Catastrophe Pay: The Ultimate Guide Addressing Everything HR Leaders Need to Know

As wildfires sweep through Los Angeles, displacing thousands and creating widespread disruption, Starbucks has launched catastrophe pay for impacted employees. This measure ensures that employees sidelined by the disaster—whether due to displacement or the inability to access work locations—receive compensation for missed shifts.

This move provides vital financial support for those unable to work due to the fires, reflecting Starbucks’ commitment to its workforce during difficult times. It's a prime example of corporate social responsibility. It shows how businesses can step up in crisis situations and ensure their teams are not left to face financial hardships alone. 

So, what exactly is catastrophe pay, and how does it work?

From understanding its purpose to implementing policies that genuinely support employees, let's dive deep into the ins and outs of catastrophe pay. Explore the benefits it offers, and learn from a real-world example to uncover strategies that can enhance your own disaster response. 

What is Catastrophe Pay?

Catastrophe pay—often referred to as disaster pay or emergency pay—is a form of compensation provided to employees who are required to work during or immediately after a major disruptive event, such as a natural disaster, public health crisis, or other large-scale emergency. This type of pay is designed to recognize the heightened risks, unique working conditions, and critical contributions of employees during such extraordinary circumstances.

How Does Catastrophe Pay Differ From Other Types of Pay?

To fully understand catastrophe pay, let’s compare it with other types of compensation:

Types of Emergencies That May Trigger Catastrophe Pay

Employers may offer catastrophe pay in response to a variety of emergencies. Events that could lead to disaster pay or emergency pay include:

• Natural Disasters like hurricanes, earthquakes, wildfires, tornadoes, or floods. Employees in essential roles, such as first responders or utility workers, may be required to work during these events to maintain critical services.
• Public Health Emergencies, such as pandemics (e.g., COVID-19) or widespread disease outbreaks. Healthcare workers, grocery employees, and delivery drivers were among those often eligible for disaster pay during such situations.
• Technological or Infrastructure Failures. Think cyberattacks, large-scale power outages, or water system disruptions. Workers who ensure continuity of IT systems or utilities might be eligible for emergency pay in these situations.
• Man-Made Emergencies, such as acts of terrorism, industrial accidents, or civil unrest. In these situations, Catastrophe pay may apply to those required to maintain public order or perform essential services.

How Much Is Catastrophe Pay?

There's no one-size-fits-all answer when it comes to catastrophe pay (also known as disaster pay or emergency pay). The amount varies widely based on several factors, including industry, company policy, and the nature of the catastrophe itself. Let’s break it down:

Variable 1: Industry

The type of work an employee performs plays a huge role in determining catastrophe pay.

• Hourly Workers: In industries like retail or hospitality, catastrophe pay might match an employee’s regular hourly rate, even if they can’t work due to the disaster. Some companies go above and beyond by offering a temporary higher rate during emergencies. The first approach is what Starbucks is employing for the LA fires, and the second is what they did during the COVID-19 pandemic. (See the Real World Case Study below to gain key catastrophe pay takeaways from Starbuck’s approach to COVID catastrophe pay.)
• Salaried Employees: Salaried workers may receive their regular pay for a certain period, even if the workplace is closed, or additional bonuses if they’re required to work during the event.

Variable 2: Company Policy

Every organization approaches catastrophe pay differently, and policies can vary depending on resources and priorities.

• The Specifics: Some companies outline clear policies detailing who qualifies for catastrophe pay, how much they’ll receive, and how long it will last.
• Influencing Factors: Industry standards, company values, and financial resources often shape catastrophe pay policies. Companies that prioritize employee wellbeing are more likely to offer generous support during emergencies.

If your company doesn’t already have a catastrophe pay policy in place, ahead of a crisis is the perfect time to create one. Clarity and communication beforehand are key when disaster strikes.

Variable 3: Severity and Type of Catastrophe

The nature and scale of the disaster can directly impact how much catastrophe pay is offered.

