By Connor Smith, Accountant at Hive Business
It’s the most wonderful time of the year, however, the thought of working out what to give your staff as a Christmas bonus can turn festive joy into an early Boxing Day headache. Many business owners ask themselves the same questions each year – what amount should I give my staff, however, a Christmas bonus need not all be about the money. You want to make sure that you’re giving the right kind of gift to your employees. If you aren’t careful, you run the risk of your gesture of goodwill having the opposite of the intended effect. Socks and cheap teenage deodorant year after year, for example, while well-intended, don’t make for a particularly happy 24-year-old on Christmas day (sorry nan if you are reading).
Find below some ideas on how you could reward your employees this Christmas time.
Before we get into additional bonuses that you could reward your staff with, there are a number of basic level bonuses that you should consider providing to your staff, and that you can enjoy the tax benefits of providing.
You can provide your staff each Christmas with non-cash gift vouchers worth up to £50 each, without having to worry about any unwelcome tax consequences on your employees! In addition, you can then claim the cost of these vouchers against your own tax.
As an alternative, you could consider giving your employees a small hamper of treats up to the same limit of £50 per employee. Consider delegating this hamper task to a member of your practice also, to encourage the team to get involved and onboard with the idea.
Probably the most expected ‘gift’ each year is the annual staff Christmas party. It may seem like a given, but don’t underestimate the goodwill you can generate with your staff by throwing a good festive soiree!
Consider teaming your annual Christmas party with a practice development day, to debrief the staff on the performance of the practice over the year, how their input had an impact on the results, and commending any particular members of staff for going over and above in the year (this should be voted on by the rest of the staff members). This is a great opportunity to let everyone unwind, whilst pulling together under a common goal moving into the new year.
One For All
One of the trickiest considerations of providing a Christmas bonus is debating if different members of staff get different bonuses. Avoid this issue altogether and (similar to the gift voucher idea above) provide a standard, flat rate bonus for every member of staff. This will eliminate any staff rivalries and comparisons and give the message that everyone is equal, encouraging rapport among the team.
Salary Based Bonus
Another equality-based bonus idea, each member of staff receives a bonus based on a percentage of their annual salary (e.g. 1.5%). This will result in different amounts being received by different people, however by sticking to one rate for all, your team will have a clear idea of what bonus they can expect each year.
The downside of both of these flat-rate bonuses, however, is that individual results and performances aren’t encouraged.
If your staff members have individual goals or targets, you should be able to measure their performance against these goals and identify which members of staff have met, exceeded or fallen short of their targets. Based on this, you’ll be able to set a culture among your team that going over and above does not go unrewarded, and it encourages ownership and involvement in the continued success of the business. You may, however, wish to keep individual performance-related measures separate from Christmas activities.
Profit Based Bonus
A middle ground between performance and flat rate could be a profit or turnover based bonus. For example, if you had practice-wide target income of £1m for the year and you exceeded this by 5%, a 5% salary bonus could be awarded to all staff. Alternatively, you could decide in advance that 5% of profits each year are set aside for staff bonuses, which are then divided equally between the team.
A profit-based bonus still encourages the team to take a shareholder attitude to the performance of the business but removes some of the individual competitiveness of a performance-related bonuses.
THE CRUCIAL ELEMENT – COMMUNICATION
No matter which way you decide to go with your approach to bonuses, it’s vital that you communicate your decision to your staff with the reasoning behind the approach. You’re likely to face questions on why you went with this bonus (especially if this is a change from how things have been done previously), so honesty is always the best policy. Be prepared to answer these questions in a clear and confident manner, whilst always reassuring your staff that you want them to be rewarded for their efforts in the fairest way possible.
And Don’t Forget The Tax
As with any cash bonuses you plan on paying to your team, you have a responsibility to report these in the correct manner under PAYE, which will result in tax and national insurance being deducted from the gross bonus amount before the net amount is paid to the employee. Make sure you tell your payroll provider of any planned bonuses before you make the payment!
If you need help with payroll or how to implement a Christmas bonus at your practice and how to effectively portray this to your team, get in touch.