Holiday Bonuses Shrink as Variable Pay Gets More Dollars

Pay budgets allocated toward programs that reward top performers

Stephen Miller, CEBS By Stephen Miller, CEBS December 29, 2015

Some employees got a little something extra at work by way of a holiday bonus or gift this year—but fewer than in years past.

According to Aons Hewitt’s December 2015 Report of Findings—Holiday Bonuses and Gifts analysis, only 44 percent of surveyed employers planned to give traditional holiday bonuses, with the majority of those providing cash gifts. Most say their program is intended to say “thank you” and show appreciation.

The survey was conducted in November among large U.S. employers (those with more than 200 employees; the median staff size was 500 employees).

“Companies want to thank employees for their hard work at the end of the year and are willing to do so through small gifts and cash bonuses,” said Ken Abosch, Aon Hewitt’s broad-based compensation practice leader, in Chicago. “Yet we’ll continue to see most allocate the majority of their compensation budgets toward programs that are more structured and focused on rewarding high-performers.”

Holiday Bonuses and Gifts

Of the companies with holiday bonus or gift programs this year:

  • 55 percent gave cash, 30 percent gave gift cards and 18 percent gave some type of food item.
  • 54 percent made all employee groups eligible for the program.
  • Overall, the median cost of the program was $102,000.

Of the organizations that have discontinued their holiday bonus/gift programs, 78 percent did so in the past 15 years.

Variable Pay Plans

Of the companies that don’t give traditional holiday bonuses, only 39 percent say it’s because of cost. Instead, most companies (52 percent) say it’s because they prefer to tie rewards to performance. This is double the number of companies that indicated as much prior to the recession.

Among other variable pay findings:

  • 80 percent of companies have a variable pay program beyond executive and sales employee groups.
  • For 2016, the average spending for variable pay budgets for all employee groups is projected at 14.2 percent of payroll/total cash compensation.
  • Average spending as a percentage of payroll/total cash compensation is 13.8 percent for salaried exempt employees, 7.4 percent for salaried nonexempt employees, 5.1 percent for nonunion hourly employees and 3.2 percent for union employees.

Another Perspective on Holiday Gifts

The Society for Human Resource Management’s 2015 End of Year/Holiday Activities Poll, conducted in October among a random sample of SHRM’s membership, asked about giving holiday gifts (such as gift cards or gift bags) to employees.

Almost one-quarter (23 percent) of HR professionals indicated their organizations give nonperformance-based gifts to all employees at the end of the year, a decrease from 2013 (when 32 percent did so).

Related SHRM Articles:

Compensation Budgets Favor Variable Over Fixed Pay, SHRM Online Compensation, December 2015

Flat Pay Raises Spur Variable Rewards, New Metrics, SHRM Online Compensation, August 2015

Are Holiday Gifts, Prizes or Parties Taxable Wages?, SHRM Online Compensation, December 2013

Related Resource:

2015 End of Year/Holiday Activities Poll, SHRM Research, November 2015



Hire the best HR talent or advance your own career.


HR Daily Newsletter

News, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.