Team Management

What is an Employee Assistance Program (EAP)?

Jenna Lee Business finance writer 

It’s hard to do your best work when you’re distracted by personal matters, whether you’re worried about money, your family, a health issue, or something else. And these days, thanks to COVID-19, more and more workers are languishing, which The New York Times describes as “muddling through your days, looking at your life through a foggy windshield… Languishing dulls your motivation, disrupts your ability to focus, and triples the odds that you’ll cut back on work.”

This isn’t just unfortunate for your team—no one wants to live that way—but also for your business, as distractions can cost companies millions.

One way to support workers and show you care is by offering an Employee Assistance Program (EAP). Below, we’ll cover everything you need to know about EAPs, from what they are to why you may want to offer one to how to choose the best program for your business.

What is an Employee Assistance Program (EAP)?

An Employee Assistance Program (EAP) is an employer-sponsored program designed to give employees and eligible members of their household the support and resources they need to confidentially resolve life challenges and personal issues that can negatively affect their work performance.

While EAPs started off mainly helping employees address alcohol and substance abuse, most today assist with many other areas that can affect stress and well-being, including (but not limited to):

  • Family: marriage turmoil, family planning, adoption, parenting issues, domestic violence, and child/elder care
  • Financial: budgeting, debt repayment, retirement planning, will creation, and ID theft
  • Mental health: dealing with grief and traumatic events, anxiety, and depression
  • Professional: work-life balance and burnout, career changes, professional development, relocation, stress, and conflicts with coworkers
  • Wellness: fitness, nutrition, alcohol and substance abuse, and living with chronic diseases

While EAPs can provide guidance for many issues, they don’t usually provide financial support or diagnose health issues. In other words, you shouldn’t replace your health insurance plan with an EAP. EAPs are meant to be an extra benefit for employees and a supplement to health insurance

How does an EAP work?

While some large corporations provide EAPs in-house, 62% of companies outsource these services to better maintain confidentiality, handle compliance and reporting, and ensure the program can address a wide range of issues. Partnering with a third-party EAP is also more feasible for smaller businesses that don’t have the resources to hire a dedicated EAP team (EAP providers are often connected to large networks and have a wide array of resources available at their disposal). 

EAPs are usually voluntary—when employees (or members of their household) have a need, they can simply reach out to the EAP directly. The EAP then verifies their eligibility, evaluates the issue, figures out the best way to help, and helps them explore their options.

The specific process can vary per provider. For example, EAPs can differ in:

  • Communication methods: EAPs may have employees resolve the issue over phone, video, chats, emails, or face-to-face conversations.
  • Assistance methods: After the EAP assesses the issue, they may either provide short-term treatment, follow-ups, and referrals if the employee needs longer-term help or more specialized treatment, or they may only provide referrals. Sometimes, the EAP may even simply point the employee toward a library of educational resources, such as self-help articles, videos, and other tools.
  • Partners: EAPs usually have a network of licensed professionals they can turn to, which can include social workers, mental health counselors, substance abuse professionals, attorneys, financial advisors, counselors, therapists, psychologists, nutritionists, and more.
  • Other services: Sometimes, EAPs offer services beyond formal one-on-one assistance, such as workshops on how to manage stress, live healthier, or navigate relationships, nurse advice lines, basic legal aid, and more. Additionally, some may teach managers how to recognize and resolve less serious issues or consult when managers have employee and organizational challenges.

EAP services are also usually kept confidential. You might get an aggregate usage report that gives you a general overview of which services your employees are using, but these reports don’t usually contain names—the goal is for only the employee to know they’ve used the service.

Confidentiality is key as it encourages people to get the help they need and discourages workplace retaliation (e.g. firing someone because they might be distracted having to take care of an elderly relative). It’s also required in some cases. For example, EAPs that are members of the Employee Assistance Professionals Association (EAPA) need a written policy ensuring confidentiality.

