The contract rises with inflation. Your costs rise with wages.

Indexed contracts feel like protection against inflation. In a labour-heavy business, the index and the cost base drift apart every year: quietly, and by design.

By Steve 5 min read
Abstract bridge artwork for The contract rises with inflation. Your costs rise with wages.

A multi-year contract with an annual uplift tied to a general price index looks like a solved problem. The escalator is in writing, it applies automatically, and nobody has to reopen a difficult conversation each spring. Then margin on the account erodes anyway, and the erosion is hard to attribute because no single year looks unreasonable. The mechanism is usually simple. The price is indexed to a measure of consumer prices. The cost base is dominated by wages. Those two numbers are related, but they are not the same number,…

Keep reading for free

Create an account to read the rest.

The whole library is free. No card, no subscription, no trial that quietly ends. An account simply lets us know who we are writing for, and opens every article from here on.

  • Every article, in full, at no cost
  • New articles published every weekday
  • Takes about twenty seconds
Create a free account I already have one

Free means free. We will not charge you for the library, and you can read as much of it as you like.

Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

More on Pricing

Scroll to Top