Holiday Bonuses Heading for Extinction

December 15, 2009 ( - A new survey from Hewitt Associates shows the number of companies offering traditional holiday bonuses in 2009 is at record lows.

Hewitt’s annual Holiday Bonus survey of more than 300 companies finds that less than a quarter (24%) of employers are offering holiday bonuses this year, down significantly from 42% in 2008. Of those giving bonuses, nearly half (49%) will give cash, spending a median of $250 per employee, according to a press release.

Hewitt said its research shows a steady trend away from these bonuses toward the adoption of more formal pay for performance programs to reward employees. Hewitt has found average employer spending on variable pay as a percent of payroll has steadily increased over the past decade, from 9.7% in 2000 to 11.2% in 2010.

On the other hand, average pay raises have been steadily decreasing. In 2000, average salary increases were 4.3%, compared to just 1.8% in 2009.

“Holiday bonuses have been falling out of favor in recent years as companies face increased pressure to reduce costs and are more focused on growth and performance,” said Ken Abosch, head of Hewitt’s North American Broad-Based Compensation Consulting practice, in the press release.

The Party's Over?

Hewitt's Holiday Bonus survey of more than 300 companies found that in addition to cutting back on holiday bonuses, fewer employers will host holiday parties this year. According to the press release, 60% will fund holiday parties, down from 71% in 2008. Of those that do host holiday parties, the median amount organizations plan to spend is $15,000, down from $19,000 in 2008.

A little more than half (51%) of companies said they will hold parties after work hours, and 61% plan to host them at offsite locations. Fifty-five percent plan to allow employees to bring significant others.

As for employer gift giving, 39% indicated they will give gift cards, with a median value of $35 per employee, and 22% said they will give food (e.g., turkey or ham).