In the United States, there is no standard policy on holiday bonuses. Instead, companies offer discretionary bonuses. We have the list of general Christmas bonus guidelines to follow as an employer and some information to help employees know what to expect.
In This Article
- Some General Holiday Bonus Guidelines
- Different Types of Holiday Bonuses
- How Do the U.K. and Canada Do Holiday Bonuses?
Some General Holiday Bonus Guidelines
While there isn’t a standard set of rules for holiday bonuses (for employers or for employees to know what to expect), there are a few general guidelines to keep in mind. Below, we’ve outlined some rules of thumb for employers when bonus time rolls around.
Determining how much of a bonus to give can be tricky. Some businesses give flat dollar amounts to every employee. What that flat amount is varies depending on how big the company is and often how much money it made in the most recent fiscal year. Alternately, a business may decide to give a holiday bonus equal to a percentage of an employee’s salary. A hard Christmas bonus percentage number would be nice. About 63% of companies offered their employees a monetary holiday bonus in 2017, according to CNBC, with the average bonus amount around $1,800. Whether this was a flat dollar amount given to each employee or a percentage of an employee’ salary wasn’t specified. That’s the closest we can come to a typical bonus percentage — whatever percentage ends up around $1,800.
If your company does not give flat bonuses, one strategy is to have the bonus amount reflect an employee’s performance. This performance-based bonus strategy is recommended by the Society for Human Resource Management. A performance-based bonus can be based on an employee’s history with the company, skill level, or hard-working attitude. But, no matter how much you decide to give and to whom, you should always be fair and inclusive. Even if different employees get different types or amounts, everyone should get something.
The holidays can be fun and festive, but at work, you should keep things professional. When it comes to gifts as bonuses, never give anything that could be seen as inappropriate (think: liquor, cigars, etc.) or harmful (be mindful of allergies).
And, for monetary bonuses, keep your personal opinions out of the process. Let’s say you think one particular employee is quite obnoxious, but he does his job well and is an asset to the company. He should receive the same bonus as everyone else or even a larger bonus based on his performance.
It probably goes without saying, but holiday bonuses should be treated just like an employee’s salary and need not be disclosed to anyone who is not involved in payroll or processing bonuses. Holiday bonuses should be something employees can enjoy and celebrate, not something to worry about or compare with others.
Some companies offer performance-based bonuses at the end of the year. These bonuses are usually set up to motivate employees and to help the company reach its year-end goals. What isn’t always made clear is if these performance-based bonuses are considered a holiday bonus or are planned in addition to a holiday bonus. In this regard, be transparent. And, if we could suggest: Don’t let year-end bonuses and holiday bonuses be one and the same; they mean two very different things.
Similarly, if your company plans its holiday bonuses based on the company’s earnings, bonuses will change year to year. For example, you may be able to offer a $500 flat bonus one year and only a $200 flat bonus the next year. Keep your employees informed about the company’s performance so they aren’t upset about a potentially lower holiday bonus.
Different Types of Holiday Bonuses
Holiday bonuses are often thought of as cash, but there is no rule saying a holiday bonus has to be monetary. If you decide to give varying holiday gifts, it would be a good idea to make sure the categories are clearly defined. For example, everyone in management could get one gift, and everyone in sales another. Remember, keep it fair and professional. Below, we’ve included a list of holiday bonus gift ideas:
- Gift cards
- Paid time off
- Gas cards
- Company-branded clothing items
- Food (hams or turkeys for a holiday meal are a popular choice)
- Gift certificates (think: spa or relaxation services)
- Gift baskets
Note: If you’re planning on giving out cash, know that monetary bonuses have to be reported on an employee’s W-2 form as taxable income, according to tax specialist H&R Block. As an employer, you may have to pay the holiday bonus amount and the tax amount. You can refer to an online tax calculator to help you determine how much of a bonus will be taxed.
How Do the U.K. and Canada Do Holiday Bonuses?
In the U.K., the holiday bonus is universal from the government for those who qualify. Normally, it’s given the first week of December and is an automatic payment of £10. Employees must qualify for certain benefits in order to get the holiday bonus. U.K. married couples, civil partners, or those in cohabitation will get two holiday bonuses, one per person. As for individual companies, holiday bonuses are not required and may be given at each company’s discretion, just like the U.S. Monetary bonuses are taxable.
In Canada, there is no standard or government-funded holiday bonus. Bonuses are given at the discretion of an individual’s employer. As in the U.S., bonuses may include cash, gift certificates, paid time off, or physical items. Taxability depends on the type of bonus the employer chooses to give:
- Cash bonuses require income tax, Canada Pension Plan (CPP), and employment insurance (EI) deductions
- Gift cards require income tax and CPP deductions
- Non-cash gifts valued over $500 require income tax and CPP deductions
- Non-cash gifts valued up to $500 are not taxable
Employers must report taxable bonuses on the employee’s T4 slip each year along with the employee’s salary, commissions, vacation pay, and other earnings.
There is no typical Christmas bonus. Because there are no regulations surrounding holiday bonuses in the U.S. Whether or not employers give holiday bonuses is at the employer’s discretion. Some general Christmas bonus guidelines to follow include being fair, professional, and confidential. Holiday bonuses don’t have to take the form of cash; they can come as gift cards, paid time off, gas cards, company-branded clothing, food, gift certificates, or gift baskets. While Canada is similar to the U.S. in regards to holiday bonus rules and regulations, the U.K. gives a holiday bonus to all who qualify.
Not sure about your bonus? You may want to read: Holiday Loan Options to Consider