Variable Pay Plans Are Pushing Aside Holiday Bonuses

Holiday season payouts will be larger but scarcer in 2017

By Stephen Miller, CEBS Oct 30, 2017
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Bonuses bestowed on workers as an end-of-year holiday gift are becoming scarcer, while variable pay plans that tie payouts to meeting individual and organizational goals, usually paid in the first quarter of the new year, have become more popular.

That said, the smaller pool of employers that continue to give out holiday bonuses are, on average, being more generous compared with employers that gave out holiday bonuses in previous years, according to new survey findings.

Holiday bonus budgets may be affected by whether the company "had a good year," but individual bonus amounts are often determined by an employee's job position—either calculated as a flat amount or based on a metric such as one week's salary. Alternatively, the size of bonuses may be left to the manager's discretion and hinge on an employee's perceived value.

The latest annual Holiday Bonus and Hiring Survey by Accounting Principals, a nationwide staffing firm for finance professionals, polled more than 500 HR or hiring managers across a range of industries about their holiday rewards. The survey, conducted from Aug. 25 through Sept. 6, showed that for the 2017 holiday season:

  • 63 percent of companies plan to give their employees a monetary holiday bonus—smaller amounts may be put on a gift card—which is down from 75 percent in 2016.
  • Those receiving a holiday bonus will see the average dollar amount rise by 66 percent to $1,797, up from $1,081 in 2016. The average holiday bonus in 2015 was $858.
  • 38 percent of companies are giving donations to charities selected by employees in lieu of an end-of-year bonus.

"This year there is a steep decline in those planning to give out holiday bonuses," said David Alexander, president of Accounting Principals. He noted that among those not planning to give holiday bonuses:

  • 39 percent of HR or hiring managers said that their company would rather give employees other perks, such as extra paid time off during the holiday season.
  • 37 percent said that their company gives bonuses at other times of the year.

At organizations that are giving holiday bonuses, "there will always be employees who are thrilled to receive them and others who will be dissatisfied with the amount," said Susan Hosage, SHRM-SCP, a senior consultant with OneSource HR Solutions in Scranton, Pa. To make these gifts more meaningful, she urged managers to communicate about the gift personally with each employee and to express appreciation for the employee's efforts. "That is what adds sustained meaning to the gift," she said.

[SHRM members-only toolkit: Designing and Managing Incentive Compensation Programs]

Variable Pay Is on the Rise

"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."

Research findings support that view. While fewer U.S. organizations are paying holiday bonuses, the percentage of employers using variable pay vehicles—such as annual or quarterly bonuses based on individual, team and organizational goal achievement—rose 1 percentage point for the third straight year, to 85 percent in 2017, according to research from WorldatWork, an organization of total rewards professionals

Related SHRM Articles:

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

Are Holiday Gifts, Prizes or Parties Taxable Wages?, SHRM Online Benefits, November 2016

 

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