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20th November, 2019

The Christmas bonus: A guide for small business owners

In the lead up to the festive season, small business owners will be wondering whether or not to offer a Christmas bonus to staff and how large it should be this year.

Despite how challenging the holiday period can be, there’s nothing like being able to spread a little Christmas cheer among the staff that have supported you throughout the year.

But deciding what form an end-of-year reward might take, and how much to spend, can leave business owners scratching their heads.

As with most aspects of small business, a range of factors should be considered before deciding to pay staff any bonuses.


Are you obliged to pay a Christmas bonus?


In short, unless there is a contract of employment or some other form of agreement with an employee that states otherwise, companies are not legally required to pay their staff Christmas bonuses.

In saying that, it’s also true that each case depends on its own circumstances and there’s some considerations that should first be taken into account.

If you do not have specific clauses relating Christmas bonuses included in your employment contract, but you have previously given regular Christmas bonuses to your staff , it would be quite difficult to argue that this practice had not become a contractual entitlement and something your staff would now expect.

READ: 9 office end-of-year party dos and don’ts

On the other hand, if previous bonuses have been offered sporadically or without any real formula or expectation, then it would be unlikely that employees could argue that these bonuses were customary and therefore considered a business obligation.

If you’re unsure of your position, it’s always best to check with a small business or employment law solicitor to clear up any questions you might have on this subject.

Assuming there is no agreement or legal obligation to pay Christmas bonuses, then it is entirely up to the business owner’s discretion as to whether they choose to pay a Christmas bonus, and if so, in what form.


What are the best bonus options for small businesses?


If we asked ten different companies about how they are structuring their staff Christmas bonuses, no doubt we’d get ten different answers.

That’s because choosing what bonus you will give your staff, if any, will come down to individual factors such as your current and predicted profit margins, the individual tasks that your staff perform, your specific industry and even the way your office operates.

Below are some of the most common bonuses offered by small business owners when it comes to giving a little extra to their staff at Christmas.

Cash bonuses

For many, the phrase ‘Christmas bonus’ immediately conjures up thoughts of a large cash payment (thanks Hollywood). But it’s interesting to note that, in a recent study by the Bank of America, only 38 percent of small businesses were planning on gifting a cash bonus to their staff.

Due to changes in staff retention rates, the uncertain economy and even industry changes such as online shopping, home delivery options and population shifts – offering a straightforward cash bonus is rarely the best (or most reasonable) option for small businesses.

If you are interested in offering a cash bonus to your staff, though, there are several options available to you.

1. The flat rate

With a flat rate bonus, all staff receive the exact same bonus amount. Depending on your setup, this option is often a great way to ‘level the field’ and to ensure staff see this bonus as a gift, rather than being tied to performance or seniority.

If you do choose this option, remember that whatever amount you choose will be setting a precedent for years to come, so speak with your accountant to find out an amount that is sustainable and able to be increased slightly each year.

2. The salary percentage

If your business has a more hierarchical structure due to differences in seniority or roles, a salary percentage bonus might be the best option.

Many small businesses find that by offering a bonus of 1.5 percent of the annual wage, this affords their staff an additional one- or two-weeks extra pay for the holidays. This amount might not  buy them a trip to Fiji, but most staff respond very well to this option.

Gift, perks or party bonuses

While cash bonuses are usually very well received by employees, they can often cause too much strain on the company cash flow. Many small business owners choose to offer non-cash bonuses or extra employee perks instead.

READ: Giving tax-deductible and FBT-free Christmas gifts (Australian readers only)

For physical gifts, things like gift certificates for local restaurants, magazine subscriptions or bottles of champagne always work well when paired with a handwritten card.

Another option that is gaining popularity, offers staff additional employee perks around the holidays. Something as simple as allowing staff to finish a couple of hours early in the week leading up to Christmas or offering an extra day or two off over the Christmas period is a great crowd-pleaser and requires no additional budget.

Whatever type of bonus you choose to implement, the goal should always be the same – making your employees feel valued and appreciated. After all, happy, motivated staff are one of small businesses greatest assets.

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