The Business of Holidays – To Bonus or Not

Lmoney_gift_322ong, long ago, in a fiscally confident time, employers would share the company good fortune and offer their employees Holiday Bonuses.  However, given the economy, what will employers do this year?  Can they afford to give Holiday Bonuses?  Is it even a good idea?  Why exactly do some companies continue to give, or even contemplate giving, these year-end Bonuses?

It is probably a fair assumption that employees know only too well not to count on getting a Holiday Bonus this year.  But what are employers thinking?   And, what should employers be thinking?

The fact is that Holiday Bonuses are not always the most motivating.  If you give a bonus out of obligation, employees will know it. I once worked for a company that gave turkeys each year for no other reason than that was what had been done for the last 50 years.  Unfortunately, not everyone wanted a turkey, hence, the Bonus was not well received.  Given the cost of turkeys, employee feedback begged the question:  are turkeys a good return on investment?

Giving Holiday Bonuses doesn’t sound like it should be a difficult process, but a lot of companies get it wrong.  In reality the Holiday Bonus, if part of your overall employee program, is one perk that should be handled very carefully and with some extra thought.  If you’re going to give a bonus, think through the whole process.

Industry at large is strapped for cash.  Bonuses that are small can be appreciated, or at least, understood for what they are.  Employees can feel grateful for even the most modest of bonuses.  Having said this, if you’re going to give your employees an inexpensive bonus, there’s a good argument for being clever and thoughtful about it.

By putting some thought into a Holiday Bonus, you can avoid a lot of problems. Don’t give anything too personal, anything that contradicts the receiver’s value system (such as giving alcohol to a non-drinker), or anything that could be misinterpreted (for instance, giving female employees beauty kits and male employees jumper cables, thereby reinforcing stereotypes).  Most importantly, should your company provide a year-end bonus, be fair about it. You may like one employee better than another, but don’t give $10 to one and $200 to another.

But do employers even have to give a bonus?  And, what about non-monetary bonuses?

The fact is that many companies stopped their Holiday Bonus programs in the early 2000s.  Besides the obvious economic rationale for discontinuing Holiday Bonus programs, other reasons employers ended bonus programs include switching to performance-related compensation plans, rising corporate sensitivity to workplace diversity, and serious issues of entitlement that arise when providing an obligatory bonus.

Still some employers see the Holiday Bonus as a company’s chance to say thank you and to offer their employees something extra along with their December paycheque. Their experience is that Holiday Bonuses do positively impact morale and company loyalty.

One of the biggest fallacies of the Holiday Bonus is the method by which the bonus isn determined:  the senior management team sequestered and sitting around the proverbial boardroom table.  They look at how much money they have at their disposal and try to match the bonus to the fiscal reality.  What is missing in this approach?  The employees’ voice and preference!

The need for companies to be transparent about their financial standing is a whole other article.  Having said this, sharing the fiscal realities and how these relate to the Holiday Bonus is imperative.  Hence, building an employee team to help match the fiscal reality to the Holiday Bonus is just good common sense.  An employee team can be considered to represent the voice of the employee body.  Better yet, have that employee team conduct and interpret a quick survey of employees and their preferences is a best practice!

Whether the Holiday Bonus will be more of a symbolic gesture this year or something significant, employees know best what will create that elusive motivation and loyalty!  Employees might well prefer a half-day off with pay of their choosing than a gift certificate.  They might prefer a personalized and framed letter from the company President, acknowledging their contributions, over a pen and pencil set.  They might prefer a well thought-out, no-cost-to-the-employer Employee Discount Program over a basket of fruit.  Or, employees might prefer a holiday party, with good food and time away from the office with friends and new friends rather than the obligatory turkey.

To bonus or not to bonus is the question.  Well thought-out bonuses might very well increase employee motivation and loyalty.  There are creative ways to give your employees bonuses that don’t necessarily need to break the bank.  Involving employees, educating them about the financial realities and tasking them with advising what the best Holiday Bonus is might well be the best practice of the year.

Tanya Sieliakus, CHRP

VP, Consulting Services

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