Even in good economic times, employees can sometimes find themselves saddled with major expenses like unplanned home or car repairs, out-of-pocket health care charges, and emergency travel. If they can’t afford to pay those bills, the stress can affect their health, their focus, and their productivity.
Today, as millions of workers cope with job loss, furloughs, and reduced hours, that kind of financial emergency is more common than ever. Perhaps your company has employees who have been furloughed and are struggling financially. If not, there’s still a good chance that some of your employees have spouses or partners have lost their income or had it reduced substantially. Two-income families with one or both earners unemployed or underemployed can turn unplanned expenses into an emergency. In some cases, there’s not even enough money for monthly bills and housing. According to a survey by the U.S. Census Bureau, more than a third of all renters said in July that they had little confidence they would be able to pay their August rent.1 Another survey found that approximately 24% of respondents had skipped paying bills or paid late and 17% had done without essential medical care because of the economic consequences of the pandemic.2
People in need of emergency funds don’t have many options. Some can borrow from the equity they have built in their homes. Others have no recourse but to pay the exorbitant interest rates of payday lenders. Especially in the latter case, these temporary solutions can create even larger financial problems down the road.
That’s why a growing number of companies are stepping in to help. Since the start of the pandemic, 16% of employers have modified their employee financial hardship and grant programs.3 Some are offering one-time bonuses to help ease the strain on employee family income. Others have created emergency reimbursement accounts, providing employees with funds for certain designated emergency needs. A third option is an emergency loan, like the interest-free loans the analytics company Verisk is offering to employees affected by COVID-19.4 Your company can create an Emergency Loan Account (ELA) that lets you loan money to furloughed or in-need employees, with or without interest, at your discretion. (If you’re thinking of charging interest, you should consult a tax professional first.) The borrowed funds are not taxable to the employee. Best of all, you don’t have to fund the loan account until you’re ready to grant the loan, so the funding remains liquid.
Offering emergency loans can allow your company to provide assistance even if you don’t have the resources to give employees emergency funds with no strings attached. By helping valuable employees through a financial crisis with an emergency loan, employers can help preserve the investment they’ve made in those workers and earn greater loyalty from them. A Harvard Business Review study found that businesses offering long-term financial security to employees have less than half the industry averages for turnover.5 And by doing the right thing for workers in need, you’ll also earn points with the rest of your employees and build your company’s reputation as a people-friendly place to work—a reputation that will pay off when you’re ready to hire again and need a competitive advantage to attract top talent.
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Editor’s Note: TASC offers an Emergency Loan Account (ELA) benefit from more than 50 benefit offerings that can be instantly configured into custom plans that meet employee needs – where they are in life.
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Sources:
- “Coronavirus Evictions Are Starting, With Millions More Expected By The End Of 2020,” Huffington Post, August 2020: https://www.huffpost.com/entry/coronavirus-evictions-starting-2020_n_5f2dbf23c5b6e96a22b285a5
- “Some lower-income families can’t fully afford bills, medical care or food…” MarketWatch, August 2020: https://www.marketwatch.com/story/some-lower-income-households-cant-fully-afford-bills-medical-care-or-food-because-of-covid-19-and-many-didnt-get-stimulus-checks-11596635198?mod=meera-jagannathan
- “Here’s What Companies are doing to Protect the Financial Security of their Workers…,” JUST Capital, May 2020: https://justcapital.com/reports/heres-what-companies-are-doing-to-protect-the-financial-security-of-their-workers-during-coronavirus-and-what-good-looks-like-in-the-long-term/
- “Capitalism Meets Coronavirus: Additional Company Policies,” JUST Capital, April 2020: https://justcapital.com/news/capitalism-meets-coronavirus-how-companies-are-responding/
- “Employee Loans and How They Work,” The Daily Pay, July 2017: https://www.dailypay.com/blog/employee-loans/
