPP conversion rates for each country from IMF. We also list the nominal currency conversion rates in the third column as a comparison.
*The nominal conversion rates are as of 24th May 2023.
Implementing a food stipend with COLA parameters
If you decide to offer a food stipend, during the implementation process, Forma will help you set up the funding configuration based on this guide. You will only need to focus on how much and how often you’d like the employees to be funded. For example, you’re offering food benefits programs where you expect your employees to spend on the weekly team connection event. It’s reasonable to set the value of the monthly benefits at 5 dine-in meals.
We can then calculate the monthly stipend amount. Based on the data on the price comparison website Numbeo, a dine-in meal in the U.S. costs around $20 [3]. This means that we can set the funding basis at $20*5 = $100 per month for U.S. employees.
Let’s say you’re offering this program to employees in U.S., U.K., Japan, Germany, France, Singapore, and Mexico. We can compile a funding table as follows:
That’s it! Now your food benefits program is ready to go live and your employees can enjoy it!
Get help with food stipend COLA
Taking the steps covered can be incredibly helpful in planning for COLA and offering equitable benefits. For more information about food stipend programs, <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">schedule a consultation</span> with one of our experts. We’d be happy to help you find the perfect solution for your unique needs.
About Forma Research
Forma Research provides benchmark reports, best practices guides, data tools, and other resources to help HR professionals and brokers expand their understanding to become experts on flexible benefits and Lifestyle Spending Accounts (LSAs).
Disclaimer
The information presented in this article is intended for informational purposes only. The accuracy of the data can be impacted by various factors, including but not limited to the current economic environment in each country, inflation, and nominal currency conversion rate changes. While the referenced data is believed to be accurate, Forma is not responsible for any incorrectness or incompleteness of the data, and readers are advised to also apply their own discretion and judgment before making any decisions based on the information provided in this article.
Reference materials
[1] Forma Research Guidelines for LSA Program Cost-of-Living Adjustments