Key Considerations for Giving Holiday Bonuses to Employees

(Updated March, 2024)

A year-end or holiday bonus for employees can look different for private practices depending on their head count, profit, culture and various other determining factors. 

And while employees may not count on the perk as much as Clark Griswold in National Lampoon’s Christmas Vacation, it is still a powerful way to boost company morale, increase productivity, retain talent in a tight market and help your workforce mitigate holiday stress and costs with some extra funds. And for all those reasons, giving holiday bonuses to employees is an aspect of small business that must be carefully executed. 

When done right, you can foster loyalty and show employees you care – but when done wrong, it can have an adverse effect. Most businesses that pay bonuses follow one or more of these best practices during the holidays or at the end of the year to ensure they incentivize, not insult, their staff.

Best Practices for Giving Holiday Bonuses to Employees:

  • BE CONSISTENT: If your employees have received holiday bonuses in the past, they will expect it moving forward. So, if you can’t do financial bonuses this year, let them know immediately so they can factor it into their holiday shopping budget.
  • BE CREATIVE: Bonuses don’t have to be financial. Small businesses can get creative with voluntary benefits that cost little to you like extra time off during the holiday season, holiday party with fun gifts, an extra PTO day, etc.
  • BE CAREFUL: If you choose not to include financial bonuses in a year of substantial growth for the clinic, beware that it may stir resentment, frustration and potentially an exit from employees.
  • BE INCLUSIVE: With any form of bonus, include all your employees – full time and part time. Those staff you are leaving out could be the very same ones you’re trying to hire next year but who can’t get past that feeling of being excluded.
  • BE TRANSPARENT: Consider holding a quick all-hands meeting before bonuses are distributed that thanks employees for their hard work and is transparent in explaining your holiday bonus methodology; for example, if better performances receive better compensation. This can help staff understand why they may not have received as much as a peer and ideally will inspire better performances next year.

A holiday bonus is not a guaranteed perk for small business employees. According to a Bureau of Labor Statistics report, for businesses with fewer than 100 employees: 14% of workers got a year-end bonus, and only 9% got a holiday bonus. In businesses with more than 100 employees, only 8% got a year-end bonus, and just 3% got a holiday bonus. 

After a year marred by inflation, talent wars, labor shortages and looming recessions, it’s no surprise owners are looking for bonus payment alternatives. Nevertheless, most businesses understand the value of giving a holiday or year-end bonus as an incentive to retain employees. 

Here are four tactical ways to provide bonuses to employees for the holiday season. 

4 Types of Holiday Bonuses for Small Business Employees

FLAT-RATE CASH BONUSES: Everyone loves a little extra cash around the holidays. Giving everyone at your business a flat-rate cash amount means all employees are treated equally. The amount just needs to be added to a payroll check or issued as an additional payroll check to comply with taxes.

PERFORMANCE BONUSES: Different from flat-rate bonuses, some clinics prefer performance-based bonuses around the holidays. These can be based on the employee’s role in the company profits or based on the company’s overall performance. Performance bonuses can be given at the start or end of a year or tied to quarterly reviews. This might also be a great time to re-evaluate your compensation model, and consider implementing the Pay-for-performance model

YEAR-END BONUS: The year-end bonus is always given at the end of a calendar year. A year-end bonus can be considered the holiday bonus and it is typically based on the percentage of the employee’s salary. For example, 3% of each staff member’s overall salary.

NON-CASH GIFTS: Many small businesses choose to give non-cash gifts, either in lieu of or in addition to a cash bonus. Like we mentioned earlier, these can take the form of special perks that they are given or can choose like flexible hours during the holidays, extra time off, etc.

Start the New Year with a New Approach to Personnel Management

Whatever you choose for your employees to receive this holiday season, remember that it matters how you gift. Be sure to praise your employees for their hard work and loyalty and show them, through gifting, that you appreciate having them on the team.

To learn more about practice management and personnel management, join MEG Academy and get the best insights into operations, environment, leadership and more!

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