5 Tips for Giving Holiday Bonuses

‘Tis the season for holiday bonuses!

Maybe your organization can’t afford to distribute $100,000 holiday bonuses like Hilcorp, but it’s still a great time of year to let your employees know how much you value their hard work (and how much you’d like for them to stay, particularly in a competitive War for Talent economy). But, there is a fine line; an initiative that is meant to foster goodwill can quickly turn into an insult if not navigated carefully.

Read on to learn about holiday bonuses, and five ways to present them to your workers in the right way.

What is a Holiday Bonus?

Holiday bonuses range from small gifts – cash, bottles of wine – to one months salary. The amount is usually dictated by the organization's traditional practices in previous years, or by the growth of the company throughout the year.

A holiday bonus is typically independent of an end-of-year bonus. An end-of-year bonus typically involves a “profit share,” where a portion of the company’s profits are set aside and then distributed evenly throughout the staff. In order to avoid confusion, many companies dole out the holiday bonus in late December and the end-of-year bonus in January of the following year.

1) Be Aware of Financial Limitations 

Holiday bonuses are nice, but what if your company cannot afford to give one?

• If your company has given holiday bonuses in previous years, but will be unable to this year, try to let employees know as soon as possible. Many employees count on that bonus check and may factor it into their holiday shopping budget.
• In some instances, companies that struggle financially may find other ways to reward their employees with non-cash bonuses like more paid time off, bottles of wine, gift cards, a small holiday party, or internal product discounts. If you can manage, include a nice, handwritten note; this type of personalized “thank you” can pay off in a big way!
• Be careful, though, and don’t be a Grinch. If employees witnessed company growth this year and are presented with a paltry bonus, this can lead to resentment and potential flight risk!

2) Be Consistent in Distribution 

There are two schools of thought on holiday bonus distribution. It is up to your organization to decide which makes the most sense:

• Keep it Equitable: When determining bonus amounts, think "fair and equitable distribution,” to ensure no worker feels unfairly shortchanged. In many cases, companies distribute a flat holiday bonus: spread around in equal amounts to all employees given out uniformly and on an unbiased basis. In a similar vein, the salary percentage bonus ensures each employee receives about 2% of their annual salary. This typically works out to about 4 weeks’ pay and is therefore sometimes referred to as a “13^th month salary.” With this bonus, everyone has a clear idea of why they received their amount. (However, if an employee sitting beside them receives more, it may elicit a larger conversation about salary discrepancies.)
• Reward Top Performers: If all workers earn the same holiday bonus amount, what does that say to the top performer who puts in extra hours and great effort? Is it fair for that person to receive the same bonus as a poor performer who is on the brink of being let go? If you want to retain top performers, make them feel valued with a performance-based bonus, even if that means dividing the pool of money inequitably among all employees. In some cases, the performance bonuses are done as a percentage, anywhere between 1 and 5% depending on the employee’s review. So, if an employee gets a 5 on their review, they would get a 5% bonus, and so on.

Regardless of which method your company chooses, it is imperative to make sure your company is consistent with a strategy each year. If your holiday bonuses were performance-based last year, they should follow that same trend this year.

3) Be Inclusive

Whether you choose to assign performance-based bonuses, or evenly split the pool among workers, all employees should be included. Don’t let your four-month intern, part-time, contract, or temp worker feel left out just because they aren’t full-time salaried employees. If you end up wanting to hire them down the road, they may be less inclined to join your company based on this unfair treatment.

4) Be Better

Giving out the same bonus amount year after year, particularly if the company has experienced growth, can feel insulting to workers. Do your best to continue to raise the bonus amount each year for workers; it’s an easy way for them to feel more valued.

5) Be Transparent

Harness the power of pay transparency by holding a company meeting (ideally in early December), explaining your company’s holiday bonus methodology. Don’t forget to verbally thank your employees for all of their hard work this year.