• Scale Matters: A localized event, like a building flood, might result in different pay structures than a widespread event, such as a hurricane affecting an entire region.
• Type of Event: Emergencies like hurricanes, wildfires, or pandemics may trigger varying levels of support depending on the resources required and the risks involved.

Variable 4: Employee Role and Location

Where an employee works and the role they play during a catastrophe also influences disaster pay.

• Essential Workers: Employees required to work during a catastrophe, such as healthcare workers or utility crews, may receive hazard pay or enhanced catastrophe pay as a recognition of the risks they’re taking.
• Location-Specific Rates: Catastrophe pay may vary based on local cost-of-living differences or regional regulations. For instance, employees in areas with higher living costs may receive greater compensation to account for increased expenses during emergencies.

What Does This Mean for You?

Understanding how catastrophe pay works—whether you’re shaping a policy or preparing to implement one—helps ensure fairness, transparency, and employee support during challenging times. While amounts and policies may differ, what matters most is making sure employees feel valued and supported when they need it most.

The Benefits of Offering Catastrophe Pay

Offering catastrophe pay goes beyond simply compensating employees. It’s an investment in your workforce, your organization’s resilience, and your reputation. 

Let’s take a closer look at the key benefits:

1. Boosts Employee Morale and Trust

During a catastrophe, employees face heightened stress, risks, and personal challenges. Providing catastrophe pay demonstrates that you value their wellbeing and the critical role they play in keeping operations running. Showing employees they won’t be left high and dry in hard times builds trust and fosters loyalty.

2. Increases Retention and Attracts Talent

Employees are more likely to stay with an organization that takes care of them in times of crisis. A fair disaster pay policy also helps your company stand out to prospective employees as a supportive and proactive employer.

3. Maintains Business Continuity

Catastrophes often demand that certain employees (e.g., first responders, healthcare workers, IT teams, or logistics personnel) stay on the job to ensure critical services continue. Catastrophe pay incentivizes employees to show up and perform at their best, even in challenging circumstances.

4. Enhances Company Reputation

Organizations that offer disaster pay during emergencies often gain positive recognition from employees, customers, and the public. This goodwill not only strengthens your employer brand but can also attract future business opportunities.

5. Improves Employee Performance and Engagement

When employees feel valued and fairly compensated, they’re more motivated to perform their duties effectively, even under extraordinary circumstances. Disaster pay provides both financial relief and emotional reassurance, allowing employees to focus on their work without additional stress about their financial security.

6. Supports Compliance with State or Local Regulations

While there’s no federal requirement for catastrophe pay, some states and union agreements mandate it during specific emergencies (e.g., California’s wildfire laws). Offering disaster pay proactively helps ensure compliance and reduces the risk of legal challenges.

7. Strengthens Company Culture and Values

Catastrophe pay reflects a company’s commitment to its core values, such as compassion, fairness, and responsibility. Research shows that employees take pride in working for an organization that aligns with their personal values and genuinely cares for its people

Navigating Legal and Regulatory Considerations 

When disaster strikes, HR leaders must juggle employee support with compliance to ensure their organizations remain on solid legal ground. Understanding the legal and regulatory framework for catastrophe pay is essential to protect both your workforce and your organization. 

Federal Regulation 1: The Fair Labor Standards Act (FLSA)

This law states that: 

For Exempt Employees:

• Exempt employees must receive their full salary for any week in which they perform work, even if operations are disrupted or the business is closed.
• If the closure is less than a full workweek, exempt employees are still entitled to their full salary.
• Employers may require exempt employees to use their accrued paid leave if they are unable to work due to the disaster.

For Non-Exempt Employees:

• Employers are required to pay non-exempt employees only for hours actually worked.
• If a disaster prevents non-exempt employees from working, there’s no obligation to compensate them for unworked hours.
• Be mindful of state-specific wage laws, which may impose additional requirements, such as payment timelines or mandatory reporting pay.

