When it comes to giving workers a little something extra for the holidays, what employees want and what employers are willing to give often differ. And that might not be a bad thing.
Holiday appreciation rewards shouldn’t be confused with annual performance-based bonuses based on an incentive compensation plan, which can represent a large percentage of an employee’s total pay. Instead, these are the rewards that are given by employers at holiday time, usually to all full-time workers and with the same value bestowed on all (or differentiated based on staff or executive level).
In a poll conducted by Express Employment Professionals, a franchised staffing company, employees and job seekers were asked, “How do you wish your company showed appreciation to employees?” In response, 27 percent said “cash bonus” and 13 percent said, somewhat optimistically, “pay raises.” Gift cards, a popular year-end gift by employers wishing to spread holiday cheer, trailed far behind, and even less appreciated were holiday parties.
How Do You Wish Your Company
Showed Appreciation to Employees?
Days off or shortened holiday hours
Gift items other than money
A holiday party
A combination of the above
Bang for the Buck
While it’s no surprise that employees say they value cold, hard cash, the amount of a typical holiday reward—especially at small businesses—often is modest. So employers may be justified in thinking a colorful card to use at the corner coffee shop, the local electronics store or at the movies comes off better than a few extra bucks noted on a pay stub, despite what employees say they’d prefer, research by behavioral economists suggests.
A 2013 Harvard Business Review article discussed several studies on the matter, including a European experiment with students cataloging books:
Before the students started to catalog the books, the experimenters told some of them that they would receive an unexpected seven-Euro bonus—a 20 percent pay hike relative to the promised wage of 36 Euros for the three-hour job. Another group was given a gift-wrapped water bottle that was worth around seven Euros. … The cash bonus didn’t have any effect on the speed or accuracy with which the students did their jobs. However, those receiving the free bottle reciprocated by upping their data entry rate by 25 percent, a productivity increase that more than offset the cost of the bottle itself.
And here’s the kicker: “In a separate experiment in which catalogers were offered the choice between a bottle versus seven Euros, 80 percent took the cash.” So the workers said they’d prefer to receive cash, but worked harder when given a nicely wrapped present of equivalent value. One conclusion: “It was the thought that counted, and simply handing out a few more Euros hardly takes much thought. Even offering the option of a gift showed that the employer cared.”
Likewise, a holiday party may not be what employees would select if offered the price of the meal in cash instead, but employers are probably not mistaken in thinking the conviviality of a party has greater benefits in terms of fostering engagement with the company and bonding among employees.
Say ‘Thank You,’ If Nothing Else
In a separate poll by Express Employment Professionals, business leaders were similarly asked, “What type of holiday bonus will you give your employees this year?” Most said cash, but 21 percent indicated they had no plans to give holiday bonuses or gifts.
What Type Of Holiday Bonus Will You Give Your Employees This Year?
We will not give holiday bonuses
Extra days off
A combination of the above
“During the holiday season, it’s important for businesses to show their appreciation to their employees,” said Bob Funk, CEO of Express and a former chairman of the Federal Reserve Bank of Kansas City, in a media release. “It can be disheartening for an employee to feel unappreciated, yet our poll indicates that more than a fifth of employers won’t give their workers anything this holiday season. You don’t have to be extravagant about your holiday bonuses, but it’s important to show recognition. As one respondent told us, ‘A thank-you note will suffice.’
“Showing appreciation is investing in your employees,’ Funk added. “It improves morale and increases loyalty. It’s good for business. So even if you’re struggling through difficult economic times, be sure to say thank you. Even the simplest gesture can go a long way and make the holiday season that much brighter for the people who make your business possible.”
Another Holiday Bonus Survey: 78% Offer Some Sort of Year-End Gift
While the vast majority of Americans will never see anywhere near the level of year-end bonus lavished upon Wall Street bankers, a new survey shows that nearly 80 percent of employers plan to offer some type of holiday bonus or gift in 2015.
In the survey, 78 percent of respondents said their companies are offering a year-end gift/bonus. That was up from 53 percent a year ago, according to outplacement consultancy Challenger, Gray & Christmas Inc., which conducted the survey among approximately 100 HR professionals in November 2014.
About half of the companies awarding bonuses planned to give traditional monetary bonuses based on company, departmental, and/or employee performance. That represents an improvement over the previous year, when just 44 percent gave out traditional bonuses.
The other 50 percent of this year’s survey respondents said their companies are handing out smaller monetary or non-monetary gifts, typically valuing less than $100. These might include gift cards, cash, or some type of actual gift.
“Employers across the country have picked up the pace of hiring this year. As the pool of available talent gets shallower, it is critical that companies not overlook the importance of retention. The need to keep the talent they already have, is undoubtedly a driving factor behind the increased percentage of employers awarding year-end bonuses,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
Higher Profits, Larger Holiday Rewards
Another factor helping to fuel year-end bonuses is the fact that after-tax corporate profits continued to increase in 2014. In the third quarter, corporate profits reached a record high of nearly $1.9 trillion, according to the latest data from the U.S. Bureau of Economic Analysis.
With profits on the rise, about 22 percent of survey respondents said their companies were upping the amount of year-end bonuses. However, most employers (77 percent) plan to keep bonus levels on par with last year.
“Those getting a bump in their bonus check, should not expect to see a Wall Street-like figure when they open the envelope. Last year, Wall Street bonuses were up 15 percent to an average of more than $164,000, according to a report from the New York state comptroller. That average will likely increase again this year, thanks to a strong stock market,” said Challenger.
“Despite the lack of six-figure Wall Street-like bonuses, most employees still appreciate the year-end bonus. Mostly, they want to know that their hard work is recognized and appreciated. Many workers would be happy with a $50 gift certificate to a local restaurant or store. Many would probably be happy with an extra day or two of paid vacation at the end of the year.
“As the economy keeps improving and hiring continues to accelerate, employers may have to up their game when it comes to year-end awards. The number of cities with unemployment rates below 3.0 percent is growing every month. At that level, it becomes increasingly difficult to find skilled labor and the odds of employee poaching go up exponentially. In these environments, companies will be forced to greatly expand their retention efforts,” said Challenger.
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.