Staff Christmas Bonus – Yes or No?
This is the time of the year when employers ask of themselves, “Am I going to give my employees a Christmas Bonus”? Many employers have a practice of paying Christmas bonuses – partly as a reward to staff for their contribution to the success of the business during the previous year, and partly to mark the festive season itself. Christmas bonuses, by their nature, typically differ from performance–related bonuses, which employees may be entitled to earn during the year (although, obviously, if there is actually a performance component to a Christmas bonus, employers need to ensure that the performance criteria or KPIs they are employing are clear and fair).
Many times Christmas bonuses are based on how the employer feels. In cases where employers pay a Christmas Bonus selectively or based on feeling, the road can be difficult. A Christmas Bonus that is selective can give rise to disgruntled staff and dissatisfaction in the workplace. This is especially the case when staff do not understand how the amount was derived, or if the amount is very different from the year before, and/or if it is not the same amount across the board, employees might start thinking that the employer is playing favourites.
NOTE: If your company’s fiscal year end is December 31st, you may consider a bonus or profit sharing based on the company’s performance. Paying this at Christmas time is different than a Christmas Bonus based on feelings.
If you are paying a Christmas Bonus to your staff, I would challenge you with these questions:
- Why are you giving bonuses at Christmas time?
- What is the bonus based on?
- Is it discretionary, i.e. based on how you feel? Or based on a plan?
- How much should be given? Does everyone get the same amount?
- Do your existing employees expect to receive something this year?
- What will happen if I do not give a bonus because the company did not make a profit?
I have been an employee in the past and have received a Christmas Bonus. I was happy to receive it as it was “extra” and timely, however, it was hard for me not to “expect” it each year and I fell into this trap – that I was “entitled” to it.
As an employer today, I do not give out a Christmas Bonus, but (pre-Covid) do take time out of the busyness to have a Christmas Party for our staff and their significant others where we would celebrate the year by enjoying a nice meal together, celebrate service milestones, give out awards for sales etc. and have some entertainment.
With respect to a Bonus, Incentive Plan or Profit Sharing, I currently use the Gain Share concept based on “The Great Game of Business” (www.greatgame.com) where we have one plan, one target for the whole company.
Probably the best approach for an employer when considering a Christmas Bonus is to pay one across the company or not at all. I would suggest creating an Incentive Plan or pay Profit Sharing to your staff. This requires that companies have a clear idea on what their goals are and the financial statements must be accurate If you would like some help with this, feel free to contact me at nathan@southbrookmc.com.
