Helping an Employee in a Personal Financial Crisis

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Other programs, particularly for low-income workers, try not only to help them out of immediate binds but encourage them to manage their money better over time. Four years ago, the eastern Kentucky nonprofit Mountain Association for Community & Economic Development began hearing from companies that workers needed advance loans. "My cash flow's in chaos because employees come to me wanting advances and never pay me back," one employer told Larrey Riddle, MACED program director. That, along with the growing number of payday lenders in Appalachia—one opens every four days in Kentucky, according to the Brookings Institution—spurred MACED to develop The Save It! Loan program as a pilot two years ago. Workers at participating companies can borrow between $300 and $500 through the credit union. Borrowers qualify based on their income (between $12,000 and $60,000) and employment history, not their credit rating. The repayment is collected automatically from their paychecks over 10 months at 18% interest. The credit union also collects an amount equal to half the loan's principal and puts it in a savings account for the borrower, so employees automatically save as they repay their loan. The goal is to help workers build savings and keep them from the debt traps that payday loans often lead to. Eleven employers, with payrolls ranging from 20 to 400 workers, participated in the pilot, which made 385 loans worth about $120,000.

Confidentiality

Absent such innovative solutions, small companies can offer some support as a benefit through employee assistance programs (EAPs). Such programs generally cost a few dollars per employee per month, and offer confidential help for a range of issues, including domestic problems, addiction, and financial woes—a particular concern right now. Melanie Hardie, a senior financial consultant at Ceridian Lifeworks, says the number of calls her team gets about foreclosure has gone from one or two each week to four or more daily. About a quarter of Ceridian Lifeworks' business is from small accounts, which the company classifies as under 350 employees. "Most companies, small businesses or large businesses, don't have the qualified professionals in-house," says Hardie. "Really we're an extension of their human resources department."

As the recession grinds on, more companies find themselves managing workers facing personal financial crisis. And while employers like Humanix treat workers like family, taking care of them makes business sense as well. "I don't want to make it Pollyanna," says Humanix's Nelson. "If an employee has a stressful financial situation at home, they're not going to be fully engaged in their job."

Tozzi covers small business for BusinessWeek.com.

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