More Companies Offer Bonuses as a Challenging Year Ends

To reward employees who have dealt with a year of business and personal hardships due to the COVID-19 pandemic, more companies are giving holiday bonuses to their employees this year, new survey data shows.

This year, just over 33 percent of companies reported they would offer a year-end bonus to all employees, as either cash or a gift card, up from 30 percent that did so last year, an October survey of 189 U.S. companies found.

These figures do not include separate awards under performance-based incentive pay plans, which are also offered by about a quarter of surveyed employers, similar to last year.

"The employers who were able to retain their workforces and are, so far, weathering the pandemic recognize the importance of rewarding their teams, despite not being able to predict exactly what will happen next year," said Andrew Challenger, senior vice president of survey sponsor Challenger, Gray & Christmas, a global outplacement and executive coaching firm.

Holiday Cheer

Year-end holidays are a popular time for employers to award bonuses and other gifts to thank employees for their work throughout the year. These holiday rewards are discretionary and should be kept distinct from variable compensation that's earned through a formal performance-based incentive-pay program, which ties payouts, usually paid in the first quarter of the new year, to meeting individual and organizational goals.

Employers that lack a variable-pay program, in particular, may use discretionary holiday bonuses to reward employees for the organization's performance. In that case, employers should clearly communicate that it's the company's choice to give these rewards, lest employees believe the bonus will be coming every year, pay consultants advise.

In recent years, bonuses awarded to workers as an end-of-year holiday gift have become scarcer while variable pay plans have become more popular. However, both types of "bonuses" have a role in improving employee engagement and job satisfaction.

Amazon's Example

Amazon is among the companies that have significantly stepped up their bonus programs this year, noting that its warehouse staff was on the job during the pandemic and busier than ever as online purchases replaced in-store shopping.

Those employed full time at the online retailer during 2020 will qualify for a "special recognition" bonus of $300, while part-time employees will receive $150, Dave Clark, senior vice president of worldwide operations at the company, wrote in a Nov. 26 blog post.

"I've been at Amazon for 22 holiday seasons and this one is definitely unique, to say the least," Clark said. "I'm grateful to our teams who continue to play a vital role serving their communities."

Amazon offered a similar bonus in June to workers who continued to come to work during the pandemic. The company also "issued temporary wage increases and double overtime pay at the height of the pandemic, but both of those incentives came to an end in June," CNBC reported.

Walmart's Bonuses 

On Dec. 3, Walmart announced special cash bonuses will be paid Dec. 24 to its U.S.-based hourly employees, in recognition of their sustained commitment to customers during the pandemic. Similar to Amazon, Walmart's part-time and temporary hourly employees will receive $150 and full-time hourly employees will receive $300. More than 60 percent of Walmart's hourly employees are full-time.

This will be Walmart's fourth special cash bonus paid to U.S. staff since the start of the pandemic. Workers also received quarterly bonuses in their Nov. 25 paychecks based on strong third quarter business performance.

John Furner, president and CEO of Walmart U.S., praised employees for having "stepped up to serve our customers, communities and each other when it was truly needed most."

Cash Preferred to Gifts

In another survey, when asked what they would like most from their employer this holiday season, gifts (6 percent) and in-person and virtual parties (1 percent) ranked far behind a bonus (37 percent), job security (35 percent) and an annual merit increase (21 percent).

The firm's Holidays 2020: The End-of-Year Employee Experience Report is based on responses from 300 full-time employees in the U.S. who were polled in October.

Fifty-four percent of employees reported their job was negatively affected by the pandemic. The top causes were a reduction in pay (15 percent), followed by a cut in hours (14 percent).

"Traditionally this time of year, many companies would be ramping up office holiday festivities," said Amy Mosher, isolved's chief people officer. "Due to the pandemic, the last frontier of normalcy either is not happening at all or happening virtually in some capacity."

Bonuses Make a Difference

A December bonus "can help make employees feel like they made a difference," said Nirit Peled Muntz, chief people officer at Hibob, an HR technology firm. As 2020 draws to a close, "many companies are thinking about end-of-the-year bonuses simply because of the hardships of this year," she noted.

"The overwhelming effects of the pandemic and the fact that many people overcame complex personal circumstances and still achieved or even exceeded their work goals deserves to be rewarded, and companies are doing their best to find ways to recognize hard work," Muntz said.

But a year-end bonus is only a start, she added. "Work-from-home burnout is becoming more common, and, with this, companies are also giving out bonuses more frequently to keep morale high, trending toward quarterly bonus payments rather than only an end-of-year bonus," Muntz pointed out.

Bonus programs "are becoming less formal and more spontaneous, sometimes moving away from an annual or quarterly structure entirely," she explained. "Spot bonuses for exceptional performance or actions are also a good approach for companies to take. By providing instant rewards, desired or positive behaviors are reinforced."

Advised Muntz, "make sure that you're rewarding strong performers for their hard work." This year, she has seen "an increased focus on individual employee performance, so bonuses are more commonly tied to concrete results and achievements by each person separately" as opposed to bonuses shared equally among team members.

Related SHRM Article:

Fewer Workers Will Get Pay Raises in 2021; Bonuses Gain Ground, SHRM Online, November 2020

Employers Give Employees the Gift of Time, SHRM Online, November 2020

A Gift Guide for Your Employees, SHRM Online, November 2020

Here's How to Encourage Employees to Take PTO, SHRM Online, November 2020

Variable Pay Plans Are Pushing Aside Holiday Bonuses, SHRM Online, October 2017

'Tis the Season to Refine Gift and Bonus Policies, SHRM Online, December 2016