It’s Christmas time, and you know what that means: Christmas bonus time! Are you wondering if there is a standard bonus structure that companies should follow for giving their employees holiday bonuses? There are also a variety of options for bonuses, cash is not the only option. Read on to find out more!

In the United States, there is no strict definition or standard that companies follow when giving out holiday bonuses. Instead, companies offer discretionary bonuses, with little to no regulation insofar as what makes a bonus “fair” or “good enough”. Because of this, many employees are dissatisfied with the kinds of holiday bonuses they receive.

If you’re an employer who’s unsure what to do, don’t worry. Included in this article are some guidelines about holiday bonuses that can help you keep your employees happy and motivated, without bankrupting the business. This article is useful for employees as well. It’s a good idea to learn about typical Christmas bonuses guidelines so you know you’re being justly compensated.

What Are the Typical Christmas Bonus Guidelines?

Normally, the size of the holiday bonus is going to depend on the employee. A general guideline is to have the bonus reflect the employee. Employees who make more money, spend more time, have been with the company longest, or who performing integral or managerial tasks can probably receive a more generous bonus than employees who don’t fall into those categories. This is not to say that low-tier/low paying jobs or new hires aren’t important or don’t deserve a bonus. Sometimes, these are the hardest working employees. So, as an employer, keep in mind that the holiday bonus should reflect the amount of time and effort an employee has put into their job, and how much relative importance that job carries.

Additionally, as an employer, don’t let your personal opinions about people get in the way of giving a fair bonus. Let’s say you think one particular employee has an obnoxious personality, but they do their job well and honestly. Give them the same bonus you would give to anyone else doing their job.

There are some businesses that give flat dollar amounts in holiday bonuses, to every employee. What that flat amount is varies depending on how big the business is and how much money its making. But typically, flat amounts for full-time employees range between $300 and $500. Sometimes companies give holiday bonuses equal to one or two weeks’ salary. As a Christmas bonus percentage, this would be about roughly .5%-1% of an employee’s annual income.

Different Types of Holiday Bonuses

Again, there is no one standard for holiday bonuses in the United States. So every company is going to do them a little differently. Not all bonuses are going to come in the form of money. The majority of holiday bonuses come in the form of cash or gift cards. But they can also come in the form of non-monetary gifts, such as company clothing or food (like fruit baskets). Some employers offer paid time off as a type of holiday bonus. Others may offer performance-based bonuses instead of a holiday bonus. These performance-based bonuses are usually set up to help motivate employees at the end of the year and to help the company reach it’s year goals. Sometimes, companies will let an end-of-the-year bonus count as a holiday bonus. Having the end-of-year bonus count for the holiday bonus can causes high levels of dissatisfaction among employees if they were expecting two different bonuses.

General Guidelines for Giving Holiday Bonuses

As a rule, don’t let a year-end bonus count for a holiday bonus: the two bonuses mean two different things. A year-end bonus is based on performance, while a holiday bonus ought to be a thoughtful gift that shows employees your gratitude and appreciation for them. Make sure that when you give a holiday or a year-end bonus, your employee knows which one they’re getting. If you choose to give both, space them out so they can’t be confused for each other, or seen as one single bonus.

Another guideline is to make sure everyone gets a holiday bonus, no matter what. Different employees may get different types, but everyone needs to get something. This brings us to our next guideline: if you’re going to give different employees different gifts, make sure these categories are very clearly defined. Maybe give everyone in management one gift, and everyone in sales a different gift, etc. You don’t want it to appear that certain people are getting better gifts simply because you like them more.

The third guideline concerns company earnings from year to year. Depending on how well your company is doing, the value of your holiday bonuses may change from year to year. Maybe one year you’re able to afford giving everyone $500, but the next year, you can only afford giving everyone $200. This is fine, as long as you keep your employees informed. Usually, employees will have a sense of how the company is doing, but always make sure they know what to expect in that year’s holiday bonus.

Here are some more guidelines: don’t give employees anything that could come off too personal or unprofessional. And never give anything that could be construed as sexual harassment (like lingerie). If you know a certain employee doesn’t drink or smoke, don’t give them wine or cigarettes for their holiday bonus. Also, know about employee allergies. Make sure your gifts can’t be misinterpreted for anything else other than what they are: a professional gesture of gratitude.

And lastly, if you’re planning on giving out cash as a holiday bonus, know that monetary bonuses have to be reported on an employee’s W-2 form as taxable income. As an employer, you may have to pay the holiday bonus amount and the tax amount, if you and your employee are on a gross-up arrangement.

Christmas Bonus Calculators?

Since holiday bonuses differ so widely between companies, there is no one universal holiday bonus calculator. For a Christmas bonus percentage, remember you can use .5%-1% of someone’s annual salary. There are, however, online tax calculators that can help you determine how much of a bonus will be taxed. Here’s a great one from TurboTax.

How Do the UK and Canada Do Holiday Bonuses?

In the U.K., the holiday bonus is universal for those who qualify. Normally, it’s given the first week of December. It is an automatic payment of £10, tax-free. Qualifications for this bonus include: ordinary residence in the U.K., Isle of Man, Channel Islands, Gibraltar, Switzerland, or any country in the European Economic Area (EEA). Employees also have to qualify for one of these bonuses in order to also get the holiday bonus. Some of these are: the Attendance Allowance, the Mobility Supplement, the Disability Living Allowance, the War Widow’s Pension, a State Pension, or Carer’s Allowance.

U.K. married couples, civil partners, or those in cohabitation will get two holiday bonuses, one per person.

In Canada, holiday bonuses operate similarly to how they do in the United States. No universal standard exists, so bonuses can be monetary or non-monetary, given or not given at all.

In Summary

So, here comes the big question: should all employers give holiday bonuses? As an employer, this may depend on what kind of business you’re running. If you want to retain employees, it’s a good idea to do something at the end of the year that shows your appreciation, even if you can’t afford generous monetary bonuses. Think of what you would want to receive yourself, and make your gift a fair, heartfelt gesture. Typical Christmas bonus guidelines vary so do what feels right.