Federal Regulation 2: Family and Medical Leave Act (FMLA)

The Family and Medical Leave Act (FMLA) provides eligible employees with up to 12 weeks of unpaid leave for family and medical reasons—including situations linked to natural disasters. 

Eligibility Requirements

To qualify, employees must:

• Have been employed for at least 12 months.
• Have worked at least 1,250 hours in the 12 months preceding the leave.
• Work at a location where the employer has 50 or more employees within a 75-mile radius.

Qualifying Reasons for Leave

FMLA covers employees who:

• Are unable to perform their job due to a serious health condition caused or worsened by a disaster.
• Need to care for a family member (child, spouse, or parent) with a serious health condition.

Examples:

• An employee is diagnosed with stress or anxiety resulting from a disaster, and a healthcare provider documents it as a serious health condition.
• An employee needs to care for a parent whose medical equipment stopped functioning due to a power outage caused by the disaster.

While FMLA does not cover personal disaster recovery activities (e.g., cleaning up after a flood or searching for missing relatives), offering flexible work arrangements—like extra leave or remote work—can go a long way in showing empathy and supporting employees during these times.

Developing a Catastrophe Pay Policy, Step-by-Step

Starting from scratch to develop such a policy for your organization? Here's how to write an effective policy that helps employees during their darkest hours.

Step 1: Define Eligibility Criteria

Eligibility criteria are the foundation of your catastrophe pay policy. Clear guidelines help employees understand whether they qualify for additional pay during emergencies, ensuring transparency and avoiding confusion. 

Begin by identifying which employees are considered essential to maintain operations during a disaster. Essential roles often include healthcare professionals, IT personnel ensuring system continuity, or logistics staff managing critical supply chains. It’s also important to decide whether part-time, temporary, or contract workers will qualify for catastrophe pay. Including these groups, when possible, can promote equity and boost overall morale. 

Lastly, specify which types of emergencies trigger the policy—such as hurricanes, wildfires, pandemics, or cybersecurity events—and make these scenarios explicit in your documentation.

Step 2: Establish Pay Rates

Determining how much employees will be paid during emergencies is a critical component of a catastrophe pay policy. Employees working during disasters often face heightened risks, stress, and unusual conditions, so fair and competitive pay acknowledges these challenges and motivates them to perform at their best. 

Many organizations offer a pay premium, such as 1.5x or 2x the regular hourly rate, to compensate employees for working in extraordinary circumstances. For salaried employees required to be on-site, consider offering a flat-rate bonus (e.g., $300 per week) as an alternative. 

Be sure to communicate pay rates clearly to employees ahead of time so they know exactly how their compensation will be calculated. This transparency reduces confusion and builds trust in your organization.

Step 3: Define How Hours Worked Are Tracked

Accurate time tracking during emergencies is essential to ensure employees are compensated fairly and disputes are avoided. Equip your workforce with digital time-tracking tools, such as mobile apps or cloud-based systems, which allow employees to log their hours even if they are working remotely or outside of normal conditions. 

In cases where technology is unavailable due to disaster-related disruptions, provide employees with a manual tracking process, such as logging hours on paper or submitting them through email. Managers should validate and approve these records to ensure accuracy. 

It’s also wise to establish a backup plan for reconstructing hours worked using employees’ typical schedules, in case attendance systems fail altogether. By implementing robust time-tracking measures, you demonstrate a commitment to fair pay and operational accountability.

Step 4: Calculate Overtime Pay for Emergency Work

Overtime calculations during a catastrophe can be complex, but it’s critical to get them right to comply with laws like the Fair Labor Standards Act (FLSA). 

Non-exempt employees who work more than 40 hours in a workweek must be paid overtime, which is typically calculated at 1.5x their regular hourly rate. For employees receiving catastrophe pay premiums (e.g., 1.5x their regular rate), their overtime rate must be based on this increased pay. This means overtime hours worked during emergencies should be calculated as 1.5x the catastrophe pay rate. 

