Most US Companies to Not Offer Bonuses this Holiday

November 16, 2004 ( - Sixty-three percent of US companies will not award holiday bonuses this year, which is consistent with past results, according to Hewitt Associates.

Variable pay plans, on the other hand, are becoming more popular, as companies attempt to tie bonuses to performance. Eighty percent of employers now offer such systems, up from 59% in 1995.

Bonuses, however, are not gaining popularity. Forty-six percent of companies have never offered bonuses, and 16% have recently discontinued their programs. Of those who cancelled their programs, 54% did so in the 1990s, while 43% did so in the last four years.

The reasons for elimination are varied, with 65% saying it was because of cost, 37% claiming it was because of entitlement issues, and 28% saying it was because they developed pay-for-performance programs. Of those who have never offered such bonus systems, 40% claimed it was because of cost, 39% never had considered such a program, and 21% said that is was not consistent with their rewards philosophy.

Of those who are offering bonuses, 49% said that they will offer retailer gift certificates, 37% will award cash, and 21% said they will give employees food. They do so, according to the Hewitt survey, to say thank you (54%), maintain tradition (24%), and to boost morale (17%).

Of those offering bonuses, 85% budgeted less than 1% of their payroll expenses to such awards, while 9% budgeted between 1% and 2%. The median award for cash bonuses will be $550 per person, while the median food or certificate award will be worth $25. Variable pay programs, on the other hand, often call for nearly 10% of total payroll expenses, according to Hewitt.

Companies may not give bonuses, but most (75%) throw parties for employees. The average party will cost $20,000, with 17% paying more than that. Twenty-one percent will pay less than $5,000.

Hewitt Associates ( ) is a provider of human resources outsourcing and consulting services, working with over 2,300 companies.