It’s that time of year again, with holiday music, winter wonderlands, and the age-old dilemma of what to do about holiday bonuses. When it comes to team holiday gifts, cash bonuses can be a real crowd-pleaser, but there’s more to it than just handing out envelopes. How much is enough? Should it be performance-based, or is a flat amount fairer? What about employees who’ve been with the company for a short time? These are all things to consider when deciding how to spread the cheer.
The team at Giftpack knows a thing or two when it comes to spreading cheer. Their company branded swag is a great way to show appreciation for your employees’ hard work. Cash is king, but a thoughtful, personalized gift can go a long way toward making your team feel valued.
What is a Holiday Bonus?
A holiday bonus is a gift given to an employee during the holiday season. While holiday bonuses can take many forms, including:
• Physical gifts
• Gift cards
• Extra days off
The Nature of a Cash Bonus
A cash bonus is an extra compensation above and beyond what a worker normally pays. Often, the value of the bonus is a percentage of an employee’s annual pay. In that case, higher-paid employees would receive a larger bonus. Other companies award a flat amount to each employee.
Timing and Frequency of Bonus Distribution
Some companies pay out a holiday bonus only after a particularly successful year, while others offer them yearly, although the amount may differ based on the company’s profits. Either way, you’ll want to set expectations.
Setting Expectations and Communication
It’s a good idea to explain how the program works in the employee handbook and include what employees can expect to receive, how it will be calculated, and conditions under which a bonus may not be given. If you plan to discontinue bonuses, let employees know well in advance.
How Do Holiday Bonuses Work?
Holiday bonuses are a seasonal gift from employers, often arriving in late December. These are typically outlined in employment contracts, right alongside your salary. Companies have different methods for delivering these bonuses. Some prefer individual checks, while others add them to your standard paycheck or issue pretaxed gift cards.
How Much Do You Get?
Last year's average cash bonus was $2,145, which marked a 21% drop from the previous cycle. The amount you get can vary significantly based on company policy.
Different Bonus Types
• Salary Percentage: Some companies link your bonus to a percentage of your salary, usually between 2 and 5 percent.
• Flat Bonus Amount: Others stick to a fixed sum, like $50 or $100.
• Business Performance-Based Bonuses: Some companies adjust bonuses based on how well the organization did that year.
• Employee Performance-Based Bonuses: Others consider your tenure with the company or your annual performance.
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Why Do Companies Give Out Holiday Bonuses?
Handing out holiday bonuses isn't just a nice gesture; it’s a strategic move that can benefit both employees and the company. The most obvious advantage is improved morale. A financial thank-you at the end of the year shows your team you appreciate their hard work. This recognition can lead to higher job satisfaction and loyalty, which is good for everyone involved.
Boosting Employee Happiness and Productivity Through Holiday Bonuses
When employees feel valued, they’re happier. Happy employees are more productive. They’re motivated to help the company reach its goals. A holiday bonus can improve their happiness levels and keep them focused on the job.
Easing Financial Stress for Employees During the Holiday Season
The end of the year is expensive for many people. There are gifts to buy and trips to plan. A bonus can ease the financial burden and show that you care about your employees’ well-being. It’s a simple way to reduce stress and make the holidays more enjoyable.
Using Performance-Based Holiday Bonuses to Drive Motivation
Holiday bonuses can also motivate employees. Tying bonuses to yearly performance or goals can motivate your team to work harder throughout the year, leading to increased productivity and better company results.
Reducing Employee Burnout and Turnover with Holiday Rewards
Rewarding employees with bonuses can decrease burnout. When people feel appreciated, they’re more likely to stick around. This can reduce costly turnover and keep your company running smoothly.
7 Different Ways Companies Give Holiday Bonuses
1. Monetary Bonuses: The Classic Holiday Reward
Monetary bonuses are a staple in many companies' holiday offerings. Often given as a separate check or included in regular pay, these bonuses can vary based on performance, tenure, or company profits. They might be a percentage of the salary or a flat amount. These bonuses are subject to taxes, and companies must ensure they align with IRS regulations.
