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What to Consider When Giving a Holiday Bonus

December 22nd, 2011

Holiday bonuses can go a long way to making employees happy, but they should be about more than compensation. They should be about appreciation.

Big holiday bonuses are a longtime tradition for some industries, and the National Labor Relations Board has allowed unionized workers to make holiday bonuses a contractual obligation. But small businesses operate in a different realm, where owners need to use personal discretion to set a precedent for holiday extras.

In a survey last December, Challenger, Gray & Christmas, an outplacement consulting firm, found that 64 percent of employers planned to give holiday bonuses, up from 54 percent in 2008, when most industries were strained by a bad economy. Greater economic conditions certainly play into whether to give a holiday bonus, but it’s always good form to show employees appreciation for a successful year.

How to Structure a Holiday Bonus: Decide its Purpose

What role will a holiday bonus play in your overall, yearlong pay scheme? Is it a substitute for a year-end bonus? Is it a substantial contribution to annual pay? Or is it a token of holiday spirit?

If you already pay a year-end bonus, a holiday bonus can be more a gift of appreciation than part of your employees’ annual pay and benefits package. If the company had a good year and your employees all worked hard, make a statement of gratitude by presenting them with a nice gift.

How to Structure a Holiday Bonus: Budgeting the Bonus

Holiday bonuses meant as tokens of appreciation shouldn’t be part of a business plan. Just look at revenue from the first 10 months of the year to decide how to approach bonuses each holiday season. But use generosity in moderation, because being too generous in a good year could make for an embarrassing downgrade in a bad year.

How to Structure a Holiday Bonus: Cash versus Gift

If a holiday bonus isn’t an established part of annual pay, a gift is just as meaningful as a little cash — sometimes more so if the cash gift is going to be small. If you give someone a really small amount, they might be insulted. But give them a good bottle of wine and something that costs $10, along with a nice note, it’s an expression of thanks and of holiday spirit and cheer.

So as you decide how to handle the holidays, keep in mind that whether it’s cash or wine, to employees, it’s your appreciation for their service that counts.