Train your payroll team to handle these layered calculations accurately to avoid compliance risks or employee dissatisfaction. By ensuring that employees are properly compensated for their extended efforts, you promote fairness and reinforce their trust in your organization.

Step 5: Streamline Payroll Procedures

Timely and accurate payroll processing is vital during emergencies when employees may face added financial stress. Automating your payroll system to handle catastrophe pay rates and overtime calculations will help ensure consistency and prevent errors. Make sure your payroll software is disaster-proof, with secure backups and remote access capabilities that allow HR teams to process payments even during disruptions. 

Additionally, develop a contingency plan for payroll, such as working with a secondary payroll provider or issuing manual checks, to ensure employees are paid on time even if your primary systems are compromised. And communicate any potential payroll delays to employees promptly and provide an estimated timeline for payments. 

This proactive approach shows employees that you are prioritizing their financial wellbeing, even in challenging circumstances.

Step 6: Review and Refine Your Policy Regularly

A catastrophe pay policy is not a one-and-done effort—it requires regular review and refinement to remain effective and compliant. After each disaster, gather feedback from employees and managers about how the policy supported them and identify areas for improvement:

• Conduct post-emergency surveys or host debrief sessions to learn what worked well and what needs adjustment.

• Stay informed about updates to federal, state, and local labor laws to ensure ongoing compliance, as regulations related to emergencies can vary or evolve over time.

• Use lessons learned from past events to refine pay rates, eligibility criteria, and payroll processes, ensuring your policy continues to meet the needs of your workforce and your organization.

This iterative approach not only strengthens your policy but also signals to employees that you are invested in their long-term wellbeing.

Tips for Effectively Communicating Your New Policy

Clear and timely communication is the backbone of an effective catastrophe pay policy. Employees need to understand their eligibility, compensation, and what to expect during a disaster before it happens. A well-communicated policy builds trust, reduces confusion, and ensures everyone is on the same page when an emergency strikes. 

These four best practices will help you effectively communicate your catastrophe pay policy across various channels.

1. Employee Handbooks

Action: Include detailed information about your catastrophe pay policy in your employee handbook.

Why it’s important: Employee handbooks are the go-to resource for understanding workplace policies. By including catastrophe pay details in this document, employees always have access to a reliable reference point. Ensure that the policy is outlined in clear, straightforward language, covering eligibility criteria, pay rates, and how the policy applies during different types of emergencies. 

For added visibility, consider highlighting the policy in the handbook’s table of contents or providing a summary in an FAQ format.

2. Company Intranet

Action: Post your catastrophe pay policy and updates on the company intranet.

Why it’s important: A centralized, digital location like the company intranet ensures employees can quickly access the latest updates and policy information. Use this platform to post the full policy, key updates, and any relevant emergency resources, such as contact information for HR or payroll. 

To keep the policy top of mind, create a dedicated “Emergency Preparedness” or “Crisis Resources” section that’s easy to navigate. If you already have a notification feature on your intranet, use it to alert employees when updates are posted.

3. Email Announcements

Action: Send timely email notifications about your catastrophe pay policy before, during, and after emergencies.

Why it’s important: Email is an effective way to communicate directly with employees, especially during disasters when other forms of communication may be disrupted. Craft email messages that are clear, empathetic, and actionable. For example, before an anticipated emergency, remind employees of the policy details, including eligibility and how they’ll be compensated. 

During the emergency, send updates about payroll timelines, additional resources, or any changes to the policy. Finally, follow up after the crisis to address questions, share next steps, and gather feedback.

4. Meetings and Training Sessions

Action: Conduct meetings or training sessions to explain the policy in detail.

Why it’s important: Interactive settings like meetings and training sessions give employees the chance to ask questions, provide feedback, and fully understand how the policy works. Hold an annual training session to walk employees through the policy, including examples of how it applies in real-life scenarios. 

For managers and supervisors, provide additional training on how to implement the policy, track hours worked, and approve payroll. During these sessions, emphasize the company’s commitment to employee safety and wellbeing, reinforcing trust and alignment.

