The Christmas bonus: a small business owner’s guide

Compensation & Benefits Christmas bonus

As the office continues to evolve to reflect the ever-changing modern workforce, holiday bonuses can be a hot button issue. Startups often forgo cash bonuses altogether while they’re finding financial stability, while more traditional companies have ingrained them into their system to the point that they’re considered part of an employee’s annual compensation. Without getting too deep into the trends of the changing workplace, the facts are clear: bonuses keep workers happy and improve employee retention. And, they don’t have to bankrupt you.

It’s difficult to get into averages and norms when it comes to the Christmas bonus. Every company is unique, and when it comes to small businesses, there are wildly different approaches to employee engagement, compensation, and perks. But there are a few types of bonuses that can help you to choose the right option for your company.

One important thing to keep in mind throughout this entire process is that communication is key. Whatever system you choose, be prepared to answer to your employees. You’ll need to field questions like why you went with that amount, why so-and-so got more, and so on, so be ready with clear, honest answers. Implementing a fair system ensures that all employees feel appreciated – the point of the Christmas bonus in the first place.

Here’s a run-down of the different types of holiday bonuses:

The flat amount

With this type of Christmas bonus, the same amount goes to everyone. This is a great option to ensure comradery among your employees, and to make a clear differentiation between this holiday token of appreciation and anything to do with salary or performance. When selecting an amount, remember that you’re setting a benchmark for the coming years. Whatever you give this year will need to be increased next year – if not, your employees will want a good reason why it didn’t.

The salary percentage

Another option that usually keeps things civil between staff is a bonus based on salary – in this option, everyone receives 1.5 per cent, for example, of their annual salary. This often works out to two or even four weeks’ pay, which is why it’s sometimes referred to as the 13th month pay. Like a flat Christmas bonus, this type ensures that everyone has a clear idea of why they received their amount, and why the employee sitting beside them may have received more (though it might elicit a larger conversation about salary discrepancies).

The performance-based bonus

A Christmas bonus based on your performance review is tricky, but the broader message is good: all staff should be helping the company meet its goals and objectives. However, with performance reviews increasingly panned as an ineffective productivity tool, aligning your holiday bonus with them might be problematic. A better option might be to base it on ongoing feedback throughout the year – the amount of thumbs ups (or gold stars, or high fives, etc.) that an employee gets impacts the size of their holiday bonus.

The profit share

This is a combination of the above: a portion of the company’s profits are set aside and then distributed evenly throughout the staff. In a way, it combines the best of both worlds: it keeps things fair and equal, but it also encourages employees to feel like a stakeholder in the company’s success. An important consideration in this type of bonus is, again, communication: it might not always be clear to employees how the company is doing at the top level. If profits – and, in turn, bonuses – are going to decrease from one year to the next, be sure to tell your staff as early as possible. If this happens, be prepared for a hit to morale – tie the message in with some team-building activities, or a productivity-boosting event to keep employees engaged and geared up to improve profits in the coming year.

The recognition bonus (a.k.a. the alternative to cash)

If the budget for bonuses is low, an employee gift is a good option. A gift certificate, movie tickets, a magazine subscription, or even a bottle of wine can be a nice gesture – plus, it will likely be more appreciated than the cash equivalent (the average price of such gifts is less than $100, according to this survey). If you can, include a handwritten note – the time-investment will pay off. In terms of other alternatives to cash for the Christmas bonus, consider giving staff extra paid time off, or implementing flexible hours over the holidays.

No matter what type of bonus you choose to use, the goal is the same: employee appreciation. Using the holidays as an excuse to make your employees feel valued – whether with cash or otherwise – will inevitably pay off throughout the year.

See also:
9 unique employee perks to attract talent
Employee motivation strategies that don’t work

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