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December 23, 1999
Holiday Bonuses Alive but Fading; Many Switch to Performance-Based Pay
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le the traditional holiday bonus or company-provided turkey is still alive in the 1990s, 64 percent of companies today do not offer any type of holiday bonus, according to a Hewitt Associates study of holiday bonus and gift practices at 268 companies nationwide. In fact, the majority of large employers (52 percent) have never had a bonus connected to the holiday season.

According to the study, 12 percent of companies reported discontinuing their plans in the recent past. Eighty-four percent of companies that canceled their programs did so in the 1990s, with another 10 percent eliminating their programs in the 1980s. When asked why they discontinued the programs, companies most often pointed to program costs, and the fact that they now tie all employee reward to individual and company performance.

"The money once used in holiday bonus programs isn't going away altogether--it's being delivered in different ways," said Ken Abosch, Hewitt Associates global compensation business leader. "Companies have realized that tying bonuses to business results is a more powerful way to reward employees and improve performance. Increasingly, they are moving away from an `entitlement mentality' and toward a performance-based pay model."

Cash (And Food) Still King

Of the 36 percent of companies that do provide a bonus or gift to employees during the December holiday season, 37 percent provide the bonus in cash, 29 percent give the gift of food (e.g. turkey, ham, etc.), 26 percent host a holiday party and 24 percent give employees a gift certificate to a local retailer. Some employers provide more than one type of holiday bonus to employees.

The majority of companies providing holiday bonuses (59 percent) budgeted less than one percent of payroll expenses for the awards, compared to 9.3 percent of payroll budgeted for performance-based plans in 1999. The average monetary value of the bonuses and gifts varied by award type. Cash awards tended to have the highest value, with companies spending an average of $767 per employee. Companies hosting parties for employees spent an average of $52 per employee, while the average value of a gift certificate was $35. The average monetary value of an edible gift was $23.

"Some companies feel strongly about providing a holiday bonus to employees, and the programs are firmly entrenched in the companies' cultures," said Abosch. "Many do so out of tradition and the fact that employees expect the bonus, while others use the bonuses to improve employee morale or to simply say `thank you' to employees for a job well done."

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