How to Determine Holiday Bonuses

If your small business is financially fortunate enough to offer employees a holiday bump, make sure bonuses are given out equitably.
holidaybonus
When giving out holiday bonuses to employees, fairness counts. Here are some tips. (Photo: gururugu/Shutterstock)

The holidays will be here in no time, which means small business owners are starting to think about if and how they will be giving out bonuses this season.

In the U.S., holiday bonuses are somewhat of an annual tradition. According to the American Express Holiday Growth Pulse survey, 80 percent of small businesses and 87 percent of midsize companies plan on giving employees annual holiday bonuses.

As a business owner, knowing how to fairly divvy out bonuses can be a challenge. You want to ensure your employees feel appreciated and nobody holds a grudge against you or another member of your team. To keep your staff feeling warm and fuzzy this holiday season with a reasonable bonus structure, follow this advice from three business pros.

Related: 6 Cool Employee Perks Your Small Business Can Afford

Paula-Welsh

Paula Welsh, CEO of 7 Charming Sisters,
distributes holiday bonuses to employees who have been with the company for at least six months.
(Photo: Paula Welsh)

Bonuses based on role and department

Many business owners know they want to compensate employees with bonuses but aren’t sure of the best way to go about setting specific dollar amounts. One of the easier ways is to determine bonuses based on department and position, said Paula Welsh, president and CEO of jewelry line 7 Charming Sisters.

Welsh said all directors on her staff receive the same bonus, and the same goes for each person on her marketing team and managing department.

“Because we don’t view Christmas bonuses as merit bonuses, this approach seems equitable and fair and allows everyone to enjoy their holiday bonus,” she said.

Related: 5 Creative Ways to Thank Your Employees During the Holidays

Bonuses based on merit

Some bosses take a different approach to holiday bonuses, rewarding employees based on performance and the value they add to the company. That’s how Brett Anderson, president of financial advisement firm St. Croix Advisors, said he allocates bonuses.

“For many families, this holiday bonus is what makes their Christmas gifts for their family possible,” Anderson explained. “You can have a base holiday gift. But the reality is, some employees will have a greater impact on the organization and should be recognized for the value they’ve brought to the organization.”

“You don’t want employees to leave for the holidays feeling alienated or unappreciated.” -Robin Schwartz

Robin Schwartz, managing partner of manufacturing employment resource MFG Jobs, said she finds rewarding staff based on value or hard work is risky because it can seem less objective — at least to other members of your team.

“Perhaps the performance-based bonuses can move to another time of the year,” she suggested. “You don’t want employees to leave for the holidays feeling alienated or unappreciated.”

Related: Commission or Profit-Sharing: How Should I Reward My Sales Team?

Bonuses based on salary

Another method for determining bonuses is to go strictly by the numbers.

According to Schwartz, many companies “decide to provide all staff a percentage bonus based on their annual salary.”

So, while someone who makes $60,000 a year would still receive a larger bonus than someone who made $35,000, “since all employees see the same percentage bonus, it remains equitable,” she said.

Bonuses based on employment longevity

At 7 Charming Sisters, Welsh said she only distributes holiday bonuses to employees who have been at the company for at least six months, their standard probation period. But Welsh makes sure her new employees aren’t left out. New team members are each given a $50 gift card from a local grocery store.

No matter how you decide to show your employees some love this holiday season, above all, find ways to make your team feel respected and appreciated. After all, they are the backbone of your business.

Related: Three Keys to Retaining Your Best Employees

 

 

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