Of course, confidentiality isn’t always possible. For example, if the employee discloses something especially concerning, such as the urge to harm themselves or someone else, the EAP professional may need to involve other parties. Additionally, if a supervisor or HR makes a (rare) mandatory referral to the EAP, the EAP may report if the employee is attending required sessions. Also, if the EAP purely gives referrals for treatment, rather than having its own network of licensed professionals, or if the service requires the participant to get treatment in person, the program can also lose some of its confidentiality.

How much do Employee Assistance Programs cost?

EAP services are generally free for employees. However, many EAPs provide a limited number of treatment sessions, so if the employee requires more than their allotment or needs an outside specialist, they may need to pay. Fortunately, EAPs usually try to help employees find affordable options and/or those covered by insurance.

The cost for employers can vary. For example, your cost may be cheaper if you can offer it through your current health insurance provider.

If you partner with a standalone third-party EAP provider, they’ll usually either charge by usage (i.e. you only pay when employees take advantage of the services) or on a fixed-fee basis, meaning you pay a fixed rate (usually $0.75–$1.50 or more) per employee per month, regardless of use. Rates usually vary depending on the services you want to include (for example, the number of counseling sessions each employee gets annually).

The Substance Abuse and Mental Health Services Administration (SAMHSA) recommends joining a small business EAP consortium to save money on EAP costs. EAP consortiums are groups of smaller companies that join together to hire an EAP provider. Usually, the more employees in the consortium, the cheaper the per-employee cost for everyone.

Why should I offer an Employee Assistance Program?

Numerous studies have concluded that EAPs are worth the investment, with many employers reporting positive returns on their investment. According to the U.S. Department of Labor, for every dollar you invest in an EAP, you could save $5 to $16. This is likely because EAPs could:

  • Help you maintain a competitive benefits package. 79% of companies offer an EAP, and it’s important to offer competitive benefits if you want to attract and retain employees. Ultimately, this can save you money on recruiting and training costs.
  • Show you care about your employees’ health and well-being. This can increase your team’s morale and encourage loyalty.
  • Make your team more engaged. Stress, depression, mental illness, and substance abuse—issues EAPs usually help address—have been shown to impact productivity and cost employers billions each year. By offering services that help employees better manage these issues, you may be able to decrease absenteeism, increase productivity, and help your bottom line.
  • Lower your health care costs. By addressing stress, nutrition, mental health, and more, EAPs can improve your employees’ overall health, potentially resulting in lower health care claims and fewer accidents and workers’ compensation claims—if employees are less distracted with personal issues, they may be less likely to injure themselves on the job.
  • Help resolve team issues. Some EAPs may help mediate tense work situations, which can reduce risk and save you from having to hire outside consultants or full-time HR staff.

What are the legal requirements of an EAP?

If you hire a third-party EAP provider, they may be responsible for keeping your program compliant. However, it’s still important to be aware of the regulations that could come into play if you decide to offer an EAP.

The Americans with Disability Act (ADA)

While EAPs are usually voluntary, there may be times when a manager wants to make a mandatory referral, such as when the employee is misbehaving or their work isn’t up to par. While mandatory referrals aren’t prohibited, the Society for Human Resource Management (SHRM) recommends only considering mandatory referrals in extreme cases, such as if the employee makes workplace violence threats or discloses having suicidal thoughts.

It’s generally best practice to avoid mandatory referrals because they could signal that your company thinks the employee has a disability, and if you threaten to terminate the employee (or discipline the employee in another way) for refusing treatment, they could take you to court under the Americans with Disabilities Act (ADA), claiming disability discrimination based on a perceived disability. 

If a manager insists on making a mandatory referral, encourage them to talk to HR, an EAP counselor, and/or legal counsel before referring the employee in order to get professional guidance and ensure they follow the appropriate steps. Legal may advise documenting performance issues beforehand, issuing written—but not mandatory—referrals, and/or getting the employee’s consent before referring. (Counterintuitive, we know, as mandatory referrals don’t sound optional.)

The Mental Health Parity and Addiction Equity Act (MHPAEA)

The Mental Health Parity and Addiction Equity Act says any group health insurance plans that treat mental health or substance abuse can’t set higher copayments and deductibles or make it harder to get treatment for those issues. Additionally, if you have 50 or more employees and your EAP offers mental health or substance use disorder benefits, you can’t force employees to go through the EAP before accessing these benefits (unless you do the same for medical and surgical benefits).


