Holiday bonuses becoming a rarity at Christmas

2006

U.S employers are increasingly doing away with holiday bonuses, even at Christmas, in favour of year-round performance-related pay, a new survey has suggested.

The study by HR consultancy Hewitt Associates found that two thirds of companies said they would not award holiday bonuses this year, with firms relying more on variable pay plans (performance-based bonuses that must be re-earned annually).

A whopping eight out of 10 said they currently offered a variable pay programme.

"The majority of companies have realised that only through performance-based awards can an organisation effectively motivate and reward employees for helping achieve their goals," said Ken Abosch, a consulting business leader for Hewitt Associates.

"Variable pay plans, as opposed to holiday bonuses, clearly connect employees to company performance," he added.

The poll of more than 300 organisations found that more than half had never offered a holiday bonus, while 14 per cent had discontinued their programmes.

Of those that cancelled, nearly two thirds did so in the past six year.

The main reasons for scrapping a programme were cost (61 per cent), employees did not value it (35 per cent), entitlement issues (33 per cent) and the development of pay-for-performance programmes (21 per cent).

Of those that never offered a holiday bonus programme, 45 per cent said that all rewards were tied to performance anyway, more than a third said it was because of cost, and 30 per cent had never considered such a programme.

Just 5 per cent, down from just under a tenth last year, said they would direct some or all of the money they would have spent on holiday bonuses to charitable organisations.

Of the 34 per cent offering a holiday bonus programme, 39 per cent said they were doling out cash, 37 percent going for gift certificates and 27 per cent preferring food, such as a turkey or ham.

Most did so to show appreciation, maintain tradition and boost morale, with more than half saying all employee groups were eligible for holiday bonuses, while a fifth said only full-time employees were eligible.

Overall, employees' take-home pay was continuing to be hit hard this year by health care costs, flat base pay increases and rising energy costs, added Hewitt.

For the majority of employees, therefore, variable pay could help make up where base salary increases and holiday bonuses had now fallen short.

"For those employees that meet or exceed their individual and company goals, the bonus payout could be much more than a traditional holiday bonus," said Abosch.

Nearly two-thirds of organisations planned to host a party, down from three quarters last year.

Of these, fewer than a quarter said they would $5,000 or less on their parties, 27 per cent were budgeting between $5,000 and $20,000, and 11 per cent were splashing out $20,000 and $30,000.