Variable Pay Plans Are Pushing Aside Holiday Bonuses

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Bonuses bestowed on workers as an end-of-year holiday
gift are becoming scarcer, while variable pay plans that tie payouts to meeting
individual and organizational goals, usually paid in the first quarter of the
new year, have become more popular.

That said, the smaller pool of employers that continue
to give out holiday bonuses are, on average, being more generous compared with
employers that gave out holiday bonuses in previous years, according to new
survey findings.

Holiday bonus budgets may be affected by whether the
company “had a good year,” but individual bonus amounts are often
determined by an employee’s job position—either calculated as a flat amount or
based on a metric such as one week’s salary. Alternatively, the size of bonuses
may be left to the manager’s discretion and hinge on an employee’s
perceived value.

The latest annual Holiday Bonus
and Hiring Survey
 by Accounting Principals, a nationwide
staffing firm for finance professionals, polled more than 500 HR or hiring
managers across a range of industries about their holiday rewards. The survey,
conducted from Aug. 25 through Sept. 6, showed that for the 2017 holiday
season:

  • 63 percent of
        companies plan to give their employees a monetary holiday bonus—smaller
        amounts may be put on a gift card—which is down from 75 percent in 2016.
  • Those receiving a
        holiday bonus will see the average dollar amount rise by 66 percent to
        $1,797, up from $1,081 in 2016. The average holiday bonus in 2015 was
        $858.
  • 38 percent of
        companies are giving donations to charities selected by employees in lieu
        of an end-of-year bonus.

 

“This year there is a steep decline in those
planning to give out holiday bonuses,” said David Alexander, president of
Accounting Principals. He noted that among those not planning to give holiday
bonuses:

  • 39 percent of HR
        or hiring managers said that their company would rather give employees
        other perks, such as extra paid time off during the holiday season.
  • 37 percent said
        that their company gives bonuses at other times of the year.

At organizations that are giving holiday bonuses,
“there will always be employees who are thrilled to receive them and
others who will be dissatisfied with the amount,” said Susan Hosage,
SHRM-SCP, a senior consultant with OneSource HR Solutions in Scranton, Pa. To
make these gifts more meaningful, she urged managers to communicate about the
gift personally with each employee and to express appreciation for the
employee’s efforts. “That is what adds sustained meaning to the
gift,” she said.

Variable
Pay Is on the Rise

“Companies want to thank employees for their hard
work at the end of the year and are willing to do so through small gifts and
cash bonuses,” said Ken Abosch, Aon Hewitt’s broad-based compensation
practice leader, in Chicago. “Yet we’ll continue to see most allocate the
majority of their compensation budgets toward programs that are more structured
and focused on rewarding high-performers.”

Research
findings support that view. While fewer U.S. organizations are paying holiday
bonuses, the percentage of employers using variable pay vehicles—such as annual
or quarterly bonuses based on individual, team and organizational goal
achievement—rose 1 percentage point for the third straight year, to 85 percent
in 2017, according to research from
WorldatWork
, an organization of total rewards professionals

At Converge HR Solutions, we understand the importance
of variable pay plans and the effect that they can have on employees. That is
why we offer an HR Outsourcing service, which includes performance management
and compensation, to assist your company in determining if an employee deserves
a bonus or not based on their performance.
More and more companies are steering away from holiday bonuses and
moving toward these performance bonuses, which turn out to be more beneficial
for employee morale in the long run.  If you would like to learn more about what else the HR
Outsourcing service provides, or are interested in any of the other products
and services Converge has to offer, visit our website at https://convergehrsolutions.com/, email us directly at info@convergehrsolutions.com or give us a call at 610-296-8550.

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