How to Award Good Year-End Bonuses
By Mark Di Vincenzo. Mark is a journalist with 24 years of experience and a New York Times best-selling author.
Every year, soon after Thanksgiving, associates at the largest New York City law firms await the announcement of their year-end bonuses. The venerable firm Cravath, Swaine & Moore LLP typically goes first, followed by other firms which often try to match Cravath’s bonuses, to keep their own promising young lawyers happy.
This year the bonuses ranged from $37,500 for the top and most experienced associates, to $7,500 for those who started their careers in 2011.
TribeHR's holiday gift? Swag!
Were they happy to hear these four- and five-figure numbers? They were not. Consider that some senior associates at Cravath and the other firms received a bonus of as much as $110,000 as recently as 2007.
The bottom line is that what makes a good year-end bonus really depends on who's giving it and who's receiving it. This year, sadly, most workers aren’t getting a dime.
According to a recently released survey of 500 business owners by American Express OPEN, only 29% of small-business owners are planning to give bonuses this holiday season. That’s up slightly from last year, when just 25% gave year-end bonuses, but way less than in 2005, when 54% of small businesses did.
A similar survey by Hewitt Associates found that of the companies that will give bonuses, fewer than half will give cash, spending a median of $250 per employee; less than 40% will give gift cards, with a median value of $35 per employee. The rest will give food.
Many companies that award bonuses do so based on seniority. Unfortunately, that’s not a good way to motivate employees, according to Ronald Riggio, Professor of Leadership and Organizational Psychology at Claremont McKenna College. Bonuses need to be tied to performance, Riggio says, and the bonuses must be large enough to be seen as worth the effort.
Companies that don’t have the cash should give Christmas gifts. If you go this route you need to do three things:
- Be honest. Let your employees know the company doesn’t have money for bonuses, but you appreciate their efforts and hope they’ll accept the gifts in that spirit.
- Make it clear that the gifts are not tied to performance, so employees won’t think the value of the gifts they receive is what the company thinks they’re worth.
- Personalize the gifts. Give a round of golf to an employee who you know plays golf. Give a nice box of chocolate truffles to someone who you know has a sweet tooth. Personalized, heartfelt year-end gifts can make employees feel valued more than cash.
Can’t afford even small gifts? Then how about giving the gift of time? Paid time off. Many employees appreciate a paid personal day or two, and clever business owners can find a way to let their employees know what it will cost the company. Make up a company “gift card” that says something like:
This card—with a value of $320 (16 hours of work multiplied by your hourly rate of $20 an hour)—is your pass for two additional days of paid time off next year. Enjoy!
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