Holiday bonuses pros and cons

Pros and Cons of Holiday Bonuses

Distinct from a year-end bonus – which tends to be tied to an employee’s performance – a holiday bonus is simply a way to thank all of your staff for the work they do for you throughout the year. As with most business decisions, there are advantages and disadvantages to paying your staff a holiday bonus, so read on and decide for yourself whether this is the best route for your company.

Pro – happy workers are good workers

Any sign you can give your staff that you appreciate the work they do for you – especially if it’s a financial or another tangible sign – tends to result in higher levels of employee satisfaction. And employee satisfaction is highly correlated with improved performance and productivity.

If you’re able to give significant holiday bonuses consistently, you’re also likely to see an improvement in worker retention rates.

Con – it’s not going to be cheap

Let’s get the most obvious disadvantage to holiday bonuses out of the way first: they come with financial implications for your business, which will be more costly the more staff you employ.

At the end of a wildly successful year that expense might seem manageable, but it could come back to haunt you in leaner times – especially if you have created expectations for your staff (more on this further down).

Staff working hard
Holiday bonuses can help you attract and motivate high caliber employees.

Pro – attract great staff

In some industries, it can be tough to recruit and retain the best staff in the business – employees who are not just good at what they do but hard-working, loyal and consistent.

In some industries, it can be tough to recruit and retain the best staff in the business – employees who are not just good at what they do but hard-working, loyal and consistent.

Almost nobody is going to take a job purely on the basis that the company pays a holiday bonus, or leave a job purely because they don’t get one. But if your business offers decent pay, benefits and working conditions, a generous holiday bonus can be the frosting on the cake – not only because of the financial incentive itself but the appreciation and respect for your staff that it represents.

Con – raised expectations can lead to disappointment (or complacency)

If you consistently pay a generous bonus to your staff every holiday season for a few years in a row, sure they’ll appreciate it – but they’ll also come to consider it an expected part of their annual remuneration, and possibly take it into account when budgeting for the expensive holiday season. So what happens if you have a bad year and can’t afford to pay bonuses, or can only pay them at a much-reduced rate? Your employees will be upset to find themselves without the extra cash they may have been counting on – and they’ll be resentful of you for removing a perk to which they’d become accustomed.

Office Holiday Party
Throwing an office holiday party is a great alternative to show your appreciation for the hard work your employees have given all year long.

Alternatives to holiday bonuses

If you want to show appreciation for your staff around the holidays but are put off by the idea of handing over extra cash, then depending on your budget there are a number of alternatives. You could give out non-cash gifts – a Christmas turkey, or coupons for a particular store – which is likely to be much less expensive. A gift with a small cash value doesn’t risk the offense that could be incurred by giving the same amount in cash. You could save even more money if you’re able to work out a deal with a local trader.

Another option is you could throw a holiday party to show your workforce how much they mean to you and allow them to relax in each other’s company. And if your budget is even lower, don’t risk financial trouble by forking out for gifts or parties you can’t afford – your employees won’t thank you for short-term generosity if it puts their jobs at risk! A nice way to make your staff feel valued is for you (or for the head of each department in a larger company) to write each one a personal note or card thanking them for their hard work over the year.


The holidays are a great (but not the only!) time to go that extra mile for your employees and make them feel glad to be a part of your organization. Holiday bonuses are one way to do that, but they’re not a perfect or complete solution. There are other ways to show appreciation that may work better depending on your company’s budget, ethos and workforce. Now you have a better idea of the advantages and drawbacks of paying holiday cash bonuses; you should be well placed to decide whether they are the right route to choose for your business.


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