What Is an Employee Assistance Program & How and Why to Create One

An employee assistance program (EAP) offers employees support for personal and workplace problems that can affect their output at work and enjoyment of their personal life. Most EAPs help employees with substance abuse and mental health issues but can also cover family issues, wellness concerns, and retirement planning.

As you explore the possibility of an EAP for your small business, you’ll want to consider how it will be managed (in-house or via a third party—or a combination of both), as well as legal implications and the benefits EAPs offer to your employees and your business.

How EAPs Work (+ Sample EAP Policy)

An EAP provides outside counselors, resources, and referrals to assist employees and their family members. Any EAP benefits received by employees or family members remain confidential. Employers do not get to know who is utilizing the service, what the reasons are for, or how often employees call. Due to the Health Insurance Portability and Accountability Act (HIPAA) regulations, which we address later, there is complete confidentiality between the third-party EAP provider and the employee.

Although their offerings are broad, most EAP services either directly or indirectly address mental health, financial concerns, family issues, overall well-being, and legal matters. Specifically, services may include:

Substance abuse treatment
Tuition reimbursement
Legal assistance
Childcare services
Eldercare services
Health and wellness stipend
Grief counseling
Financial assistance and debt relief
Healthy eating memberships
Professional development
Career transitions
Travel credits and reimbursement
Conflict resolution
Retirement planning

All EAPs provide a predetermined number of counseling referral sessions, typically one to three, at no cost to the employee to fully assess the issue before recommending a resource, therapist, or service to the employee. Most EAPs do not offer long-term counseling but can help direct the employee toward services that are designed to be long-term solutions.

Here is a sample EAP policy for your employee handbook:

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Creating an EAP

While workplace stress and mental health concerns are indeed big issues affecting small businesses and their employees, it’s not the only reason to create an EAP. Taking a holistic approach, you can help your workers’ well-being throughout their life.

When creating your EAP, you can keep the entire program in-house, outsource all of it, or anything in between. Depending on the setup you use, the costs will vary.

In-house employee assistance programs are usually only offered by large corporations with the resources required to manage the services offered. Some companies may offer an on-site gym, daycare, cafeteria, masseuse, mental health counselor, and other wellness services.

Because these EAPs offer all of these services in-house, they’re incredibly expensive to operate. Most small businesses shy away from a fully in-house EAP.

Employers may choose to partner with a third party to operate their EAP. Under this arrangement, the vendor will charge either a flat fee or pay-per-use fee. Flat fees can make it easier to budget, but you may end up paying for services you don’t use. Pay-per-use fees could save you money initially by only paying for the specific services your employees want, but when you need to scale up, it could become much more expensive.

The biggest benefit to using a third party is that you’re not reinventing the wheel. The vendor you choose should be able to handle any of your customization requests and provide you and your employees with access to skilled mental health counselors, therapy services, development programs, and any other support you wish to offer. This setup is most often chosen by small businesses.

EAP Service Providers

You’ll want to do your research because your EAP will directly affect and interact with your employees. Make sure you choose a reputable provider and one that can offer best-in-class services to your team.

Request references from each provider and a proposal. When reviewing the proposal, pay close attention to:

Previous clients
Services offered to past clients
Cost estimate and detailed breakdown
Scope of services

Your job doesn’t stop when you find a provider. You must continuously evaluate the vendor and their services. Make sure you speak with your team about their experience with the services through anonymous surveys and check-ins.

Here are some EAP service providers you may want to consider:

EAP	Key Features
Beacon Health Options	Mental health, substance abuse, and depression counseling Network includes over 120,000 providers
ComPsych	Integrates employee wellness offerings in-house Provides general counseling services
Employee Resource Systems	Elder care, child care, and nanny assistance Legal and tax help, plus counseling services
First Sun	Grief, relationship, and substance abuse counseling Legal consultations, elder care solutions, and estate planning

Some companies choose to do a hybrid EAP setup where they offer some services in-house and outsource others to a vendor. This is another option for small businesses as it can help expand the EAP services you offer while still being budget-conscious.

With a hybrid EAP, you could develop and implement an internal wellness program that helps employees eat healthy meals at work. Parallel to that, you could partner with a vendor to offer your employees free access to a gym and trainers, something you don’t have the resources to build and maintain on site. This allows you to tailor your EAP to your employee’s needs and desires while ensuring you can afford all the services you offer.