2. Additional Time Off Time as a Gift
Some companies grant extra days off during the holiday season. This might mean additional paid vacation days or letting employees leave work early. Extra time off is a great way to let employees recharge and spend quality time with loved ones.
3. Holiday Parties: Celebration and Camaraderie
Holiday parties are a fun way for companies to celebrate the season with their teams. These events can be as simple as an office potluck or as extravagant as a formal gala. Parties allow employees to relax, enjoy good food and entertainment, and connect with colleagues in a festive setting.
4. Gifts: Thoughtful Tokens of Appreciation
Companies may choose to give employees tangible gifts instead of or alongside a monetary bonus. These can include:
• Shopping vouchers
• Employee reward baskets
• Food hampers
• Tickets to events
Like sporting games or theme parks, gifts add a personal touch and are often chosen to reflect the company’s employee appreciation. People love receiving personalized gifts because they make them feel valued and recognized for their impact. As early as more than 10 years ago, Harvard Business Review emphasized the importance of individual recognition when showing gratitude.
Corporate gift-giving, particularly from the employee perspective, is a thoughtful gesture that reflects an organization's appreciation for its team members. The IRS considers small non-monetary bonuses, like holiday gift baskets, to be de minimis fringe benefits, meaning their value is so small they are not worth taxing. If you know awarding a monetary bonus to all your employees might not be feasible due to taxes, consider offering something small like a company swag gift instead.
5. Shopping Vouchers or Gift Cards: Flexibility and Choice
Shopping vouchers and gift cards allow employees to choose what they want or need during the holiday season. Companies that want to offer a specific gift while still providing some level of choice often favor them.
6. Employee Rewards or Recognition Programs: Honoring Achievements
Some companies use the holiday season to reward employees through recognition programs. These can include performance-based awards, certificates of achievement, or special mentions at holiday gatherings.
7. Donations in Employees’ Names: Giving Back
Companies may make charitable donations in their employees' names as a thoughtful holiday bonus. This reflects a company's commitment to social responsibility while honoring its team members' values.
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How are Holiday Bonuses Determined?
Company Performance: The Financial Backbone
How much did the company make this year? The answer to this question can determine how holiday bonuses are calculated. A profitable year can mean a more generous bonus, but remember: this is often a one-time increase.
Bonuses might be reduced if the company doesn't meet its financial goals. In these cases, businesses typically let employees know in advance so they can plan accordingly. To make up for smaller bonuses, companies might offer extra time off or special privileges at work.
What Are They Doing? Taking Cues from Competitors
Companies often look at how similar businesses are handling holiday bonuses. If competitors offer big bonuses, a company might feel compelled to do the same to stay competitive. By studying the strategies of similar companies, a business can get a better sense of what it can afford to offer its employees. This research can help decide the level and type of bonuses.
Year-Long Recognition: More Than Just a December Thing
Some companies prefer to spread their holiday appreciation throughout the year. Rather than giving a big bonus at the end of the year, they might hold:
• Events
• Awards
• Activities
To show appreciation all year long. This encourages a culture of recognition and appreciation that isn’t confined to just one time of year.
Are Holiday Bonuses Taxed?
Getting a holiday bonus feels great, but remember, the IRS wants a piece of the pie. Bonuses are taxable, so Uncle Sam treats them like your regular paycheck. Here's how it breaks down:
Social Security taxes bite off 6.2% if you make under $147,200 annually. Medicare? That takes 1.45% off the top. Your state might want a cut, so check your local tax rules. Federally, bonuses get a flat 22% tax rate. And if you’re putting money into a retirement plan, expect that to come out of your bonus, too. Hostile workforce? Maybe just make it cash.
How are Holiday Bonuses Paid Out?
Holiday bonuses come in different forms. Companies choose to give a monetary bonus. This can be a separate check or part of your regular paycheck. These bonuses are taxable. Businesses need to follow IRS rules to avoid any surprises later. Companies work with payroll services or accountants to get this right.
Industry-Specific Approaches to Employee Bonuses
Gift cards or certificates are another option. They can feel more personal but are also taxable, like cash bonuses. The way bonuses are paid can vary by industry. In fields like finance, bonuses are often linked to performance. They can differ a lot between employees, even on the same team.
