We are so close to Christmas, and it is almost impossible to discuss anything now without mentioning Christmas. Christmas connotes spending a lot of money and yet there seems to me little of that around this year. Therefore, today I will be looking at the Christmas bonus.
For many employees, a Christmas bonus is a happy conclusion to a long year of hard work. But, for employers, the question of paying employee bonuses is still worth considering.
There are many types of bonuses – some discretionary some not so. A Christmas bonus is a bonus paid to employees at Christmas time. While employees may expect a Christmas bonus, organizations may not always have to provide them.
A discretionary bonus is given at the sole discretion of the employer. This means an employee can’t expect them to provide one. There’s no requirement for the employer to provide a bonus, employees cannot expect a certain amount to be paid, or for it to be paid at a certain time and non-discretionary bonuses are often not announced in advance. In many instances the Christmas bonus is a discretionary bonus.
There are some circumstances however under which a Christmas bonus must be paid. These are when it is written in the employment contract. Also when a behaviour providing it every year is uninterrupted, long-standing, automatically received, expected, and well-known then it has actually become an implied term in an employee’s contract.
Unfortunately, Christmas bonuses are increasingly becoming a thing of the past even though, according to a study, almost 50 percent of staff would rather prefer a Christmas bonus to a Christmas party. This year I suspect even the Christmas party will be scrapped. There is no statutory obligation for employers to provide Christmas bonuses but the above criteria for obligation may apply.
A small gesture, like a Christmas bonus, or any kind of bonus for that matter, goes a long way. It shows employees that you are grateful for their work, dedication, and effort. In addition, it can then help raise morale while building a feeling of unity and pride.
However, bonuses can be a double-edged sword. If you get them wrong, underpay them, or make an employee feel cheated out of getting a bonus and the opposite impact could be felt.
There is a great need to have planned and built a solid remuneration package in the first place. In tough times it is important to try and keep employees motivated and disappointing an employee by not paying a bonus they thought they were entitled to can be a key demotivator!
Communication is key to how you handle payment or non-payment of a bonus. Let’s be realistic, in tough times, like now not all employers can afford to provide bonuses. If this is the case, the best approach to take is to be clear with your employees as to why it is not possible to pay.
During the Covid-19 pandemic, there have been many examples of employees who have not only understood this fact, when it was explained, but have even helped the business out by working part-time, agreeing to defer bonuses (or eliminate them), or undertaking job-sharing.
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While an employee bonus is not an everyday occurrence, it’s human nature to want to work towards something. Incentive-based bonuses provide a focus for work effort, give employees much-needed recognition when they achieve them (which is why it’s important to make goals SMART), and help them feel valued.
Employee bonuses are another way of making employees feel valued and important. Therefore, it’s so important to be very clear about any changes to bonus structures, particularly if bonuses aren’t likely to be paid – or not likely to be paid in full.
Employees love being given rewards – like a Christmas bonus. And, when times are good, employee bonuses are an important tool to incentivize employees and reward achievement.
However, while it is wonderful to reward employees, at the end of the day it is more important for them to know and understand why you are rewarding them (or not, if necessary). An open culture of communication will help employees feel like they are being dealt with fairly.
We know the custom over many years is to give staff commodities like rice, groundnut oil etc at the end of the year instead of giving cash. Whatever your custom is please carry on. Employers are fast turning from just that to their brother’s keepers. This is especially if you employ a lot of low cadre staff whose salaries are not huge to start off with.
Please do not confuse the performance bonus with a Christmas bonus. Even though both may be discretionary, the performance bonus is usually not.
Let me be the first to wish you a very merry Christmas and of course a great weekend.