Human Capital & Careers

The Ghost of Holiday Bonuses Past

This year nearly 80 percent of U.S. companies are employing variable-pay plans; only 37 percent are planning a year-end bonus for the rank and file.
Stephen TaubNovember 18, 2004

Waiting for a holiday gift from your employer? Bah, humbug!

This year, 63 percent of U.S. companies aren’t planning a year-end bonus for the rank and file, according to a new survey by Hewitt Associates.

Not that Corporate America has become a collective Scrooge — at least, not lately. Rather, this year nearly 80 percent of organizations plan to offer variable-pay plans — performance-based bonuses that must be re-earned annually — compared with just 59 percent in 1995, according to Hewitt’s survey of 1,185 companies nationwide.

“With increased pressure to improve business results, more companies are moving to variable-pay programs,” said Hewitt’s Ken Abosch, in a statement. “Variable pay is designed to help employees concentrate on company goals and objectives while eliminating ‘entitlement’ issues that often arise with a holiday bonus.”

Of those companies that are planning a holiday bonus this year, 85 percent have budgeted less than 1 percent of payroll expenses for these awards, while 9 percent have budgeted between 1 and 2 percent, according to Hewitt. Most often, they’ll dole out the goodies in the form of retailer gift certificates (49 percent), as well as cash (37 percent) and food (21 percent).

Organizations with variable-pay programs, on the other hand, are budgeting nearly 10 percent of payroll in 2005 for those incentives. “They’re clearly sending a message to employees that they will be rewarded for high performance,” said Abosch.

The Hewitt survey also suggests that whatever Tiny Tim might believe, “each and every one” of us didn’t always receive a holiday bonus; approximately 46 percent of the surveyed companies said they had never offered one. Another 16 percent discontinued their program — and of those organizations, 54 percent eliminated holiday bonuses during the 1990s.

Why have companies bid farewell to these holiday bonuses? The biggest reasons are cost (65 percent) and entitlement issues (37 percent), and now the development of pay-for-performance programs (28 percent), according to Hewitt.

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