How Holiday Bonuses Reflect Company Culture and Values
Other businesses might give the same amount to everyone at a certain level, regardless of how they performed. Bonus sizes also vary. They can be small tokens like $25 gift cards or large sums that might exceed an employee's regular salary.
This is more common in industries with highly paid professionals, such as executives and finance experts. A company’s approach to holiday bonuses can say a lot about its culture and how it values employee recognition.
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6 Best Tips For Giving Holiday Bonuses?
1. Can You Afford to Give a Bonus?
Assess your financial health. Take a hard look at your current finances. Do you have the cash on hand and cash flow to give a bonus this year comfortably? You need to be sure you can give your employees a holiday bonus and still cover your rent, loans, and other expenses in January and February, even if some clients need to pay you or you lose a big customer. Don’t jeopardize your future stability for a short-term goodwill gesture.
2. Set Clear Expectations with Your Team
Communication is crucial. If your company has offered holiday bonuses in the past but cannot do so next year, let employees know as soon as possible. Many employees rely on that bonus and factor it into their household budget as part of their yearly earnings. The earlier you inform them, the better they can adjust their financial plans. Avoid surprises that could lead to disappointment or resentment.
3. Fairness Above All: Be Equitable
Be consistent and unbiased when choosing bonus amounts. A fair and equitable approach ensures bonuses are given out uniformly. If possible, include all workers.
Recognize every worker in some way during the holiday season. Take the example of a temp worker who had been working at a company for four months but didn’t receive a bonus, while an employee hired a week before did get one. This kind of oversight can damage morale and breed resentment.
4. Explore Alternatives to Monetary Bonuses
If cash is tight, consider other ways to show appreciation. You could offer extra paid time off around the holidays or a thoughtful gift. The gesture doesn’t have to be extravagant; it just needs to show that you value your team. Explore creative alternatives that fit your financial situation and make your employees feel appreciated.
5. Transparency is Key: Explain the Process
Ensure everyone understands how the bonus program works. Clear communication helps set expectations and avoid misunderstandings. Detail the bonus program in the employee handbook, including how it is calculated, what employees can expect when they receive it, and any conditions under which bonuses won’t be offered. Transparency builds trust and decreases the likelihood of misunderstandings.
6. Give Ample Notice Before Eliminating Bonuses
Bonuses can be incredible morale boosters. If you must eliminate them, give employees plenty of notice. They may be counting on the bonus and will react with disappointment and resentment if it suddenly disappears.
Communicate openly and honestly about the reasons behind the change and offer support if needed. A well-handled announcement can help ease the transition and maintain morale.
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FAQs on Holiday Bonuses
Do Most Companies Give Employees Holiday Bonuses?
Holiday bonuses seem like a common tradition, but not all companies are on board. According to the Bureau of Labor Statistics, only 14% of employees in smaller companies with fewer than 100 employees received a year-end bonus, and just 9% got a holiday bonus.
For larger companies, the numbers drop even further to 8% and 3%, respectively. While many employees hope for that extra holiday cash, it’s far from guaranteed.
Do Companies Give the Same Bonuses Every Year?
The bonus you received last year might be different this year. Companies often adjust their bonus offerings based on how the year went financially. You might see lavish parties, fancy gifts, and generous cash bonuses in good times. But those perks can disappear when profits dip unless contractual obligations say otherwise. It’s all about the company’s bottom line.
How Is a Bonus Different from a Commission?
Bonuses and commissions might sound similar, but they differ. A commission is directly tied to a sales goal. Sell more, earn more. Simple. Conversely, bonuses can be linked to job performance but don’t always scale with production. You might get a bonus for doing a great job, but it doesn’t necessarily mean you’ll earn more for exceeding expectations, unlike a commission.
How Many Businesses Offer Holiday Bonuses?
The decision to give holiday bonuses varies widely. A 2020 Bureau of Labor Statistics survey shows that smaller companies are likelier to give holiday bonuses than larger ones. In companies with fewer than 100 employees, 9% of workers received a holiday bonus. But in larger companies, only 3% got one. Each company sets its policies, so it’s a bit of a mixed bag.
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