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For every climate and every geography, there’s at least one type of natural disaster that could affect both businesses and employees. Natural disasters can include severe weather events (such as hurricanes, floods, winter storms, and tornados), seismic events (such as earthquakes), and even human-caused events (such as wildfires, most of which are started by people).
When a natural disaster hits a community, it might not be possible to prevent the incident from affecting employees. Even if the business is intact and able to operate as normal, some workers — or most of the staff — might be dealing with injury, damaged or destroyed homes, lost property, post-traumatic stress, and environmental damage, to name just a few potential effects. And the economic cost can be profound: Billion-dollar natural disasters increased from three in 1980 to 22 in 2020.
Organizations typically don’t have much influence over efforts to prevent or mitigate natural disasters, but by offering certain financial benefits to their workers, employers can provide some assistance to ease recovery and help employees get back on their feet faster.
The cost of dealing with the aftermath of a natural disaster varies widely depending on the disaster and the individual, but these unexpected events can be very expensive for the citizens who live in affected areas. Repairing storm or wind damage to a home costs between $2,724 and $21,930, according to home-services company Angi.
Personal property is just one potential expense: Some disaster expenses covered by FEMA (Federal Emergency Management Agency) include temporary housing (such as a hotel), essential items like food and water, medical or dental expenses, transportation repair or replacement, mold remediation, and even funeral expenses in worst-case scenarios.
While FEMA can reimburse some of these expenses, it takes time to file a claim, and the length of time between submission and reimbursement depends on the scale of the disaster and the type of financial assistance needed. This is a critical time for employees to have some kind of emergency savings account, which provides a financial cushion to cover immediate expenses such as evacuation, temporary housing, and medical needs.
When workers don’t have to worry about how they’re going to pay for everything they need in the immediate aftermath of a disaster, they’re better able to focus on other urgent tasks. Low-income households will experience much more stress following disasters than people with higher incomes; a research bulletin released by the Substance Abuse and Mental Health Services Administration found that low-income households were more likely to express worry about food in the aftermath of Hurricane Sandy, for example, and that these households were 4.5 times more likely to need to leave their community to obtain food.
Providing a workplace emergency savings account (ESA) to all employees can help mitigate some of this stress, better preparing employees to handle natural disasters.
It’s been widely demonstrated that employees who are worried about finances are less productive at work, more prone to both absenteeism and presenteeism, and more likely to have strained relationships with coworkers. When a natural disaster enters the equation, these effects are even more prominent — and when every employee is facing similar challenges, organizations might struggle to fill schedules and provide the same level of quality or service.
Beyond the immediate ripple effects on the business, providing a workplace ESA to employees can help enhance loyalty and foster increased retention because it demonstrates a company’s commitment to employee well-being under adverse circumstances. Employees with a workplace ESA who can leverage that account during a natural disaster will feel more supported by their employer, and that level of dedication between employee and employer can cause its own (positive) ripple effects on recruiting and retention efforts.
Emergency savings is a critical component of financial wellness, just like saving for retirement. There are ample resources available to help educate employees about emergency savings because having money set aside specifically for emergencies is such a core part of financial wellness, so even organizations that don’t offer financial wellness training or education as part of their benefits package can easily find and use educational or informational resources about saving for an emergency. An ESA also provides a concrete way for employees to put their new financial knowledge and skills into action.
Emergency savings is an essential aspect of financial well-being, much like retirement savings. Numerous resources are available to help educate employees about the importance of setting aside funds for unexpected situations, as it is a fundamental part of financial health. Even organizations that don’t offer financial wellness programs as part of their benefits can easily access and use educational materials on emergency savings. When companies are able to offer a dedicated ESA, they give employees a practical way to apply their financial knowledge and skills.
A workplace ESA allows employees to automatically save money in their emergency account every time they receive a paycheck through payroll deductions. The employee doesn’t have to set up a separate account and remember to transfer money on a regular basis; all the thinking behind the savings is done for them. Employers can entice employees to save by offering a sign-up bonus, regular matching contributions, or milestone bonuses, which will help participating employees save more money faster than they could otherwise.
One of the biggest challenges to a thriving workplace ESA can be employee participation. While some employees will immediately recognize the long-term value of saving for an emergency, others might need some convincing.
Enrolling in a workplace ESA should be easy and low-friction. If employees don’t already have a designated savings account, it’s likely that the hurdles in place to starting one — finding a savings account provider (such as a bank or credit union), opening an account, and setting up monthly transfers, to name just a few — are part of the reason why they haven’t yet taken that step. A workplace ESA that’s seamlessly integrated with payroll and easy to set up can remove these logistical barriers.
Depending on the geographic location of the business, employers can cite natural disasters as one reason why it’s important to have emergency savings, and they can tailor this education to the specific disaster. Water, wind, fire, and earthquakes all will have different effects on residences, cars, and the availability of temporary housing, and understanding which is the most likely scenario can help employers talk to staff about the specific needs they might be facing after a natural disaster.
Many employees might hesitate to enroll in a workplace ESA because they are more concerned about spending their money on immediate needs, such as paying down debt, saving for a vacation, or other items that feel more pressing than saving for an emergency that might never happen. Employers can offer guidance around the need to balance emergency savings with other financial goals and include data and information about the likelihood of experiencing any emergency, including a car breaking down or an unexpected health expense.
Employees might also not know how much to save for an emergency. There are a few ways that employers can help them determine the appropriate size of their emergency fund, including providing financial coaching as part of a financial wellness plan, or offering data and information around how much it costs to recover from location-specific natural disasters.
All emergencies, and especially natural disasters, are inherently sudden and unexpected. Nobody knows weeks or months in advance whether there will be a wildfire, earthquake, or flood that will affect their home or their workplace. When they happen, there’s often little time to plan ahead — and the opportunity to save money to help with the disaster is long gone at that stage.
When employers can help employees save for any emergency, especially a natural disaster, they’re also increasing their own productivity and efficiency in the aftermath of the event, cultivating employee loyalty and engagement, and reducing stress all-around for everyone at the organization. Employees who feel financially equipped to handle a natural disaster are more likely to be able to work, less likely to call in absent for any scheduled shifts in the wake of an event, more likely to feel present and focused when they’re working, and more likely to be able to handle the stress involved in experiencing a natural disaster. A workplace ESA is one of the best tools employers have to support their most valuable resource — their people — before disaster strikes.