Holiday Bonus Know-How: 3 Guidelines for Employers

Well-Done-blackThe end of the year is a traditional time for recognizing employees’ contributions to your business. Whether you choose to give your employees a raise, a bonus, or a nonmonetary reward, it’s important to let your employees know that you appreciate their hard work.

Choosing a Reward
While bonuses and pay raises are popular choices, there are plenty of other ways to show your appreciation. Be creative and consider other types of rewards such as a catered appreciation lunch, offering a paid shorter workday of the employee’s choosing, or throwing a holiday or end-of-year party. Even a gesture of personally thanking employees for a job well done can go a long way towards keeping your team engaged and motivated.

Guidelines for Giving Rewards
Remember that even the best intentions can subject a company to liability if the employer is not careful. Consider the following tips to help you stay on track when rewarding your employees:

  1. Be careful. Employers can generally decide whether or not to give employees a bonus or raise, but be careful about making any verbal or written commitments–even a casual mention of a bonus or raise could be construed as binding. And remember to check with your accountant or a financial professional about the tax implications of any rewards you plan to give.
  2. Be clear. Communicate your company’s reward policy to employees by including it in your new hire orientation materials or benefits package, and remind them of your policy when it’s time to conduct performance reviews.
  3. Be objective. When it comes to assessing eligibility for a pay increase or other benefits, ensure fairness and consistency by using a standard grading system to measure employee performance. Remember to document your reasons for offering a particular reward, including specific examples of performance.

Also keep in mind that federal nondiscrimination laws require that bonuses be provided on a nondiscriminatory basis. This means the eligibility criteria for bonuses must be applied in a nondiscriminatory way, and eligible employees must receive bonuses in nondiscriminatory amounts. (States may have their own requirements, so be sure to review your state’s nondiscrimination laws.)

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