6 Ways Employers Can Help Employees After a Natural Disaster

The summer of 2021 was filled with heat waves, floods, hurricanes, tropical storms, and wildfires. Each event seemed to illustrate more dramatically than the last just how profoundly employee wellness can be affected by natural disasters.

Nearly one in three Americans lives in a county that experienced some type of natural disaster this past summer, according to an analysis from the Washington Post published September 4, 2021. And that doesn’t even count the multi-day heat waves, which aren’t considered a disaster but are dangerous nonetheless.

Data from the National Centers for Environmental Information looking at January through June, 2021, shows that there were eight natural disaster weather events in the country during that period, each of which accounted for more than $1 billion in damage.

Many employers have long-standing policies and plans in place to help employees through natural disasters and to protect employees’ livelihoods if headquarters is hit. But a far more dispersed workforce than ever before paired with the sheer volume of events this past summer has been overwhelming for both employees and HR leaders alike, and prompted many companies to reassess their disaster efforts.

This is especially important in the wake of the pandemic when many employees may still be working remotely but suddenly find that they’re homeless or have only a damaged home to work from. They may also have children, displaced family members, cleanup, and/or repairs to tend to, all of which adds to the normal stress of their role.

Most importantly, employers need to understand the lasting effects that injured, missing, or lost friends and family, destroyed or damaged homes, loss of power, and disruption in transportation can cause, not only on employees but on entire communities. Workplace flexibility and acts of compassion in and out of the office can help tremendously.

With that in mind, here are six ways employers can best help employees financially survive (and maybe even set them up to thrive) in the wake of a natural disaster.

1. Embrace Emergency Communications

Make sure you work closely with your communications and IT departments to create an emergency contact list for all employees and a dedicated emergency number for employees to call in during a natural disaster.

You’ll want to check in with every employee before, during, and after an emergency with important notifications on closings, schedule changes, any damage to company buildings or plant and any supports, and resources you have at the ready for affected employees.

With the pandemic and the increase in remote workforces, many employers have already upped their communications efforts. Be sure those efforts also work to reach employees during times of natural disasters and leverage existing data to ensure tailored communications are possible if your workforce is geographically dispersed.

2. Consider Offering Direct Employee Assistance

Employers may offer disaster relief payments to employees to help with medical care, temporary housing, transportation, and funeral expenses. Set up as a nonprofit entity, a tax-advantaged employee crisis fund lets the employer make grants to employees unable to afford basic personal necessities. When these payments are made as a result of a qualified disaster (such as a federally declared disaster), the payments won’t be subject to federal taxes (though state rules vary).

3. Make Financial Resources Readily Available

Employers may also provide loans (either directly or through third parties) to employees who are victims of federally declared disasters. When certain requirements are met, those loans aren’t subject to federal taxes, and if the amount is less than $10,000, the loan can be interest-free. If this isn’t an option, having a relationship set up with a partner with lending expertise (like SoFi at Work) is an excellent way to ensure employees will be in good hands should they find themselves in need of a personal loan or other personal finance solutions.

Employees can also borrow from themselves if they work for employers that allow tax-free loans from 401(k) or other retirement plans. HR leaders at companies that provide this benefit may want to check if Congress is enacting any special rules due to the disaster your employees have experienced. In past cases, the government has sometimes increased the loan limit, delayed repayments, and made other concessions for employees who need to use retirement money to pay for disaster losses.

Since every disaster is different, and every employee’s needs will vary, it’s critical to have a holistic financial well-being program in place that allows employees to connect with a credentialed financial advisor who will be well-suited to provide informed and unbiased guidance as a fiduciary. In addition to helping employees navigate the lending landscape, such advisors could likely provide guidance on when and/or where a 401(k) withdrawal or loan might be a good idea, whether there are investments that it might make sense to liquidate, and more. They’ll also be up-to-date on the latest legislation and public resources available to disaster victims.

4. Understand Special Rules for Hardship Distributions

Employers should expect to field plenty of questions about hardship distributions from retirement plans. IRS rules allow a hardship distribution for expenses and losses incurred by an employee due to a federally declared disaster. These distributions are usually subject to income taxes, but in some cases, Congress waives the 10 percent early distribution penalty for distributions taken before age 59 ½.

Other times, Congress may declare what are known as qualified disaster distributions. These are specifically for employees who take a retirement plan distribution because of an economic loss due to a disaster. In these cases, the government bends the rules even further, sometimes allowing for taxation of the distribution over three years, exemption from the 20 percent withholding requirement, and other changes to the regulations.

HR professionals may want to keep an eye on Washington to see how Congress reacts to a specific disaster affecting their employees.

5. Set Up Information Banks

Consider setting up a command center of phone lines or, perhaps even temporary on-site in-person kiosks run by volunteers and/or counselors on your financial wellness team who can provide useful information for dealing with disaster aftermath. Some examples of help you might offer include the following.

•  Help filing and appealing insurance claims

•  Information on qualifying for charitable, community, and/or federal relief efforts

•  Guidance filling out FEMA forms

•  Tips for avoiding fraud and scams that often surface in the wake of a disaster

•  Help finding contractors, construction workers, and other skilled laborers to rebuild

•  Information for unaffected employees who want to help. What charities and relief groups need money or volunteers? Which, if any, groups are being sponsored by the employer?

6. Rethink Paid Leave

Employees who are nearby but fortunate enough to have been unaffected by the disaster will want to help. Consider partnering with a local organization needing volunteer help and giving employees paid time off to pitch in.

Alternatively, you might find employees willing to donate some of their own PTO days to fellow workers who need to devote time to disaster recovery. If that’s the case you’ll want to look into formal leave-sharing plans so that employees don’t face unforeseen tax consequences.

The Takeaway

Once things are back to normal, or even sooner, make sure to review and update your company’s disaster recovery plan, incorporating these six points and any other lessons you have learned. For employers who have been fortunate enough to avoid this summer’s severe weather and other catastrophes, a review may be more important than ever to avoid being taken by surprise.

Even HR professionals can use some help from time to time. SoFi at Work is here for you with education, financial solutions, and contribution benefits for employee-focused employers.

Photo credit: iStock/fizkes

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