Hardship funds look good on paper, but don’t build financial resilience

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The past two years have been extraordinary for the American workforce. The silver lining is that companies have become increasingly empathetic and are implementing voluntary benefits and programs to truly support employees both inside and outside the workplace.

To help employees in financial difficulty, some companies have begun offering financial hardship employee assistance funds, offering grants that are interest-free or do not need to be repaid. According to EBRI data, more than a quarter of employers currently offer emergency fund/employee hardship assistance and almost 30% plan to offer it.

Why now?

Since the start of the pandemic, the percentage of American workers who have no money set aside for emergencies has increased dramatically. In third-party research conducted before COVID, Salary Finance found that about half of American workers had no money set aside for emergencies. A year later, that number has risen dramatically to more than two-thirds of American workers. It’s not like it’s not a priority, either — nearly 50% of working Americans say saving money is one of their top financial priorities.

The other reason companies need to lead with empathy is more self-serving: employees have the upper hand. With the big quit, people are quitting their jobs in droves – and a competitive job market gives them the peace of mind of knowing they can go elsewhere if they choose.

Because companies are now recognizing the need to deal with employee financial stress, offering a hardship fund can be an attractive option. Unfortunately, hardship funds add an administrative burden to the already overburdened HR teams that often administer them, and the operational mechanisms can be cumbersome or off-putting for both employer and employee.

Hardship funds are complex: to obtain one, a business must determine the structure, eligibility requirements, application processing and funding mechanism. Unlike other financial wellness benefits that do not require employer funding, financial hardship funds cost companies money.

These funds can also cross a personal line, as they do not allow anonymity. To get hardship assistance, employees often have to submit a request and explain why they need the money. This puts the company in the delicate position of determining who deserves the funds – and obviously raises anonymity issues on both sides. As a result, employees who need help the most may not feel comfortable asking for it.

If you’ve ever created a hardship fund, you’ve probably dealt with or faced these pitfalls and may be looking for a better solution. If not, here are some other programs you should consider to build your employees’ financial resilience.


Although education alone is unlikely to lead to financial resilience, it is a starting point. Implementing a financial education program for employees that is easy to navigate and addresses the basic challenges so many people have when it comes to their personal finances: how to budget, open and monitor bank accounts, aside from emergency cash, set financial goals, understand and improve your credit score, and recover from financial setbacks. Ideally, the material should be available in different formats so that employees can learn in the way they prefer: articles, videos, step-by-step guides, calculators, etc. urgent financial problems.

Responsible credit solutions

A recent study by the Financial Health Network found that, with limited access to affordable credit solutions, almost a quarter of employees withdrew money from their retirement funds in 2021. Worse still, more than 12 million Americans use payday loans each year, with the average borrower taking out eight loans at $375 each and spending $520 in interest. Most states don’t have a maximum fee, which makes the pain of these loans even greater.

As consumer debt continues to rise, affordable and job-secure credit solutions have emerged as an important financial wellness benefit. The same Financial Health Network study found that more than 60% of employees would be more likely to stay in a job that offered helpful debt-related benefits. They are easy to manage – employers don’t have to worry about approving job applications, they provide employer and employee anonymity, and there is no associated cost to the employer .


Needless to say, employees struggling with debt or a lack of savings are financially stressed – and employees who are financially stressed are at best distracted and at worst disruptive in the workplace. Benefits are now available whereby a percentage of earnings can be deposited into an employer-sponsored savings account. In this way, employers can play a significant role in helping employees build savings. Whether it’s when an employee starts at a company and sets up direct deposit or receives their bonus or annual raise, you can ask your employees to start working towards a savings goal – often without costs for them. .

Once employees start setting aside even a small amount from each paycheck into a dedicated savings account, a powerful habit is created. Having a savings account linked to their salary, but separate, provides peace of mind knowing that they could easily transfer funds in an emergency, but not mix those same funds with outgoing money for current bills or daily purchases.

The decision to offer a financial hardship fund is a noble one – but they can be much more effective when combined with other benefits and programs that encourage financial literacy and long-term resilience. Consider your employee population – leverage surveys, analyze data on programs used by employees, review requested programs – and implement the programs that will supplement hardship funds. After all, funding hardship funds for an extended period could wreak havoc on the bottom line without responsible programs to supplement them.

Dan Maclin is CEO of Salary Finance.

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