Legal Considerations

When your small business offers an EAP to your team, you may include mental health services, access to therapists, and other support which would require confidentiality. Be aware of some legal issues, especially if you’re offering all or part of your EAP in-house.

Mandatory Referral

In most cases, employees can choose whether they participate in your EAP. If an employee is going through marital problems and your EAP includes counseling services, they can choose to use that service entirely on their own.

However, if an employee has a substance abuse problem, you may require them to use services under your EAP. It’s best to get the employee’s consent for a mandatory referral but you may require the counseling service even without their consent, if you have strong documentation in their personnel file of a problem.

Continuing with the substance abuse example, if your employee signs a consent form, then the counselor could speak with you after treating the employee to provide limited feedback about the employee’s fitness for work. Without a release, however, it’s much more difficult to allow an employee to continue working unless the counselor provides you with a fitness certificate or other form stating the employee’s issues are resolved or properly under control. The counselor will not be able to provide you with any more information.

Tip: Even for an employee who has a substance abuse problem, we don’t recommend requiring the use of EAP services as a condition of continued employment. The employee could claim disability discrimination based on a mental disability, invasion of privacy, or misuse of confidential medical information.

Confidentiality & HIPAA

Gym memberships are one thing, but many EAPs today involve medical information. When an employee uses a mental health counselor provided under your EAP, even though the counselor may be paid by your company, you have no right to access the employee’s medical record. The only time a mental health counselor could release limited information is if the employee signs a consent and release form.

There are two exceptions:

An employer may receive a limited report showing what services were provided, the cost of those services, and the type of issues addressed.
If an employee is using EAP services because of a mandatory referral, the provider can inform the employer about whether the employee is attending required sessions, participating in required services, or fit to return to or continue working.

HIPAA establishes privacy rules and standards to protect the privacy of medical records and personal health information. It applies to health plans and providers. So, if you have an in-house medical professional, even if your company pays for 100% of their service, they are not allowed to disclose any patient information to you, absent a waiver and consent.

Benefits of EAPs

According to the American Institute of Stress, 94% of workers feel stress at work; 63% of workers report feeling so stressed at work, they’re ready to quit. This is a significant amount of the workforce that is stressed to the point that their work productivity will fall, costing your small business money.

It’s better to attack this problem head-on, and that’s one of the biggest reasons employers create employee assistance programs. Building an EAP for your small business can help reduce the stress your employees face and benefit your entire company by increasing productivity and efficiency. Employees will also feel supported by you and be more loyal to your organization.

If employees are preoccupied with personal issues or worried about a sick family member, they aren’t focused on their jobs. An EAP can provide elder care assistance and counseling to deal with personal issues at home. Giving employees the ability to resolve those issues and focus on work can increase productivity.

When employees are cared for as a person, they’re less likely to miss work. More than 45% of Gen Zers, the largest share of today’s workforce, report feeling stressed or anxious all or most of the time. Workers with poor levels of mental health are more likely to call out and miss work. Providing employees with personal support options will decrease absenteeism—a study from LifeWorks found that “problem-level” absenteeism declined 55% after implementation of an EAP.

An employee assistance program treats workers as individuals, supporting them and their families through challenging times. An EAP will help employees resolve those issues outside of work through counseling. This improves their mental state and happiness, which increases their morale. Even if they don’t use all of the EAP services your company offers, knowing that their employer cares enough to provide them with this type of support can also increase their engagement with your company. Poor engagement also improved (28%) after implementation of an EAP, according to the LifeWorks study.

Many people today go without the mental health and support services they need because they can’t afford them. As their employer, you have the ability to help your employees with these and other needs by providing them with access to services through your employee assistance program. Through mental health services, tax planning, and nanny assistance, your EAP can give your employees a healthier and well-planned future through resources they may not otherwise have access to.

When employees feel supported by their company, they’re less likely to leave. One of the best ways to retain your employees is to provide EAP services that support their needs. By helping employees address their issues and concerns, you can increase retention by gaining the trust and loyalty of your employees.

Bottom Line

An employee assistance program can be a cost-effective way for you to add value to your employees’ experience. Added to your benefits program, an EAP can put your company over the top and give you a competitive edge to attract and retain top talent. Giving your employees access to resources and support to help manage their entire lives will make them happier and more productive employees.