How to Decide Whether to Award a Year-End Bonus — or Not

By Robert Half December 11, 2017 at 10:00am

As the year comes to a close, it can be an ideal time to recognize individual, departmental and company-wide success with year-end bonus pay. Depending on how they are structured, bonuses may reward strong individual contributions or overall company growth.

Will your company award bonuses? In a new Robert Half survey, 51 percent of the senior managers responded that they expect to offer “somewhat higher” or “much higher” bonus pay by the end of the year.

See the data from the senior manager survey in the infographic, Holiday Bonuses: Boon or Bust.

What’s most important for employers to know about awarding year-end bonus pay — or not?

1. Know your objectives

Some companies give bonuses as a way of thanking their employees for their contributions and do not tie them to specific metrics. These are usually viewed as more informal holiday bonuses and may be more nominal than performance-based bonuses. However, these holiday bonuses also create goodwill with employees and contribute to creating a positive company culture.

Companies may also offer a one-time bonus as an incentive for employees or teams around a specific project or goal. For example, they may be planning a new division, initiative or relocation that will require a significant amount of time or commitment from the staff. These bonuses are also often structured with specific metrics and goals.

According to the 2018 Robert Half Salary Guide, highly skilled professionals expect not just a base salary that’s in line with what other firms are offering but also a choice of benefits and incentives that are just as competitive. Many companies use bonuses as a recruiting and retention tool. If you don’t, you could be on the outside looking in when it comes to top performers.

2. Recognize the benefit of bonuses

One benefit of bonuses is they give you a more flexible way to compensate your employees than salaries alone. Employers can decide how to structure their bonus programs and what types of bonuses they’ll offer, based on individual, team or company performance — or a combination of those.

Another benefit is improving staff retention. Aside from a competitive salary, professional development and work-life balance, workplace recognition is a significant strategy for keeping talented members of your team on board.

Also, year-end bonuses are a great way to celebrate success. According to Robert Half research, The Secrets of the Happiest Companies and Employees, accounting and finance professionals report their biggest driver of happiness is feeling appreciated for their work.

3. Communicate with employees either way

Group meetings are fine if bonus structures are the same for all employees, but if not, you should speak individually with each staff member. If you plan to distribute a bonus, here are some suggested ways of telling the employee:

  • Have a meeting as early as possible and discuss the reason for the bonus. Schedule this separate from a performance review.
  • Explain how the payment is determined and when to expect it.
  • Take the opportunity to offer your appreciation for the employee’s contributions.

If you won’t be giving a year-end bonus, here are some suggestions:

  • Communicate the news as early as possible, and maintain the same sense of transparency as you convey the reason a bonus won’t be given and, if appropriate, explain what the employee can do to improve the odds for a future bonus.
  • Show compassion, care and confidence in the employee’s work, if it’s deserved.
  • If you decide on a different kind of incentive or gift, talk about what that will be.

4. Consider alternatives to bonus pay

If you decide against offering year-end monetary bonuses or don’t have the budget for it, consider other kinds of employee perks, such as flexible scheduling, days off, telecommuting options or a casual dress day. Throw a holiday party or a department potluck. Give baskets filled with treats, gift cards or company merchandise.

Whatever you decide, the important thing is to keep employees in the loop and let them know your company appreciates their work and commitment — bonus or no bonus.

— by Ky Kingsley

Ky Kingsley
Ky Kingsley

Ky Kingsley is vice president of Robert Half Finance & Accounting, North America. She joined Robert Half in 2007 and is an expert on career growth and development, hiring trends, and the use of social media in recruitment. She is based in the Los Angeles area.

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