Disasters spotlight the importance of employee emergency funds

The California wildfires spurred a sevenfold increase in inquiries from potential clients at Canary, a company Rachel Schneider founded in 2020. That’s not surprising. Canary creates and manages employer-sponsored relief funds that workers can tap for quick cash when facing an emergency. Health issues, car troubles, and, yes, natural disasters are among the reasons employees apply for help. However, the funds are not designed to cover the entire expense, but are instead meant to help with immediate needs, experts said.

“Even a small amount of money still makes a huge difference for the person who is in crisis because they are dealing with a huge mental and emotional load of this trauma,” Schneider said. She added that employees value their employer saying, “We care about you. Here is money that we know isn’t going to solve your whole problem, but lets you know that we are here for you.”

Employees likely need such funds because so many are already financially strapped and would be unable to handle even a minor emergency. Anywhere from around a quarter to 30% of American households live paycheck-to-paycheck, according to a 2024 report by the Bank of America Institute. Meanwhile, over one-third of Americans (37%) can’t afford to cover an emergency that is more than $400, said a report by retirement company Empower. a retirement company. That same report found that Americans’ median savings amount is $600, and 21% have no emergency savings.

Many workers are applying for help. Canary’s grant volume has more than doubled since the LA fires. E4E Relief, a 501(c)(3) emergency relief organization, awarded over $1 million to individuals in the first week following the wildfires, a spokesperson for E4E Relief told HR Brew in an email. Last year, applications were 200% higher than in 2022.

While companies are the primary donors to the funds,some also allow employees to contribute. Schneider says multiple factors go into a company’s decision about how to structure the funds, including its size, location, workforce makeup, and whether it wants to disperse many small or fewer large grants. Employees requesting money must fill out an application that asks how much money is requested, why it is needed, and how it will be used. Documentation and receipts are required. She added that most of her clients tend to have lower-paid workforces and most of Canary’s grants are around $1,000, but can go up to $5,000.

Ari Medoff, CEO of home healthcare provider Arosa, said his industry’s business model “struggles to pay workers a living wage” and that often the employees are supporting families, including aging parents. Before hiring Canary during the Covid-19 crisis, Medoff said Arosa would give employees loans or pay advances when they needed help.

“I didn’t like that for a number of reasons, one of which is, I didn’t feel like I or anyone within the business should be the decision maker on who to give money to and how much to give,” said Medoff.

Ashley Oster, E4E Relief’s vice president and director of marketing and partnerships, said companies use emergency funds to remove themselves from the decision-making process, which helps eliminate any fear that organizations may be favoring certain employees, while also lifting the “compliance and administrative burden” from them.

“It’s much easier to be one step removed,” Oster said. “Our hope is really to be as objective and equitable as possible because we don’t know these individuals.” Employees can also appeal any rejections.

Third-party relief funds are also beneficial in times of disaster because they already have established procedures to process requests and can bring in more help when needed. Oster said E4E Relief can bring in anywhere from 20 to 60 temporary workers to help process applications. Additionally, she said its clients are sometimes asked if they can increase funding when demand is high.

“What we want to make sure never happens is that individuals go online and apply for a grant where there’s not [any] funding,” Oster said.

Of course, the fund doesn’t preclude other emergency efforts. Power company Eaton selected E4E Relief to run its program in 2023 and last year, the majority of its applications came from those affected by the hurricanes. But the company offered other aid to employees, said Erin Rowse, the company’s SVP of HR. For example, it set up a distribution center in Atlanta to funnel goods to employees in the affected areas. Easton also let its employees donate “recognition points”—through an internal program—that can be used for various purchases to their colleagues. She said Eaton has employees in Southern California, but is still deciding how it can help them beyond the fund.

“I think from the perspective of being responsive, having flexibility, trying to meet the needs where they’re the greatest: that’s always something that’s front of mind,” said Rowse.