December 13, 2016

Giving Your Employees a Cash Holiday Present is Great… Except

By Paul Bieber

This is surely the time to reward your employees for their efforts this year. This is a long-held tradition… give a Christmas gift to every employee; it feels good to share the wealth.

So what kind of problems does Bieber have with this? Let me tell you.

Taxes. Many employers only take social security out of a bonus check, making the check seem larger. This is legal, but when employees gets their W-2, they may have to pay tax not previously planned for. You can ask your payroll service to take out a flat 20 percent for tax on this bonus. In the long run this works the best, and you won’t have angry employees coming to you in February.

Fairness. Is this a reward to the whole company or to the specific employees who crafted your success? If you give to some and not others, your morale will go in the sink. All it takes is one person to file a complaint that you were biased against him/her because of race, religion, gender, age, national origin, etc. (take your choice), and you’ll have investigations. If you have well-documented employee reviews showing man 1 did much better work than man 2, you will survive the audits. Not many small and medium sized companies have a good employee review system. I don’t recommend the Christmas gift as a time to honor the better workers.

3.  I know… pay everyone the same amount and there are no problems! Wrong, I’m sorry to say. If the hard workers get the same as the laggards, the good workers will either: a) go to another job where their efforts are appreciated, or b) lower their work efforts to equal the laggards. If you give every employee one or two weeks pay, does this help to solve this? NO! The most senior people, usually with the higher wages, will get a bigger check then than new kid on the block who may be working his heart out.

So, what does work? On the anniversary of each employee’s work, give a well-prepared review, discussing last year but with greater emphasis on the year-to-come. If this employee had a great year, this is the time to prepare a bonus check. 

Then, you will feel comfortable with giving one or two weeks as a Christmas gift, or a flat dollar amount for everyone.

With all the negativity in this blog, it still is a great year in our industry. I hope that every single reader shared in it. It was a great year for me beating back cancer with unlimited compassion and care from Elaine.

Next year will even be better! Our first grandchild is arriving in mid-February. To quote Lou Gehrig, “I am the luckiest man alive.” I wish my readers and your families a healthy and wonderful Christmas and a safe, prosperous and exciting New Year.