Tips on How to Calculate Holiday Bonuses for Your Employees

In many cases, a strong holiday bonus can be a great motivator for employees.  At the same time, if expectations are not met, it can be a great disappointment and can cause many employees to begin looking for a new position right after the holidays.

• You must be fair

Even if this isn’t the case, assume that your employees will talk and share their bonus amounts.   Even if employees do not directly share the amount, often people will buy a new car, take a lavish vacation, buy a new watch, etc. during the holidays.  This will tip off other employees to a general idea of the bonus amount.

• Be consistent

Many companies have different levels of gifts or monetary awards.  However, if bonuses are given out, make sure that each person gets at least something.  Companies who give out awards to some team members and not others can see a backlash as a result.

• Make sure that employees understand the tax implications

There are several ways to structure employee bonuses.  If they are improperly structured, your employees could be bumped up to a higher tax bracket, or they could lose their tax exemptions.

• Give non- monetary gifts

If your company is just starting, or is not yet profitable, giving large cash bonuses may not be in the cards.  Time off in place of a bonus will be acceptable to many people.  Make sure this clearly communicated before people would expect a holiday bonus.