If you are a small business owner, you may be considering whether to give out holiday bonuses to your employees this year. The main benefit to holiday bonuses is that they are a great way to show appreciation of your team and employees who feel appreciated or more likely to be loyal. While many businesses have typically reserved bonuses for upper management positions, some businesses may be considering offering bonuses to lower-tier employees because of how hard it has become to hire workers in recent months.
Having said that, cash is not the only option for holiday bonuses and small businesses may be looking for alternatives this year, depending on how the pandemic has affected their business. It isn’t realistic to give out cash bonuses if the company’s current operational realities don’t support them. On the other hand, some businesses surged during the pandemic and bonuses should be calculated with this sales increase in mind.
It’s the Time of Year for Small Businesses to Consider Holiday Bonuses
According to the Bureau of Labor statistics, in 2018, 38% of private sector employees received holiday bonuses not related to production, such as Christmas, end-of-year, or profit-sharing bonuses. The types and amounts of bonuses can vary dramatically from company to company and from one job to another within an organization, though the average cash bonus is between $100 and $500.
Different ways to allocate cash holiday bonuses:
- Flat, equal amount among all employees.
- A percentage of employee salary, such as one week of salary.
- Flat amount for each position within the company.
- “Hero pay” bonuses for front-line workers, which have become somewhat common during the pandemic.
Different options for holiday bonuses:
Most businesses choose one or more of the following types of holiday bonuses:
Cash bonuses are a popular option when it comes to holiday bonuses. This option gives employees the flexibility to spend the extra money how they see fit.
HR tip: any cash you give to employees as a Christmas or holiday bonus counts as earnings. Make sure to add the value to your employee’s other earnings for the year.
An indirect way of offering money as a bonus is to give your employees gift cards to local or national businesses or grocery stores.
Non-cash gifts may include additional time off, flexible hours, work from home (WFH) options during the holidays, or even a special holiday party or trip. These gifts are sometimes offered in addition to other bonuses.
Some businesses offer performance-based bonuses, sometimes in addition to non-performance-based bonuses. These bonuses are often paid out after an employee reaches specific sales goals or other goals set by the company.
Small business tips for giving holiday bonuses
- Tie bonuses to that year’s earnings and profits; explain how employees can help you meet your sales goals at the beginning of the year.
- If you can’t afford cash bonuses this year, but have offered them in the past; let employees know as early in the year as possible and consider non-cash options such as extra Paid Time Off (PTO).
- Distribute bonuses in a consistent manner; bonuses should be fair and equitable and distributed without bias or favoritism.
- Include all workers in the holiday bonus program; excluding lower-tier employees is a great way to build resentment and increase employee turnover.
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