Why Christmas Bonuses DON’T Matter

Is a Christmas bonus a good practice for small business owners?

gift-553149_1280Recent studies by Hewitt Associates and Bank of America show only about 40-50% of companies were planning on paying out a Christmas bonus. They found most companies found it more beneficial to use financial incentives based on performance, which typically outweigh any income paid as a holiday “gift”.

Christmas bonuses seem to not be based on performance, and therefore become expected. They become a tradition rather than a win-win to the employee-employer relationship. When sales are down, the employees will still hold an expectation of a bonus, which, given the economic effect to the business, just makes the small business owner feel a bit like Scrooge. Remember Clark Griswold in Christmas Vacation? He had an expectation of a Christmas bonus, and that expectation wasn’t met. This created a great, tragic, and hilarious storyline, but is this really what we want for our employees?

Instead of Christmas bonuses, some companies choose to offer other special things like end of year recognitions, thank you gifts and acknowledgements for a variety of more performance based criteria. They give employees a paid lunch, gift cards, a paid half day off or other increased employee benefits. Also, in regards to gifts, more personalized gifts are the trend- for example, not giving a non-drinker a bottle of wine or a vegetarian a frozen turkey breast.

Overall, as a small business owner, you need to find a giving plan that is sustainable for you. This can be performance based giving, increased benefits given, or a flat fee or percentage of salary given. It is important as well, the giving not be discriminatory. Giving something to all employees in a fair way, even writing out how and why you paid the Christmas bonuses is highly recommended.

Finally, don’t use Christmas bonuses to retain staff. We have found this to be ineffective because people make stick around just to receive the bonus, and then leave anyway. Our suggestion: give a gift card and call it good!

If you have questions about Christmas bonuses or other small business matters, contact Clear Path Accountants.

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