The fourth quarter of any year is the most important three months for any business. Sales boom, consumers look for new products and services, and companies begin to plan for the next fiscal year.
But, as is the case with almost any holiday, what about the bonuses? Employees have come to expect end-of-year pay bumps, and many employers have consistently given them. But this isn’t a practice of all companies. So, should you dole out your extra business dollars in the form of holiday bonuses, or not?
To help you to decide, it’s important to take you on a little history lesson.
The history of holiday bonuses
It was common 19th-century practice for employers to give gifts to their employees around the holidays. Companies such as Ford and J.P. Morgan often gave turkey, candy, watches, or gold coins to their hard-working teams.
Then, as the century turned to 1900, U.S. employers began to substitute the traditional holiday gift with cash bonuses. It was a revolutionary idea at the time, and one that began to catch like wild fire as the 20th-century marched on.
As is the case with any new idea, there were powerful and influential “first-movers” who made the gift of holiday bonuses an accepted trend. In 1902, for example, J.P. Morgan broke bonus records by giving each of their employees a full year’s salary as a holiday present.
Other companies, while not as generous as J.P. Morgan, routinely gave their employees small cash denominations between $5 and $25, based on years of service. From that point on, it seemed, the idea of holiday gifts on behalf of employers changed from a physical item to a cash bonus.
The trend continued all the way until the 1950s when a firm announced a reduction in its annual holiday bonus as a way to save money on a new retirement plan. The union that represented the firm’s employees tried to renegotiate the bonus but was denied by the firm.
The union appealed to the National Labor Relations Board, which ruled that a holiday bonus couldn’t be considered gift but instead a portion of a worker’s wage. It seemed as if the 50-year run of expected holiday cash bonuses had come to an end. Still, the tradition was kept alive by many businesses and end-of-year pay bump is still prevalent today.
Giving a bonus to your employees
Holiday bonuses aren’t required. The National Labor Relations Board said so.
Further, never have 100 percent of U.S. companies paid a holiday bonus. In 1950, for example, studies found that 48 percent of businesses paid an end-of-year cash bonus. And that number continues to decline ever since the Labor Relations Board ruling. Today, roughly 36 percent of U.S. employers pay a holiday bonus.
But before you follow the trend and put an end to your holiday cash reward, consider this:
Psychological studies have found that a holiday bonus is a great form of recognition and can motivate employees to work harder and increase their loyalty. But, before you start doling out your cash, psychologists also found that if a bonus isn’t tied to workplace performance, it’s ineffective as a motivator.
So, they recommend that if you give out a holiday bonus, tie it to exceptional work performance. Then, your employees will be happy and motivated to work.