Performance Awards Replace Holiday Bonus as Employee Incentive

December 11, 2007 ( - Hewitt Associates has found the annual holiday bonus as a way to reward employees is losing favor as 63% of surveyed companies said they will not award holiday bonuses this year.

According to a news release from Hewitt, 90% of companies indicated they are relying on variable pay plans (performance-based bonuses that must be re-earned annually) to show appreciation for employees this year. In 2007, actual company spending on variable pay as a percentage of payroll is 11.8%, and spending on variable pay in 2008 is projected to remain strong at 11.6%, the release said.

The 2007 holiday study of more than 350 organizations revealed that more than half (53%) have never offered a holiday bonus, and 10% have discontinued their programs. Companies that discontinued their programs said they did so primarily due to cost (50%), development of pay-for-performance programs (37%), or difficulty in administering bonus programs (16%).

Of those companies that never offered a holiday bonus program, 54% said that all rewards are tied to performance, 34% said they never offered one due to cost, and 29% never considered such a program.

Of the 35% of companies that will offer a holiday bonus program in 2007, 42% said they will provide gift cards, 41% will award cash, 25% will give employees a gift of food, and 20% will give some type of catalog gift.

Reasons for providing holiday bonuses, according to the Hewitt survey, included:

  • To say thank you and/or show appreciation (69%),
  • To maintain tradition (11%), or
  • To boost morale (16%).

More than two-thirds (70%) of companies surveyed who offer holiday bonuses said that all employee groups are eligible, while 17% said only full-time employees are eligible. Holiday bonus programs were most prevalent in the insurance industry (61%), followed by health care (50%), manufacturing (39%), retail (37%), financial services (16%), and the pharmaceutical industry (8%).

In addition, Hewitt found 70% of surveyed organizations plan to host a holiday party this year, up from 65% last year. Of these, 24% will spend $5,000 or less on their parties; 12% will pay between $5,000 and $10,000; and 27% will spend between $10,000 and $25,000. Fifty-six percent of companies said they hold holiday parties after work hours and 65% hold them at offsite locations.