Helping an Employee in a Personal Financial Crisis

As more Americans face distress, small businesses are trying to find solutions, including loans, that benefit workers and companies alike

By John Tozzi

Last October, in the throes of the financial crisis, Nancy Nelson gathered the staff of her Spokane (Wash.) recruiting firm Humanix to deliver this message: "If you're finding yourself in a corner where you can't see your way out of it"—whether from credit-card debt, medical bills, or a mortgage or car loan—"first look to us and see what we can do."

Since then, the $11 million company, which is owned by its 16 employees, has made more than $15,000 in short-term, interest-free loans to seven workers. Cindy McGinty, a 52-year-old recruiter who has been at Humanix three years, borrowed $1,000 for car repairs after an accident late last year. In July, when she needed emergency dental work, the company agreed to lend her the cost, which she expects to be in the thousands. "They saved me," McGinty says simply.

As more Americans face financial distress, small businesses are trying to find solutions that benefit employees and companies alike. Workers' money problems manifest on the job in poor performance and turnover. While it's hard to measure the toll that personal financial woes take on employers, one estimate from the Personal Finance Employee Education Foundation put it as high as $4.5 billion annually—the cost of missed time, hours on the phone with creditors, and low performance because of stress, for example. Janet Raffel, a Chicago consultant on workforce development, estimates that a financially unstable worker can cost a business as much as $480 per month in lost productivity and absenteeism.

Building Loyalty

One-third of employers provide some services to help workers manage their finances, according to a new survey of 400 employers by the New York nonprofit Families & Work Institute. But smaller companies lag: Only a quarter of firms with between 50 and 100 employees offered assistance, compared with 44% of firms with 1,000 or more workers.

Many companies can't afford Humanix's approach of lending workers money directly, especially in a slump. Mitch Bolnick, CEO of security company BCD Low Voltage Systems in Phoenix, let several employees borrow from the company in the past for emergencies like car repairs. But with sales slow this year and his staff of 16 already taking pay cuts, Bolnick has held off on new loans. "This year we've had to explain to them what the situation is and why, and they understand," he says. Still, he says assisting employees when possible helps BCD build loyalty among workers: Two have told him they turned down higher-paying offers.

What can small businesses do to help employees in crisis? Some efforts come from workers themselves. Staff at CRSA, a 61-employee architecture firm in Salt Lake City, began a "We-Care Fund" five years ago to raise money for a colleague who had a premature baby. Funded through voluntary payroll deductions, the account typically has $3,500 that can be drawn on for workers' medical emergencies or other urgent needs. Most employees contribute a few dollars each pay period, and a staff committee reviews applications.

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