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Managing Employee Bonuses

Managing Employee Bonuses

Managing Employee Bonuses

While not every company offers annual bonuses, it is a nice perk you can use to retain your best employees and encourage stellar performance throughout the year. Even in hard economic times, you may be able to find a bonus program to fit your company’s financial abilities.

End of Year Bonus Program Option 1: Cash

By far, cash is the most popular end of year bonus program option you can offer. Providing a cash bonus, either as a separate check or as part of a December paycheck, can help employees cover the cost of holiday expenses. To stay in compliance with the IRS, make sure you report cash bonuses so you or your employees can take care of the applicable income taxes.

To determine the amount of the cash bonus, you can use one of two methods:

  1. Defined bonus payment
  2. Discretionary bonus payment

With the defined bonus payment, employees know how much to expect at the end of the year as long as they meet certain objectives based on their job responsibilities and company revenue thresholds. Discretionary bonus payments are awarded without without being linked to a performance plan. The latter option gives you more flexibility, but can cause problems if your employees discuss their bonuses and find that not everyone was rewarded equally.

End of Year Bonus Program Option 2: Gift Cards

While you must typically report gift cards to employees as taxable income to them, they are still a viable option for end of year bonuses. Obviously, gifts cards that spend like cash will be most popular with your staff, but cards from restaurant chains or stores that provide multiple spending options can still make a good bonus. When purchasing high quantities of gift cards, always inquire as to whether you qualify for any sort of a discount.

Gift cards can also be a nice option for employees when they don’t usually receive an end of year bonus.

End of Year Bonus Program Option 3: Food

Very rarely is it appropriate to give tangible goods as an end of year bonus. The “Christmas ham” is a good example of a once-appropriate bonus that few businesses still offer employees. If you are planning to give the gift of food as an employee bonus, make sure to consider:

  • Cultural or religious dietary restrictions
  • Employees who are vegan or vegetarian
  • Food allergies

While few people would turn away free food, it will appear as if you don’t know your staff at all if you give a ham to someone who can’t eat pork, assorted gourmet nuts to someone with nut allergies or steaks to someone who doesn’t eat meat. Unless you know for a fact that your employees will be able to enjoy the food gift, stick to cash or gift cards.

Regardless of which bonus option you select, remember that it is a token of your appreciation for the hard work of your employees during the previous year. Don’t feel like you shouldn’t give a bonus just because you can’t afford to make it sizable. As long as you’re fair in determining bonus amounts, your employees will appreciate the gesture.

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