Another law to keep in mind: HIPAA, or the Health Insurance Portability and Accountability Act, which protects individuals’ medical records and personal health information. Under HIPAA, alcohol and substance abuse records need to be kept confidential. HIPAA also bans the implicit or negative disclosure of information, which means EAPs can’t release any information without signed consent from the individual.


If your EAP offers actual medical benefits, such as direct counseling and treatment (rather than just referrals), your EAP may be considered a group health plan, which would mean it’s regulated under ERISA and may be subject to COBRA regulations and other federal laws, such as ACA. (If your EAP falls under this type and you don’t provide adequate medical care, you could be subject to ACA employer penalties.)

If your EAP purely refers participants to outside help, on the other hand, it may not be subject to these regulations as its benefits would generally be treated as excepted benefits.

State regulations

As always, it’s also important to research applicable regulations that apply to the states you operate in. For example, the Knox-Keene Act regulates EAPs with employees in California. This means every EAP that serves Californians must either be licensed or have an exemption on file with the California Department of Managed Care. If you plan on offering an EAP, be sure to consult with legal counsel to ensure you accurately identity and comply with all local laws.

What are the administrative requirements of an EAP?

If your EAP is a member of EAPA, it needs to follow certain administrative guidelines. For example, it needs a written policy ensuring client confidentiality, a minimum number of trained professionals, formal procedures for following up with employees using the program, and more.

Third-party EAP providers should be able to handle many of these requirements for you, but even if you outsource your EAP, your HR team isn’t entirely off the hook. For example, they may need to:

  • Determine what services you want to offer employees
  • Select and onboard the vendor
  • Develop guidelines and enforce policies
  • Manage your company’s relationship with the vendor
  • Track results and evaluate the ROI
  • Educate employees about the program

Educating employees and managers is particularly important if your EAP provider charges on a fixed-fee basis (i.e. you pay for the program whether the employees use it or not) and you want to get your money’s worth. Especially if the EAP provider won’t do it themselves, your HR team may want to hold info sessions and create pamphlets or wikis about what the EAP offers, when the benefits are available, confidentiality, how to access the benefits, and more.

However, getting employees to actually use the services may prove tricky, as some may think it’s only for those with substance abuse problems. To reduce the stigma, be sure to regularly emphasize the program’s confidentiality and highlight all of its benefits—and the fact that they’re free.

How do I choose an Employee Assistance Program?

You might already have access to an EAP if you’re part of a professional employer organization (PEO) or through your health insurance or benefits provider.

If you don’t already have access and want to hire a third-party EAP provider, you may first want to thoughtfully consider your budget, what benefits you want to offer, and what you want in an EAP. Then, you can ask a few standard questions to each provider as you evaluate your options:

  • What is their fee structure, and how much do they charge?
  • What benefits do they offer? Do they actually treat the issue or simply issue referrals?
  • Who are their specialists, and what are their qualifications? Are they certified professionals? Do they belong to a professional EAP association?
  • Where can employees get help? Do they offer onsite visits for convenience or offsite locations for privacy? Can they serve out-of-state employees?
  • Do they offer counseling services? How many sessions does each employee get?
  • When are their services available? Can they accommodate employees who don’t work normal working hours?
  • Can they provide referrals when the employee needs different or more help?
  • Do they provide any other services, such as workshops or supervisor training?
  • What is their confidentiality policy?
  • How soon can employees expect a response after they reach out?
  • Do they send usage reports? If so, how often, and what kind of details are included on the report?
  • Do other companies recommend them? Do they have any references you can talk to?

Bottom line

It can be hard for workers to stay productive when life gets in the way. By offering an EAP, you can help your team get the support they need, show you care, and—in many cases—increase your bottom line.

Jenna Lee
Jenna Lee Jenna Lee has been writing about finance for over six years. Her work has been featured on U.S. News and World Report, The Huffington Post, Credit Karma, and more.
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