Employees often complain about cost of living and that their increase does not match or is less than cost of living. As well, many employees want their compensation to reflect inflation rate and/or their performance on the job. Chuck says that the truth is companies give a side look at cost of living, it is something they take note in. However there are two prime considerations they actually focus on 1.) competitive market survey data that tells them what everyone else is paying for like jobs in their area; and 2.) the expense to maintain the desired competitiveness.
Employees may not believe that is fair, but what happens if they change positions and their name is on the door? Just like an employee has a budget for their household, so does a company. You want to cut costs effectively while trying to make sure you are being fair. So as the person signing the payroll, as cost of living goes up for everyone else, it also goes up for you. So for employer or employee it does not make any sense to spend more than you have coming in.
Each side has their own view points and mainly puts their own interest first. Taking care of ones self is priority to anyone. Companies should have policies about their compensations rates and how the employee with be evaluated. The employee may not like it and they may still have comments about how the company policy is, however it is in writing and they should have seen it during the hiring process and they chose to work for the company. This will also open the lines of communication between employer and employee.