The business tradition of the year-end employee holiday bonus or gift is on the wane. Once more or less the standard, the practice of handing out a little something extra to workers is today practiced by a minority of companies.
And when times are hard, even fewer companies are likely to give year-end bonuses. One study of small businesses during a recession found that the number indicating they would give holiday bonuses fell from 42 percent at the beginning of the downturn to 35 percent the second year and 31 percent the third year.
In addition, the nature of the year-end bonuses at companies that still offer them is changing. Once a holiday bonus almost always meant a little something extra in the pay envelope. However, one survey by a human resources service firm found that today just 13 percent of employers award cash. Another 44 percent hand out food, and 37 percent give employees gift certificates redeemable at retailers.
In another shift, bonuses motivated by the spirit of giving are being replaced by those that seek to motivate employees to give their best. In short, a bonus may be handed out at the end of the year, but it’s likely to be pay for performance, not pay for fun. Even when holiday bonuses are not tied to individual performance they are likely based on an employee’s longevity, company profitability, or the achievement of other organization-wide goals.
Particularly when company profitability is down, entrepreneurs tend to wrestle with the idea of reducing or ending holiday bonuses. Certainly if the choice is paying bonuses or paying rent, ending the bonus is probably the best option. However, if a company has always or usually given bonuses and this year chooses not to, managers should put extra effort into communicating that fact and the reasons for it in advance. The warm feelings always generated by a holiday pay bump can easily turn to unhappiness when employees don’t understand why it’s not happening this year.
If an entrepreneur wants to give cash bonuses even when business is slow, the best approach is probably to wait until it’s clear how much cash the company will have on hand. Then decide how much of that cash will go into the bonus pool. Finally, divide it in as fair and unbiased a manner as possible among eligible employees.
Since a holiday bonus is in large part intended to show appreciation, it’s important to make sure it doesn’t backfire. For instance, a consistent and sensible policy should be followed when deciding who will get such a bonus and how large that bonus will be. Consider it carefully. Leaving out temporary, part-time, or new employees may actually damage morale rather than help.
If a business has always given bonuses but this year simply doesn’t have the cash, consider giving employees time off. Even unpaid time off at the holidays can be considered a welcome gift and a gesture that employees will genuinely appreciate. And it won’t cost the business a dime.