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

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The past few years have been extraordinary for the American workforce. The silver lining is that companies have become increasingly empathetic, setting up voluntary benefits and programs to truly support employees both in and out of the workplace.

To help employees with financial strains, some companies have begun offering employee hardship funds, which are grants that are interest-free or do not have to be repaid. According to data from EBRI, more than a quarter of employers currently offer emergency funds/hardship assistance to employees, and nearly 30 percent plan to offer it.

Why now?

Since the pandemic began, the percentage of working Americans who have not set aside money for emergencies has risen significantly. In third-party research conducted pre-COVID, Salary Finance found that about half of working Americans had no money set aside for emergencies. A year later, that number rose sharply to more than two-thirds of American workers. It’s not that it’s not a priority, either — nearly 50 percent of working Americans say saving 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 Great Retirement, people are leaving their jobs in droves – and a competitive job market gives them the reassurance that they can go elsewhere if they want to.

As companies now recognize the need to address employee financial strains, offering a hardship fund can be an attractive option. Unfortunately, hardship funds add additional administrative burdens to the already overworked human resources teams that often manage them, and the operating mechanisms can be cumbersome or daunting for both employer and employee.

Hardship funds are complex: In order to set one up, a company must determine the structure, eligibility requirements, application processing, and funding mechanism. Unlike other financial welfare benefits that do not require employer funding, hardship funds cost companies money.

These funds can also cross a personal boundary as they do not allow for anonymity. In order to receive hardship assistance, employees often have to submit an application and justify why they need the money. This puts the company in the difficult position of determining who deserves the funds – and obviously raises concerns about anonymity on both sides. As a result, employees who need the help most may not feel comfortable asking for it.

If you’ve already set up a hardship fund, chances are you’ve dealt with or are dealing with these pitfalls and may be looking for a better way. If you haven’t, here are some other programs to consider to build your employees’ financial resilience.


While education alone probably won’t lead to financial resilience, it is a starting point. Implement an employee financial education program that is easy to navigate and addresses the basic challenges so many people have when it comes to their personal finances: how to create a budget, open and monitor bank accounts, set aside emergency cash, set financial goals, Understand and improve your credit score and recover from financial setbacks. Ideally, materials should be available in a variety of formats to enable employees to learn the way they prefer: articles, videos, in-depth guides, calculators, etc. – and access to external services such as coaching and referrals that can best help employees who are urgent financial problems.

Responsible credit solutions

A recent study by the Financial Health Network found that nearly a quarter of employees were withdrawing money for their retirement plans in 2021 as they had little access to affordable credit solutions. Worse, more than 12 million Americans take out payday loans each year, with the average borrower taking out eight loans, each paying off $375 and spending $520 in interest. Most states don’t have maximum fees, which makes the pain from these loans even more significant.

As consumer debt continues to rise, job-securing, affordable credit solutions have become a powerful asset to financial well-being. The same Financial Health Network study found that more than 60 percent of workers would be more likely to stay in a job that offers useful debt-related benefits. It’s easy to manage – employers don’t have to worry about approving applications, it provides anonymity for employers and employees, and there are no costs 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 distracted at best and disruptive in the workplace at worst. Benefits are now available that allow a percentage of earnings to be paid into an employer-funded savings account. In this way, employers can make a significant contribution to helping employees build savings. Whether it’s an employee joining a company for the first time and setting up a direct deposit or receiving their annual bonus or raise, you can advocate for your employees to work towards a savings goal – often at no cost to them. .

Once employees start putting even a small amount from each paycheck into a special savings account, it becomes a powerful habit. Having a savings account that’s linked to their paycheck but separate gives them peace of mind that they can easily transfer money in an emergency, but don’t have the same funds mixed up with money spent on routine bills or everyday purchases.

Deciding to offer a hardship fund is a noble decision — but they can be far more effective when combined with other benefits and programs that promote financial literacy and long-term resilience. Consider your employee population—use surveys, analyze data on what programs employees are using, review what programs are being requested—and implement the programs that complement hardship funds. Finally, funding hardship funds for an extended period without responsible programs to complement them could wreak havoc on the bottom line.

Dan Macklin is CEO at Salary Finance.

About Bradley J. Bridges

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