Employee Relief Funds: Three Design Considerations

When setting up an emergency assistance fund, many companies forge ahead without putting much thought into the best practices in creating these types of programs. Failure to do so always results in a fund that is less efficient, and therefore more expensive and less effective, than it could be.

While not an exhaustive list, the following are some areas to consider before finalizing the details on your organization’s emergency assistance fund:

1. Consider the geographical structure of the organization. Does the company do business in one particular area of the country? Is it nationwide? Are there international operations? Understanding the types of disasters employees are most vulnerable to can help organizations better prepare grant criteria that suits the needs of their employees.
2. Decide upon the type of hardships the fund will cover. Some employee assistance funds only cover disasters, such as tornadoes or floods. Other funds are specifically for personal hardship, such as illness, death of a family member or other personal financial hardship. Still other funds have provisions for both. Depending on the type of fund set up, there are tax implications as well as grant application criteria considerations.
3. Finally, the type of funding vehicle chosen is an extremely important consideration. Funds can be set-up as employer-sponsored charities (direct corporate assistance), employer-sponsored private foundations, or as employer-sponsored funds with outsourced public charity. Each option comes with different legal and tax considerations and should be considered carefully before a choice is settled on by an organization.

Source: Stockham, D., Clontz, B. 17 May, 2019 (revised from 2012 version) Emergency Assistance Funds (EAFs) for Employee Hardship and Disaster Relief: Legal, Tax and Design Considerations. Planned Giving Design Center. Accessed from: http://www.pgdc.com/pgdc/emergency-assistance-funds-eafs-employee-hardship-and-disaster-relief-legal-tax-and-design-cons