The SME Guide to the Christmas Bonus

13 / 11 / 19

The festive period is fast approaching and businesses will have different ways of rewarding their employees for their contributions this year. This could span all manner of things from extra holiday during the month of December to Christmas parties and bonuses. But what should you be doing for your employees to reward their efforts?

Start-ups often forgo bonuses because they have yet to find financial stability. On the flip-side large corporates have these types of bonuses ingrained into their system and tend to actually be thought of as part of the employee’s remuneration package. As an SME, you fall into that middle category and so it’s important that you take into consideration why bonuses are given.

Why give a Christmas bonus

Christmas signifies the end of the financial year for many businesses and is an extremely expensive time of year in terms of the amount the UK spends on Christmas, from food and drink to presents and family get togethers. As a result, Christmas time seems to be an appropriate time of year to reward your employees if the budget can stretch. It’s a great way to end the year and will form part of your reward and recognition scheme. Moreover, bonuses will keep your employees happy, work towards improving your retention rates and you don’t have to go overboard.

Of course, every company is unique and so it would be very difficult to give an average amount to base your bonus upon. However, below we will cover the different types of bonus you could give to your staff to hopefully ensure you give the best choice for your company. Whatever system you choose, just make sure you communicate this to your employees. Remember, people talk and the last thing you want to happen is to reward your employees, only to find lots of talk about why ‘so-and-so’ got more. Make sure you communicate from the outset and are ready with honest answers. Implementing a fair system will ensure that all employees feel appreciated which is the reason you are giving a Christmas bonus.

Flat figure

This is possibly the easiest bonus of all – You give a flat rate to all of your employees. You are showing your appreciation fairly to all employees and are making a clear differentiation from anything to do with salary performance. You can communicate that all employees will be getting a flat rate and so there will be no mutterings behind closed doors. The only issues with this type of bonus is that you are rewarding everyone with the same amount, without taking into consideration their inputs (and outputs), their level, motivation or engagement.

It’s also important to remember that you’re setting a benchmark for coming years and so whatever you give this year will have to be increased the following year!

A percentage of salary

The percentage of salary option means that everyone receives, for example, 2.0% of their annual salary. This can often work out as two-four weeks’ pay. This, like the flat rate amount enables you to easily detail what employees will be receiving. It’s impossible for them to compare figures as salaries will be different and it’s not often employees discuss their salaries with peers and colleagues. If conversations do take place, the only issue could be that it elicits larger conversations surrounding salary discrepancies!

Performance based bonus

This is possibly the most complex bonus as it’s based on your performance for the year. What you require behind this is a robust ongoing performance management process not a single annual appraisal. However, the message is a positive one as it communicates that employees should be helping the business meet its goals and objectives and those staff who are doing so, will be rewarded on this basis.

Profit share

A portion of the company’s profits are put aside and then distributed evenly amongst employees. This keeps things fair and equal in your employee’s eyes whilst also encouraging them to feel like a stakeholder in the business’ success. Communication, as always, is key – it’s important for everyone to understand how the business is doing financially and so this must be communicated at regular points throughout the year. If profits decrease year- on-year, you must inform your employees as this will obviously affect their Christmas bonus.


If budgets are running low, then why not have a think about other forms of recognition. In fact, we wrote a whole blog on this previously and so you may find some ideas here. But think about gift cards, a bottle of bubbly, chocolates etc. A written card with thanks will always go a long way in this instance also. Personalising gifts can be seen as going the extra mile, so think of buying gifts specifically for the individual, based on their likes, hobbies or interests.

No matter what type of bonus you choose or what type of budget you have, the goal is still the same – employee recognition and appreciation. Use Christmas as the ideal opportunity to make your employees feel valued. If you would like help introducing a bonus scheme or reward and recognition program to your business, why not contact us now on: 01453 297557 or email

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