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Bonus time at office might be better tied to results than holidays

It is bonus time in offices around the Magnolia State, which can be a sticky and tricky issue for many employers. Employees love getting a bonus, and it can be part of a compensation package that helps with employee satisfaction and job retention. But there can also be pitfalls to giving holiday or year-end bonuses.

“Bonuses at Christmas time are nice for employees because it is helpful to them at an expensive time of year,” said Archie King of Madison, a former counselor and HR consultant. “Unfortunately, Christmas bonuses often become an entitlement and considered only to be a part of their general compensation. If company profits are down and the Christmas bonuses are less than expected, the employees are often disappointed. Christmas bonuses become an expectation rather than an appreciation. Christmas bonuses also place pressure on the business owner when profits are down.”

King’s personal preference is to award bonuses at the end of the business fiscal year or at the end of each quarter. He also suggests that bonuses be tied to the net profits of the business.

“This gives employees a vested interest in the financial success of the company and rewards them for their contribution,” King said. “Depending on the profitability of the company, a range of 10% to 20% of the net profits should be awarded to employees based on merit. This practice will lend itself to making a bigger pie, the owners’ net profits will grow and the employees will feel like income partners. No longer are bonuses an entitlement, they are something earned. The downside to this is that the business owner doesn’t get to play Santa Claus.”

Performance-based incentives

One company that agrees with the approach recommended by King is HORNE LLP, a regional CPA and business advisory firm with headquarters in Jackson. HORNE does not practice the tradition of holiday bonuses.

“Bonuses are available year round to our team members,” said Bob Spring, director of human resources for HORNE. “They are based on goal completion and performance-based incentives.”

A source that asked to remain anonymous said that holiday or year-end bonuses are a very sensitive issue.

“Like overall compensation, it is normally a very confidential matter,” he said. “We give holiday bonuses, but I wouldn’t want to talk about how we determine how much bonus we give to different employees.”

Companies are less likely these days to give holiday bonuses, according to an article in the Christian Science Monitor, “The vanishing holiday bonus.” The article said in many companies, the year-end bonus is becoming a quaint memory of earlier times, when an extra envelope from payroll in December was an almost certain reward for everyone in a firm. Smaller companies are now more likely to give a holiday bonus than large companies. Larger companies are more likely to give performance-based bonuses.

Michelle Daniels, staffing division director for the CPI Group, Columbus, agrees that performance-based bonuses tied to the end of the year rather than Christmas are more common.

“From my experience, fewer companies give a bonus that is called a Christmas bonus,” Daniels said. “More companies now, if they give a bonus around the holidays, it is related to a year-end bonus based on results. It is company based or individually based. It is attached to a specific performance, so it is a reward for reaching goals. It is also an incentive to do the same or better for the next year, especially if there is a plan laid out and communicated on the front end.”

With Christmas or year-end bonuses, companies need to heed guidelines on taxes. Taxes also might need to be paid on gifts. At a certain level, gifts from a company are taxable.

Giving a few gifts

Gifts given by businesses to employees are common in the state. Particularly popular in Mississippi are food gifts such as Logan Farms Honey Glazed Hams. This time of year, Logan Farms Honey Glazed Hams in Jackson is swamped with orders from businesses for employees and also customers. Boopie Winstead, who co-owns the business with her husband, Bob Winstead, said businesses buying hams or turkeys for gifts around the holidays is a big part of their business.

“We sell a bunch of them,” Boopie Winstead said. “That is a large part of our business. It is a popular gift because everyone eats ham and turkey during the holidays. You don’t have to worry about size or color, and it is delicious. It is healthy, and everybody loves it.”

Most of the companies purchase gift certificates, so employees or customers receiving them can pick up the gift at their convenience. Some businesses come by and the turkeys or hams are put in a box to be delivery.

“We have had the store 12 years, and pretty much the same companies buy from us every year,” Winstead said. “So, they must be pleased. We are a service-oriented business. We do everything to give good service to our customers. You can’t buy this at the grocery. The specialty about our ham is it is a low-salt ham. So, it is a healthy ham. And we spiral slice it and glaze the hams right here in the store fresh each day. You can’t get that anywhere else.”

Contact MBJ contributing writer Becky Gillette at bgillette4@cox.net.

About Becky Gillette

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