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December 06, 2001
Holiday Bonuses Out, Performance-Based Ones In
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number of companies awarding bonuses during the holidays is dwindling, according to Hewitt Associates, the management consulting and outsourcing firm.

Hewitt surveyed 421 U.S. companies for its "2001 Holiday Bonus and Gift Study," and found that 69 percent will not offer any type of holiday bonus (e.g., cash, gift or food) this year.

This is up slightly, compared to Hewitt's 1999 and 2000 studies, each of which revealed that 64 percent of respondents did not have a holiday bonus program.

The 2001 study shows that 58 percent of companies have never had a holiday bonus program, 10 percent had a program but have discontinued it, and 1 percent are considering a holiday bonus program.

Of those companies that canceled their holiday bonus initiatives, 13 percent did so in the 1980s, 50 percent did in the 1990s, and 34 percent discontinued their programs in 2000 or 2001. (The remaining 3 percent cancelled their programs before 1975.)

"As the number of companies offering a holiday bonus decreases, we're seeing performance-based award programs increase," said Ken Abosch, senior consultant for Hewitt Associates. "Performance-based pay is not only designed to help employees focus on company goals and objectives, but it also eliminates 'entitlement' issues that often arise with a holiday bonus plan."

The Hewitt study also shows that 43 percent of the respondents that have never awarded a holiday bonus choose not to due to cost. In addition, almost one-third (32 percent) of the respondents that have never had a holiday bonus program choose not to because this type of program is not consistent with their reward philosophy. In fact, of the organizations with a differing reward philosophy, nearly all (95 percent) have a pay-for-performance plan.

(As a comparison, the Hewitt "2001-2002 U.S. Salary Increase Survey" shows that 81 percent of companies have at least one type of variable pay/pay-for-performance plan in place, up from 78 percent last year and 51 percent in 1991.)

Say it with cash

Of the 31 percent of companies that have a holiday bonus program, 36 percent provide a cash bonus, 27 percent give a gift certificate to a local retailer and 20 percent reward employees with a gift of food (e.g., turkey or ham). In contrast, of all 421 companies surveyed, 67 percent host a holiday party. (Some employers offer more than one type of holiday bonus to employees.)

This study also found that 60 percent of companies providing holiday bonuses budgeted less than 1 percent of payroll expenses for these awards.

Meanwhile, the average monetary value of the bonuses and gifts varied greatly by award type. For instance, cash awards tended to have the highest value, with companies spending an average of $634 per employee. For gift certificates, organizations will spend $69 on average for each worker, while a food gift costs an average of $33 per employee.

"For some companies, a holiday bonus is part of their culture and helps define the organization," said Abosch. "Meanwhile, other organizations use a holiday bonus as a way to build morale and thank employees for their efforts during the past year."
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