How to Set Up an Employee Assistance Fund in 4 Simple Steps

Competitive wages and good benefits (including health insurance) are crucial for attracting and retaining top talent. But even those two advantages can fall short for your employees if they experience a sudden hardship.

When disaster strikes, how can you, as an employer, ensure they feel secure and supported? 

One way is by having an employee hardship fund. These funds typically fall under companies’ corporate social responsibility (CSR) umbrella, and they can even save your business money in the long run. Find out more about them with this short guide from Groundswell.

Table of Contents:

• What is an Employee Hardship Fund?
  
  • Employee Assistance Fund Benefits
• Using an In-House Employee Hardship Fund Administration versus a Foundation
• How to Set Up an Employee Hardship Fund in 4 Steps
  
  • 1. Decide Who’s Accountable for the Hardship Fund’s Success
  • 2. Decide the Budget and Funding Structure for the Hardship Fund
  • 3. Set Up the Eligibility Criteria
  • 4. Communicate Benefits and Measure the Participation Rate
• Bring an Impact-Driven Benefits Program to Life with Groundswell

What is an Employee Hardship Fund?

An employee hardship fund is a pool of money from which an employer (or whichever entity manages the fund) makes grants to employees who meet qualifications. It’s designed to help workers meet sudden, unforeseen financial obligations.

Common reasons that employees request help from their employer’s hardship fund include:

• Loss of home due to fire or natural disaster
• Diagnosis of cancer or other medical condition that requires long-term treatments
• Death of a close family member (funeral and burial expenses)

Once an employee experiences something they believe might qualify them for help from a hardship fund, they’ll apply for assistance, attaching proof of their financial difficulties. Depending on the parameters of their employer’s hardship fund, they may receive some money.

Employee Assistance Fund Benefits

The most obvious reason to set up an employee hardship fund is to show your employees you care and provide them with some peace of mind. Those benefits can trickle down to your company’s bottom line.

In 2025, the Chartered Institute of Personnel and Development (CIPD), based in the U.K., shared an illuminating study on employee wellbeing. More than half of survey respondents claimed that one or more of the following non-work matters were a top-three reason for employee absenteeism: health issues, financial difficulties, or family challenges.

We don’t have to tell you that employee absenteeism is a big deal. A 2007 study from the SHRM estimates that companies’ losses due to worker absenteeism come out to a median of 3 percent of their annual payroll. The CDC Foundation estimated that employee absenteeism cost American companies more than $225 billion in 2014.

Using an In-House Employee Hardship Fund Administration versus a Foundation

Businesses with the means and resources to have their own foundation have been using employee hardship funds for decades. And grants coming from foundations do have their advantages, one being that the money employees receive is tax-deductible.

Corporate foundations, however, require a significant amount of money to manage. As a result, smaller companies might not have access to them.

But employees shouldn’t miss out on the benefits of hardship funds simply because they don’t work for a Fortune 500 company. To bridge this gap, Groundswell provides all the tools and information companies need to manage every aspect of employee hardship funds. It’s all part of our mission to democratize CSR programs and make them more accessible for all companies and organizations.

How to Set Up an Employee Hardship Fund in 4 Steps

Although a digital CSR platform like Groundswell gives you the digital infrastructure necessary for managing your employee hardship fund, you need to take care of a few things before launching it.

1. Decide Who’s Accountable for the Hardship Fund’s Success

Many companies task either an in-house CSR or HR representative to oversee the administration of employee hardship funds. If your employer has neither, you’ll need to task someone with making sure the hardship fund gets used. This situation could be a good opportunity for natural leaders to step up!

2. Decide the Budget and Funding Structure for the Hardship Fund

Employees themselves typically have the chance to contribute money, either as cash or a percentage of their paycheck, to hardship funds. Additionally, your employer might want to match employee donations to show their support.

For clarity’s sake (on both the employer’s and employee’s perspectives), set forth clear parameters on how much—and how often—your company will match funds. The chances your employees will donate go up significantly if they know their employer will double the impact.

3. Set Up the Eligibility Criteria

Defining a hardship for the purpose of your employee assistance fund can be…a little hard. Still, it’s not something you want to blow off until employees start sending you applications.

Most employers require employees’ needs to be unexpected, sudden, significant, and the result of circumstances outside their control. You might want to go a little deeper into the details and set a limit on the dollar amount employees can receive in one year. Capping the number of applications might also be in your company’s best interests.

One more parameter you might want to implement is a clawback provision for employees who leave the company soon after they get paid from the hardship fund. For instance, employees must pay back the full amount if they leave within six months of the grant and half the amount if they leave between 6 and 12 months.

4. Communicate Benefits and Measure the Participation Rate

The worst thing that can happen to a well-planned employee hardship fund is a complete lack of participation. If your company has already set aside money, it’s much better to go ahead and spend it on your most important stakeholders.

At the outset, name a participation rate with which you’d be comfortable. You could also measure the total amount raised by your employees. Remember: if you don’t measure it, you can’t improve it!

Bring an Impact-Driven Benefits Program to Life with Groundswell

An effective CSR program can do more than just change the world. Seriously.

It can provide substantial benefits to your employees and melt away many of their stresses. In turn, you’ll probably see the absenteeism rate dip. Whoever said CSR couldn’t be good for business?

If you want to get started with an all-in-one digital CSR platform that offers hardship funds, donor-advised funds, employee-directed grants, and volunteering all while reducing the burden on your administrative team, we’d love to talk soon. We're here to help you with all the details of the fund, including who is eligible and what the application will look like. Schedule your demo with us at your convenience.