Small Business Guide to Holiday Bonuses

November 20, 2018

This time of year, nothing spreads cheer around the office like holiday bonuses. It's important to carefully consider what your business can afford and how bonuses can impact employee morale.

Adequately Communicate with Employees

First, carefully review your budget and avoid giving more than you can truly afford. Consider not only what you can afford now but what will be sustainable over a long period. No matter what you decide, it's important to communicate with your employees so they understand the structure of your bonus program.  

Some businesses prefer to pay out year-end bonuses based on employee performance. If this is the case, it's important to make sure employees have a clear understanding of how performance impacts their bonus. Other businesses pay a percentage of the employee’s salary or are based on the number of years the employee has been with the company. Make sure employees understand the bonuses structure and that their bonus is considered compensation, which is subject to taxes and withholdings.  

Consistent Bonus Structure

It's important to establish a consistent and sustainable bonus structure. Fluctuating bonuses create anxiety and uncertainty about the business. Give employees ample notice if your bonus structure changes or is eliminated, many employees come to rely on bonuses and waiting until the last minute to let them know of a change will only increase their disappointment.  

Not all businesses can afford to pay out holiday bonuses. There are other ways to spread holiday cheer. You could offer additional paid time off, even a few extra hours or a half-day around the holidays can mean a lot to employees.

Providing food for your staff or organizing an office potluck is another alternative. You could offer gifts like movie tickets and gift certificates to local restaurants. Whatever you decide make sure to give your employees a heartfelt and personal thank you for all of their hard work throughout the year.