The Pros and Cons of Small Business Holiday Bonuses, Gifts, Parties and Time Off

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small business holiday bonuses

Article Summary: There are a few ways to show appreciation for your employees at the end of the year. For a small business, holiday bonuses are an option, but it's not the only way. 

In this article we'll talk about the pros and cons of holiday:

  • Bonuses
  • Gifts
  • Parties
  • Time off

‘Tis the season to show your employees you care. The holiday season bring out the warm and fuzzies no matter which holiday people are celebrating. If you want to join in on the fun and strengthen your relationships with employees, some type of holiday reward can help.

Gallup research finds employee recognition positively impacts employee engagement when the recognition is honest, authentic and individualized. (1) So what’s the best type of way to recognize employees over the holidays? Here’s a look at the pros and cons of bonuses, gifts, parties and time off when you’re considering what your business can offer.

Holiday Bonuses for Employees

Holiday bonuses can be based on employee performance or given out at the same amount for all employees. A 2017 report by ABC News found up to 70 percent of employers offer performance-based bonus plans, and 35 percent of U.S. employers offer across-the-board holiday bonuses. (2)

Pros of Holiday Bonuses
When a bonus is performance-based, it can motivate employees to meet the performance standards needed to secure the bonus. Some companies measure performance throughout the entire year before deciding bonus amounts. These types of bonuses can be a powerful way to keep employees performing well throughout the entire year.

Knowing that a bonus is coming can increase employee morale. The National Retail Federation reports consumers will spend an average of more than $1,000 this holiday season. (3) Anticipating a chunk of change that will help alleviate that burden is something employees can look forward to around the holidays.

Cons of Holiday Bonuses
If you give a bonus one year, employees might come to expect them each following year. If you have to reduce the next bonus or do not provide it in the future, employees can become angry or let it affect their work performance going forward.

Bonuses that are based on performance can also create some negative feelings. For example, if an employee doesn’t think the bonus they received is deserving of the effort they put forth, they might feel negatively about it. Performance-based bonuses might also create unhealthy competition or resentment among coworkers.

Holiday Gifts for Employees

Holiday gifts for employees allow small business owners to get really creative with how they recognize their employees over the holidays. There is no limit on what types of gifts to give, from elegant office-friendly gifts to gift cards.

Pros of Holiday Gifts
If you buy certain types of holiday gifts in bulk, you might be able to get a discount. You can also leverage connections you have for gift ideas and potential save money, too. For example, if you’re friends with a store owner or restaurant owner, they might be willing to give you gift cards for a lower cost.

Some employees might really appreciate gift cards, because they can help with their own holiday shopping or give them the freedom to pick out a gift for themselves they’ll really love.

If you give personalized gifts, that can make more of an impact on employee engagement, because you’re showing employees you pay attention to the kinds of gifts they’d like. A great gift can have the potential to be more meaningful while costing less than some other employee holiday recognition options.

Cons of Holiday Gifts
Employees who embrace a minimalist lifestyle or who are already overloaded with the amount of stuff in their homes may not appreciate a gift.

The wrong type of gift could make a negative impact. For example, you might think a beautiful journal is a cool gift for an employee, but the employee may interpret the gift as something meant to be used for work and assign less meaning to it. (4)

You could also even get into dangerous territory with some gifts, like if you give a bottle of wine to an employee who doesn’t drink alcohol, or you give peanut butter cookies to someone who is allergic to peanuts or is gluten-intolerant.

Holiday Parties for Employees

Some employees look forward to an annual holiday party, and others (introverts, ahem) dread them.  The 2018 Holiday Party Survey of 150 human resources representatives across the country found 65 percent of companies plan to host holiday festivities, which is the lowest percentage since 2009. (5) Some possible reasons the report cites for the decline include liability issues regarding sexual harassment and assault at holiday parties, as well as increasingly remote workforces.

No holiday party is fine for employees who get some other form of holiday compensation, since a 2017 survey of more than 1,200 people by Randstad US found 90 percent of workers would rather get a bonus or extra vacation days than attend a company holiday party. (6)

Pros of Holiday Parties
A holiday party is a way for your employees to connect. The Randstad survey found 62 percent of employees feel pressured to attend a company holiday party, so if you want to have a team bonding event where people are likely to show up, this is a good one to host.

Holiday party programming allows for employee recognition in front of employees’ friends and family, which can be really special for employees (or, on the other hand, really embarrassing.)

Planning a holiday party enables your business to connect with other local businesses who might provide services like a venue and catering. This could widen your network in your business community.

A holiday party where employees feel comfortable sharing more of themselves with their coworkers can strengthen bonds back in the workplace.

Cons of Holiday Parties
Holiday parties involving alcohol present challenges. Some employees may not want to come or will not enjoy themselves if alcohol is not present. However, any work event where alcohol is served opens your business up to liability. (7)

You must have alcohol policies in place, including for work events outside of the office. You could make the bar a cash bar where another vendor serves the alcohol, and instruct bartenders to not serve alcohol to visibly intoxicated guests. You could also provide security at any event where alcohol is served and tell employees not to return to the office or use office equipment after drinking.

Seeing employees who are intoxicated is another issue. You have to be prepared for employees behaving differently if they are drinking. Remind them before the event of how that will influence your and their coworkers’ perception of them back in the workplace.

Holiday party costs can add up quickly if you are renting a venue and paying for food, drinks and security. If an employee or employee’s guest damages a property the blame could be placed on your business and damage its reputation.

You’ll also have to be careful when planning the party theme. Your employees might celebrate diverse holidays, so creating an all-inclusive party can be challenging based on diet and which holidays are celebrated.

Holiday Time Off for Employees

Time off is the most desirable reward for employees, according to the Randstad survey, which reports 70 percent of respondents named time off as the number one thing they wanted from employers. Time is money, after all, and during the holiday season, there never seems to be enough time to do all we need to.

Pros of Holiday Time Off
While hours or a day off does technically cost your company, it might be less of a hit since other employees can pick up the slack when an employee is gone.

One way to prevent all your employees from taking the same time off around the holiday season is to give time off to be used the following year. This way, all your employees aren’t gone all at the same time. If your business tends to get slower in the holiday season anyway, you could also consider letting everyone leave a few hours early before the holiday, or adding an extra day or two on to the typical holiday leave.

Since most employees want time off, when you give it your staff, it’s likely they’ll feel gracious for this gift. Time off is universally useful.

Cons of Holiday Time Off
Your business may already be generous in how much time off you give. Giving more could place a burden on your operations.

If you don’t regulate when employees can use the time off, there’s a chance you might receive multiple requests for similar times.

If you give time off and employees want to use it during a busy time when you need them in the office, denying multiple requests could result in resentment.

What Gift Will You Give Your Employees This Holiday Season?

The type of holiday employee recognition that is most cost-effective and meaningful for your business will depend on a variety of factors, like your employee preferences, your business model, and your budget.

Some type of recognition is vital to give, though, since it boosts employee engagement. Businesses with engaged workforces are more profitable, have fewer accidents, have better customer engagement, and have better productivity and retention compared to those that don’t, Gallup reports. (8)

Try surveying your employees before the holidays about what type of recognition they’d want the most. You can host an anonymous survey using a tool like Google Forms to gain insights. (9) When you pay attention to what employees want and then deliver it, you’re giving more personalized and effective holiday recognition.