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December 14, 2006
Employers Continue Shift Away from Holiday Bonuses

Thirty-four percent of companies will offer a holiday bonus program in 2006, down from 41 percent in 2005, according to a survey of more than 300 organizations by Hewitt Associates, a human resources services company.

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Hewitt says that holiday bonuses are continuing to decline in popularity as companies favor pay-for-performance plans to motivate and reward employees. The firm found that 80 percent of organizations are offering a variable pay program this year, up from 78 percent last year.

"The majority of companies have realized that only through performance-based awards can an organization effectively motivate and reward employees for helping achieve their goals," says said Ken Abosch, a consulting business leader for Hewitt Associates. Variable pay plans, as opposed to holiday bonuses, clearly connect employees to company performance."

Fifty-two percent of respondents to Hewitt's 2006 survey have never offered a holiday bonus, while 14 percent have discontinued their programs. Of those that canceled their holiday bonus initiatives, 65 percent did so between 2000 and 2006.

Companies said they eliminated holiday bonuses primarily due to cost (61 percent), employees did not value it (35 percent), entitlement issues (33 percent), and the development of pay-for-performance programs (21 percent).

Five percent of survey participants, down from 9 percent last year, said they will direct some or all of the money they would have spent on holiday bonuses to charitable organizations.

Of the companies that will offer a holiday bonus program this year, 39 percent said they will award cash, 37 percent will provide retailer gift certificates, and 27 percent will give employees a gift of food (e.g., turkey or ham).

In a recent survey on Compensation.BLR.com, 34 percent of respondents said their company will be offering a holiday bonus this year. Among those respondents, more than 60 percent said this year's bonus is the same as last year's, and nearly a quarter said this year's bonus is bigger than last year's.

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