Make this kind of communication about the catastrophe pay policy a part of your regular employee engagement strategy. The more familiar employees are with the policy, the more confident they’ll feel during emergencies.

Beyond Compensation: Supporting Employees During a Crisis

Catastrophe pay is just one piece of the puzzle when it comes to supporting employees during a crisis. True support goes beyond financial compensation—it’s about meeting the holistic needs of your workforce during challenging times. Here are a few impactful ways to provide additional support:

1. Offer Flexible Work Arrangements

When a disaster strikes, flexibility can make a world of difference. Allow remote work, adjusted schedules, or additional paid time off so employees can focus on their safety and personal needs. During a hurricane, for example, offering remote work options or staggered shifts can help employees balance work responsibilities with caring for their families or evacuating safely.

2. Provide Access to Mental Health Resources

Catastrophes can take a heavy emotional toll on your team. Offering free or subsidized access to mental health resources, such as counseling, therapy apps, or employee assistance programs (EAPs), can help employees cope with stress and anxiety. This can also include subscriptions to meditation apps or circulating a list of local, in-network therapists specializing in crisis counseling. This shows employees that their mental health your a top priority.

3. Assist with Temporary Housing or Relocation

In the event of a natural disaster or widespread emergency, some employees may be displaced from their homes. Providing assistance with temporary housing, relocation stipends, or partnerships with local shelters can alleviate this stress. You can also help connect employees with temporary housing resources like Airbnb, which has partnered with disaster relief organizations to provide temporary housing for displaced employees and their families during emergencies.

By offering flexible work options, mental wellness support, and tangible aid like housing assistance, you send a powerful message: your employees are not just workers—they’re valued individuals, and their wellbeing matters to your organization.

Real-World Case Study: Starbucks COVID-19 Catastrophe Pay

The LA fires are not the first time Starbucks has offered employees catastrophe  pay. When COVID-19 disrupted businesses worldwide, Starbucks emerged as one of the first major companies to implement a robust pandemic pay program. 

While the policy has since been retired, its evolution offers valuable insights into how organizations can effectively support their employees during times of crisis. Here’s a closer look at how Starbucks approached catastrophe pay during the pandemic—and what HR leaders can take away from this case study to shape their own policies.

Phase 1: Initial Response (March 2020)

At the onset of the pandemic, Starbucks acted quickly to support its employees by introducing a new catastrophe pay program.

Key Features:

• Eligibility: The program applied to all U.S. and Canadian employees, regardless of whether they were full-time or part-time. Employees qualified for catastrophe pay if they:
  • Were diagnosed with COVID-19.
  • Were exposed to someone with COVID-19.
  • Experienced COVID-19 symptoms and needed to self-isolate.
• Benefits: Eligible employees could receive up to 14 days of paid leave to recover or self-isolate without worrying about lost income.

Key Takeaway:

• Proactive Policies Build Trust: By rolling out catastrophe pay early in the pandemic, Starbucks set the tone as an employer that prioritized employee health and wellbeing. HR leaders should consider creating policies that can be implemented swiftly in response to crises.

Phase 2: Expansion and Modifications (2020–2021)

As the pandemic evolved, Starbucks adapted its pay policies to meet the changing needs of its employees.

Additions to the Policy:

1. Service Pay: To recognize employees working in stores during the early stages of the pandemic, Starbucks temporarily offered a$3 per hour pay increase.
2. Vaccine Pay: In 2021, Starbucks introduced paid time off for employees to get vaccinated and recover from side effects.

Key Takeaway:

• Evolving Needs Require Flexible Policies: Starbucks’ decision to expand its support—from service pay to vaccine pay—demonstrates the importance of tailoring benefits to the unique demands of a specific catastrophe. For HR leaders, this is a reminder to revisit and refine policies as crises unfold.

Phase 3: Program Termination (October 2022)

In October 2022, Starbucks ended its COVID-19-specific programs, including catastrophe pay, vaccine pay, and side-effects pay.

