Holiday Bonuses a Thing of the Past

November 14, 2005 ( - A Hewitt Associates study found that only 41% of companies plan to award a holiday bonus to employees this year.

In its press release, Hewitt said that, of the 41% who will offer a bonus, 44% will give a gift of food (e.g. turkey or ham), 37% will give retailer gift certificates, and 13% will give cash. The reasons these employers gave for continuing to award holiday bonuses were to say thanks or show appreciation (57%), maintain tradition (22%), and boost morale (18%).

Hewitt’s survey showed that 45% of companies have never offered a holiday bonus, and 14% have stopped offering one. The reasons for discontinuing holiday bonuses included cost (55%), entitlement issues (50%), and development of a pay-for-performance program (25%).

class=”NormalDS”> In fact, as holiday bonuses are going out of style, Hewitt found that variable pay programs are becoming more popular. Seventy-eight percent of companies surveyed currently offer a variable pay program. “Employers recognize that the value in tying awards to performance, as opposed to the holidays, better connects employees to the company’s goals and objectives, eliminates ‘entitlement’ issues, and leads to increased productivity and improved business results,” said Ken Abosch, a business leader for Hewitt Associates, in the release.

Abosch also said this could be a good thing for employees as a bonus to reward performance. In most cases, it is a greater payout than a holiday bonus. A prior Hewitt survey revealed that i n 2005, actual company spending on variable pay as a percentage of payroll increased to 11.4%, up from 9.5% in 2004. Spending on variable pay in 2006 is projected to remain strong at 11.1%.

class=”NormalDS”> While companies seem to be switching from the holiday bonus tradition to variable pay programs, they are not giving up holiday parties, though. Seventy-four percent of organizations surveyed plan to host a holiday party this season. Of those, 27% will spend $5,000 or less on their parties, 30% will pay between $5,000 and $20,000, and 15% will spend between $20,000 and $30,000. The median amount companies will pay for a holiday party is $15,000.