The concern often raised by employee relief fund-sponsoring employers relates to the high turnover rate in the first few months of employment. Employers worry this may result in a disproportionate number of grants made to applicants who will not remain as employees, and a corresponding negative cash flow impact on the fund. Luckily, this concern is not borne out by the experience of most funds.
In general, employers normally see the highest turnover in the first few months of employment. The longer employees stay with employers, the lower the turnover rate. An illustration of a hypothetical retailer may be helpful to show how unlikely it is that new employees would receive grants before leaving shortly thereafter.
The natural question is how to address this dozen or two dozen grants. First, remember that applicants must demonstrate need in order to receive a grant. The grant recipients – even if relatively new employees who leave the company thereafter – are all in need. Nonetheless, it is still reasonable to want to mitigate these costs to the extent possible.
Fortunately, it is very rare for a person to complete an application after leaving the company. First, they could not be verified as a member of the charitable class after leaving the company –which means they would have to be a current employee when they applied. Next, in many cases, the application platform is accessed through single sign-on (SSO) or company intranet. Therefore, the terminated applicant would not have access.
Another mitigating factor in this situation is that the event must have occurred within a certain period of days, such as 180 days. Therefore, an employee who has been working for nine months may apply for a grant that applied within the last six months – all while employed. A shorter period limits it further. A note of caution bears mentioning here, since a very short window may sharply inconvenience applicants in need.
In some very rare cases, employees that complete an application and the employer verifies their membership in the charitable class, but they then leave the company. Legally, they could still receive a grant. On the rare occasions where this does happen, applicants often do not respond to requests for information or other factors which would allow EAF to make a grant. As a result, no grant is made. The obvious reason for this is that most potential grant recipients believe that they are ineligible as a result of their leaving the company.
Author: Doug Stockham