4 things to consider before giving out holiday bonuses

Holiday bonuses can boost staff morale by showing your appreciation for hard work, but can also create problems when they aren’t handled well. To ensure holiday bonuses make everyone happy, consider these four points.

1. Bonus or entitlement?

Holiday bonuses are often given out for the wrong reasons – employers feel obligated to employee expectations or simply follow the lead of competitors – and this can lead to a reward that isn’t tied to a standard of good work or extra effort. In this situation, the bonus has become an entitlement and doesn’t serve its intended purpose.

A bonus should recognise the input of your staff as a whole in the yearly success of your business. It should serve the dual purpose of thanking employees for hard work while motivating them to apply the same amount of effort next year.

Another way of looking at it is that bonuses should strike a balance between both staff and employers gaining something, and if staff come to expect bonuses regardless of the quality of their work, the motivating factor is removed and that balance is lost.

2. Focusing on recognition

A flow-on effect of holiday bonuses is that recognition in the workplace goes hand in hand with increased staff morale. A recent study by Roy Morgan Research found that, of people who do feel a sense of recognition for their work, 93.3 per cent are satisfied with their job in general.

For this reason it’s important to keep the concept of recognition at the forefront of your mind when planning holiday bonuses. It should always be complemented by a genuine statement of gratitude for hard work because people need to hear they are appreciated.

3. Considering all options

Financially speaking, Christmas looms as a tight time for many families with the prospect of endless presents and interstate travel. So it’s not surprising that, in most instances, a gift of cash will be more appreciated than any other form of bonus. Australian employers recognise this, with a 2011 Bank of Queensland survey finding 74.2 per cent of holiday bonuses landing in the bank account.

But other options are also worth considering, especially if the cash amount on offer is so small that it will be eaten away by tax – making you look like the Grinch. Alternatives to consider include additional leave throughout the holidays, increasing the budget for a staff Christmas party, or gift cards.

Lalin Anik and Jordi Quoidbach, writing for the Harvard Business Review, suggest you should throw out the idea of individual bonuses altogether, saying, “When employees compare their end-of-year bonuses, we see more jealousy, anxiety, and competition, and less trust, sharing, and teamwork in the workplace.”

Instead they argue for bonuses that reward your team as a team, including giving money to be spent by staff on their co-workers or towards charities.

4. What about next year?

What does a large bonus this year mean when the holidays roll around again in 12 months? Be careful not to set a precedent where employees will become disappointed if the reward is not as big in the future.

If you can set an appropriate amount and be clear that a yearly bonus is dependent on a positive review of your employees’ work, they can feel appreciated while gaining an incentive to put the same effort in next year.

Whatever your opinion on bonuses, be sure to keep these points in mind when considering whether or not to gift your staff with an end-of-year reward.

Tags: Salaries

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