Manager’s Guide to Holiday Gifts and Year-End Bonuses

“‘Tis the season to be jolly” and in the workplace that can come in the form of holiday gifts or end-of-year bonuses.

Rewarding your all-stars and spreading some holiday cheer can go a long way in boosting employee engagement.

But before you go playing Santa, consider what you can afford, what employees really want, and the tax implications.

  1. Do the math. While the spirit behind rewarding your team in December is a great one, you do need to make sure if it feasible for your company. If this has been a down year and you’re struggling to pay your bills, getting further into debt over holiday gifts is not a smart move. (It doesn’t mean you need to be a Scrooge! See #5 and #6 for some budget-friendly alternatives.)
  2. Year-End Bonuses vs. Holiday Gifts. Typically end-of-the-year bonuses reward performance, which may be quantified, like hitting or exceeding a sales target. These should be consistent. They’re a motivator that benefits the entire organization. Holiday gifts, however, are just that—a gift—and should be given to your entire team. Fair warning, don’t start a precedent you can’t maintain. If you get into the habit of being outrageously generous over the years and then give a different (smaller!) gift on year five you risk your employees going all Clark Griswold in “Christmas Vacation” on you!
  3. Show me the money. A cash bonus is one option to consider. Pros: It’s one-size-fits-all, it won’t shrink or go-out-of-style. Cons: As a manager or business owner handing out cash may feel a little impersonal, but you’ll be hard-pressed to find someone not appreciative of cold, hard cash. (Reminder: Cash is always taxable.)
  4. Gift cards. Some folks may be a little more comfortable with a gift card instead of cash, and it still gives employees the freedom to spend as they wish. Obviously credit-card branded gift cards like Visa and Amex have the most flexibility, however gift cards for retailers that carry almost anything—such as Amazon or Target—can also be crowd-pleasers. (Reminder: Gift cards are taxable wages. Check out this information from the IRS on fringe benefits for all of the details.*)
  5. The gift of time. Consider incentives like days off, closing the office the day before or after a holiday, or at the very least, closing early. We all appreciate having extra time to shop, make memories or beat holiday traffic!
  6. Think out-of-the-box. If individual gifts aren’t in the budget this year, consider an experience outside of the workplace such as bowling or an Escape Room. Or bring the party in, with an office lunch and board game break in your conference room. (This a great option for various budgets whether it’s pizza delivery or a local restaurant supplying turkey and the fixins.) Nothing against potlucks, but employees still have to buy or bring something. Let them just show up and eat instead!
  7. Bonus tip! As you are wrapping up the year, make sure that all fringe benefits have been accounted for, such as personal use of a company car. These can have significant tax implications and you don’t want to be caught unaware.

*The Society of Human Resource Management also offers a great resource on bonus compensation and taxes.

There are plenty of ways to keep things merry around your workplace that won’t break the bank. Let’s schedule a time to talk if you have any questions about year-end gifts and bonuses, or if you want to know where to find a great deal on a Santa suit.