Rationale:

• Starbucks cited the shift from pandemic to endemic as the reason for ending these temporary measures.
• While the decision marked the close of a crucial chapter, it also drew some criticism from employees and labor advocates who argued that the need for such support hadn’t entirely disappeared.

Key Takeaway:

• Transparency is Critical: The termination of a program can lead to frustration if employees feel the decision is unclear or premature. Communicating the “why” behind such decisions—and showing employees how their needs will continue to be supported—can mitigate backlash.

Criticisms and Challenges

While Starbucks’ response was largely praised, it wasn’t without its challenges:

• Ending the Program: The decision to end catastrophe pay drew criticism from some employees, especially as the pandemic continued to impact communities.
• Transparency Issues: Some employees noted a lack of clarity in how the program was applied across different locations or situations, which created confusion.

For HR leaders, these challenges underscore the importance of clear communication and equitable application of policies.

What HR Leaders Can Learn From Starbucks’ Catastrophe Pay Policy

Starbucks’ catastrophe pay program provides a roadmap for how companies can rise to the occasion during a crisis. Here are three actionable takeaways for HR leaders:

1. Develop Crisis-Ready Policies: Starbucks’ proactive rollout of catastrophe pay highlights the importance of having plans in place before disaster strikes. Create a policy framework now to ensure you’re prepared for the unexpected.
2. Prioritize Flexibility: Circumstances evolve during crises—your policies should too. Build flexibility into your catastrophe pay policies to adapt to changing needs, just like Starbucks did with service pay and vaccine pay.
3. Communicate, Communicate, Communicate: Transparency is essential at every stage, from introducing new programs to explaining why they might end. Employees are more likely to trust your decisions when they understand the reasoning behind them.

By learning from Starbucks’ example, you can craft catastrophe pay policies that not only support your workforce during challenging times but also position your organization as a people-first employer. After all, how you respond in a crisis speaks volumes about your company’s values and leadership.

Supporting Employees Everyday, No Matter What

During disasters, employees face immense stress, uncertainty, and personal challenges. While catastrophe pay acknowledges their contributions, financial support alone cannot fully address the physical, emotional, and logistical hurdles they encounter. 

Offering a holistic worker wellbeing program can help employees through acute stressors and increase resilience over time. In fact, as reported in Wellhub’s Return on Wellbeing 2024 report , 87% of HR leaders say their wellbeing program is a ‘very’ or ‘extremely’ important part of increasing employee resilience to work-related challenges.

Speak with a Wellhub Wellbeing Specialist to connect with a platform that supports your workforce’s wellbeing through every hurdle.

You May Also Like:

• The State of Work-Life Wellness 2025
• How Companies Can Handle an Unforeseen Crisis (from Bank Collapses to Pandemics)
• Five Ways to Make Employees Feel Genuinely Valued

References

• Fantozzi, J. Starbucks implements $3 pay raise for all working employees during coronavirus crisis. (2020, April 3). Nation’s Restaurant News. https://www.nrn.com/quick-service/starbucks-implements-3-pay-raise-all-working-employees-during-coronavirus-crisis
• Nowak, J. (2023, December 21). Employee leave eligibility and natural disasters. SHRM. https://www.shrm.org/topics-tools/news/benefits-compensation/employee-leave-eligibility-natural-disasters
• Picchi, A. (2022, September 19). Starbucks is ending COVID-19 sick pay for workers next month. CBS News. https://www.cbsnews.com/news/starbucks-ending-covid-pay-for-workers-october/
• Sirtori, D. (2025, January 14). Starbucks workers displaced by LA fires will get catastrophe pay. Bloomberg.com. https://www.bloomberg.com/news/articles/2025-01-14/starbucks-workers-displaced-by-la-fires-will-get-catastrophe-pay
• Wellhub. (2023, October 18). The State of Work-Life Wellness 2024. https://wellhub.com/en-us/resources/research/work-life-wellness-report-2024/