Small Business Owner’s Guide to the Holiday Bonus

Is your company giving out holiday bonuses in 2020? Get tips on what holiday bonuses and gifts are common, what other businesses are doing, and how to avoid causing bad feelings among your employees.

Holiday bonuses have long been a way for employers to show appreciation for their employees. On the receiving end, while employees like being appreciated, they like cash even better. If the company has paid cash benefits in the past, employees may be expecting and counting on that Christmas bonus to help defray holiday expenses or pay other bills.

But what kind of holiday bonus will businesses be giving in 2020 when the pandemic has upended the day-to-day operations and the sales of so many businesses?

The answer this year is likely to have less to do with employers’ generosity and their appreciation of their staff than it does with the company’s bottom line and operational realities. The size of the business and how sales have declined, or in some cases, grown during the pandemic will have much to do with how small businesses calculate this year’s bonuses.

Related: Small Business Owner’s Guide to Holiday Tipping

Holiday Bonuses This Year

To gain insight into what small businesses were doing this year, Business Know-How included two questions about bonuses on our September 2020 pandemic impact survey. Of those who responded to the bonus questions, only 41.6% indicated they were giving a holiday bonus this year.  A few of those respondents appended comments such as “If I can afford it.” to their answers.

This percent was slightly lower than 2019 survey results, which indicated 42.8%  of businesses that took our survey were giving cash bonuses. 

What’s the Average Holiday Bonus Amount?

Question 25 different small businesses and  about their bonus practices and you’ll most likely find 25 different company policies on holiday bonus giving.  But when we asked our survey respondents who indicated the nature of the bonuses they were giving this year, some patterns emerged. 

Of the people who responded to that question, 79% said they were giving a flat-rate cash amount to employees. Those amounts varied from a low of $20 in one case to a high of $10,000, but nearly half of those responses indicated the amount would be between $100 and $500.  Others were planning to give some percentage of salary, with 1 week salary being the most common weekly amount. Some were still undecided about the form and amount of the bonus, and some gave amounts that varied from one employee to another based on position in the company or performance. 

What Are Bigger Businesses Doing This Year?

According to a survey of large and midsized US employers conducted in September by Willis Towers Watson Data Services, 66% of employers say they will give bonuses this year, with executives and management level employees being the most likely to receive them. Twenty-six percent of respondents had been unsure if they’d give bonuses, and 8% said they wouldn’t be giving bonuses.

Some big box stores, because of the need to keep stores opened, shelves stocked and the lines at cash registers moving, have given employees “hero pay” bonuses during the year. Both Target and Lowes announced plans in October 2020 to give employees bonuses this Fall. While these might not technically be holiday bonuses, they come near holiday time. Such bonuses could make it harder for small local retailers who are still open to hire and retain their employees if they can’t afford bonuses or salary increases.

What Kind of Bonus Should Your Company Give?

Based on our findings and research, most businesses choose one, or sometimes more than one of these options:

Cash Bonuses

Extra cash during the holidays is welcomed by almost all employees. And for good reason. Most have extra expenses during the holidays. In some small businesses the cash bonus is a flat amount paid out to all employees. In others, it’s equal to a percentage of salary, or based on how profitable the business was in the year.

Performance-based bonuses

Some companies give performance-based bonuses instead of, or in addition to holiday bonuses. In these pay-for-performance programs, employers tie bonuses to how employees meet or exceed sales or other goals during the year, and therefore how they’ve helped meet the company’s goals and objectives. Performance bonuses often aren’t distributed until the beginning of the New Year.

Non-Cash Gifts

Many small businesses give their employees a non-cash gift, either in lieu of a cash bonus or in addition to a cash bonus.  Other offer special perks such as flexible hours during the holidays or extra time off.

Related: 5 Simple Things That Will Make Your Employees Happier

Tips for Giving Holiday Bonuses

First, can you afford to give a bonus? During a 25-year span, one employer changed their yearly bonus offerings depending on each year’s earnings and profits. During lucrative years, employees enjoyed lavish holiday parties with high-priced raffle prizes and generous cash bonuses. In lean times, there were no cash bonuses, no party and no prizes.

If your company has without fail given holiday bonuses for a good number of years, but will be unable to the next, try to let employees know as early in the year as possible. Many employees count on that bonus check and factor it into their household budget as part of their yearly earnings.

Related: Keep Employees Focused During the Holiday Season

Choose bonus amounts carefully and fairly. When determining bonus amounts, think “fair and equitable distribution.” In other words, bonuses should be consistent, given out uniformly and on an unbiased basis. Care should be taken that no worker feels unfairly shortchanged.

Include all workers. If at all possible, be sure that everyone working at your place of employment is recognized in some way during the holiday season. One four-month-long temp worker was crestfallen when the week-long employee in the cubicle next to hers received a bonus and she didn’t. 

Give the gift of time. If your company can’t afford to give cash or gift bonuses this year, consider giving the gift of time — paid time off, that is. Time off with family and friends is something that virtually everyone could use more of. Employees will appreciate an extra day off or two to relax during the year-end holidays after all their hard work during the work year.

Finally, keep in mind this comment from one of the employers who responded to our survey:

If you take care of the people that take care of you throughout the year, you only stand to benefit as people do much more when they are appreciated and tend to remain loyal.

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