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Holiday Bonuses: To Give or Not to Give?
  • 10 December 2018
  • Tiffany C Wright

Holiday Bonuses: To Give or Not to Give?

The end of the year is fast approaching. Before the year ends, however, the holidays will be upon us. As a small business owner, if you treat your business as your home away from home or consider your employees your work family, one way to recognize their contributions to your success is to provide holiday bonuses.

Benefits of holiday bonuses

According to the American Express Small Business Open Forum, 80 percent of small business owners planned to give bonuses. In the words of Shannon Esau, director of accounts and education for Rhonda Allison Cosmeceuticals, "Holiday bonuses are a tangible way to show care and concern for employees and their families." They help increase morale and allow you to provide recognition, which increases employee engagement. Hence, bonuses can be a great incentive to get your employees to meet performance targets or to help you meet company goals.


However, for these bonuses to be true incentives, they must be tied to actual performance, not just to how long your employee has been with the company or to the fact that they simply "showed up" and did the bare minimum.

Disadvantages of bonuses

The only real disadvantages of holiday bonuses occur when business owners give sizable bonuses that are not tied to performance. In that case, one major drawback is that, if you do give a nice bonus one year, the next year the employees will likely expect it. If you do it two years in a row, they will definitely expect it the following year.

What if you do not have the profits that next year to provide a large holiday bonus? What will you do then? Not being able to provide something that is expected could lead to poor morale — the opposite of what you had wanted when you started giving bonuses!

Also, when your staff begins expecting to have a bonus, it is no longer a motivator. A good motivator is conditional, as in, "if you do this, then you get that." However, if the holiday bonus is a given, all conditions evaporate.

Performance-based bonuses or smaller gifts

The way to solve this dilemma is to only give bonuses that are tied to specific performance. If your employee does not hit their targets, he or she does not receive a bonus. If you want to provide each employee with at least something, offer $25 gift cards or gift certificates to all employees who do not make the performance cut-off. Alternatively, you could provide your employees with a turkey, ham, fruit basket or similar gift that is relevant to the holidays.

Useful alternatives to holiday bonuses

In lieu of a bonus, you could also pay out unused vacation that employees cannot or will not roll over to the new year in a separate check. The company does not actually incur additional costs, but the employees feel like they received more money.

Another option for showing appreciation is donating money to their favorite charities. If you only have a couple of employees, you can donate directly in their name. Otherwise, it may be best to offer a match up to a certain amount.

Celebrating your employees during the holiday period is a great way to build goodwill. Just remember that, if you intend to provide employees with a special gift, consider which options will result in a positive boost in morale and employee productivity for the new year ahead.

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