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3 Things to Consider with Holiday Bonuses

11/14/2017

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As December approaches, and everyone begins to get into the holiday spirit, the anticipation for potential holiday bonuses also enters the scene. Holiday bonuses can look different from employer to employer, and there are several things to consider when it comes to payroll best practices. For employers who desire to express a little extra generosity during the holiday payroll season, here are three things to consider from the Human Resources perspective.

Gratitude is the Goal

The ultimate goal of a holiday bonus is for employers to express gratitude to employees, especially if they have performed well. While employers can show appreciation in a variety of ways all year long, the holidays are a wonderful time of year to share some added generosity, as these bonuses can help employees with Christmas shopping, a family getaway, or higher utility bills during the cold weather.

Gathering the Gift

From festive parties to gift baskets to extra time off, there are multiple ways to reward your employees during the holiday season. A monetary bonus will almost always be the preferred choice of your employees. If your company is in the financial position to give a monetary bonus, consider it above using finances for lavish events or gift items that employees might not use. If your company can't afford to give a holiday cash bonus, at least consider giving the gift of an extra day or two of paid time off to spend with family or friends.

Remember the Rules

A holiday bonus should never be a last-minute surprise, so let employees know what is planned in terms of a holiday bonus, and make sure to distinguish the difference between a holiday bonus and a year-end bonus, if applicable. It’s also important to note that any monetary holiday bonus must be reported on an employee's W-2 form as taxable income and must be included in the employee’s 2017 W-2, with the receipt of payment showing on or before December 31, 2017. If giving an hourly employee paid time off, remember that it has the same tax consequences as if the employee was on the job, meaning that the pay is reportable and taxable.

Also, it’s critical to know the difference between discretionary and non-discretionary bonuses. Under the Fair Labor Standards Act (FLSA), non-exempt employees who have worked overtime during the bonus period may need to have their overtime rate recalculated if the bonus is non-discretionary, which could mean more money owed to the employee. This can be quite complex to understand and to administer, so it is essential to consult with an HR or payroll professional to ensure proper compliance.

All in all, employers who give holiday bonuses can expect happy employees who will feel appreciated for their time and service. The payroll and Human Resources professionals at LBMC Employment Partners are ready and willing to offer advice and helpful tips for holiday bonus best practices, so contact us today to learn more!

Tagged with: holiday bonus, payroll