Do You Know Everything You Should About the Holiday Bonus?

/ Best Practices, Human Resources, Time & Labor

Do You Know Everything You Should About the Holiday Bonus?

Sit through a few holiday classics yet? I’ve watched Christmas Vacation 5 times already this season. A timeless tale with a rather relatable business theme – to bonus or not to bonus. Or, if you’re Clark Griswold on the receiving end, will they or won’t they?

More often than not, companies are eager to show their gratitude with a holiday bonus. However, with tight budgets and constricting finances dictating monetary rewards, companies may need to get creative with their holiday compensation. Here are a few tips for HR to navigate the Holiday Bonus this year.

  • A Definite Distinction: Don’t fall into the trap of combining the holiday bonus with an anticipated year-end bonus. Year-end bonuses are typically part of performance-based compensation, whereas a holiday bonus is a show of good will and appreciation on the part of the employer. If distributing both, you can make a clear distinction by providing a holiday bonus between Thanksgiving and Christmas, and your year-end/profit sharing bonus in January.
  • Dollars and Sense: While the holiday bonus is typically a monetary gift, it may make more fiscal sense to consider an alternative gratuity that could be just as valuable to employees (unlike the Jelly of the Month bestowed on said Griswold). Offering extra Paid-Time-Off may be just as valuable if you are having a particularly lean year and cannot afford to gift additional wages.
  • Divide and Conquer: If you are distributing a monetary holiday bonus make sure you’ve thought about how to scale the extra wages. Some employers select a flat rate in which to distribute companywide, while others base it on pay scale, longevity, and seniority.
  • The IRS Wants Their Bonus: Not to be left out from the seasonal merriment, the government is going to want a piece of your holiday cheer. Monetary bonuses are taxable income and must be reported to the IRS. Some employers will automatically deduct the taxes on the check, while others may not, requiring it to be noted as year-end income by employees. It may also be considered deductible salary expenses for a company.
  • Advanced Notice is Appreciated: If your company will be discontinuing holiday bonuses this year, wit may behoove you to inform employees. While bonuses should never be “expected,” the likelihood that your staff relying on the financial windfall they’ve received each year thus far is high. They’ll have to accept the loss, but they’ll appreciate the advanced notice instead anxiously anticipating that extra envelope – a la Clark Griswold.

Whether you choose to celebrate this season and embrace the time honored tradition of the holiday bonus, or select an alternative means of spreading holiday cheer throughout the workplace, your employees will no doubt appreciate the gesture. Small tokens of good will, recognition, and valued performance go a long way in terms of employee engagement and retention.


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