The Christmas bonus payment is an additional payment made by some companies to their employees around the holiday season as a way of showing appreciation and spreading holiday cheer. The amount and eligibility criteria for Christmas bonuses vary between organizations. In this article, we will look at the key questions around Christmas bonus payments: who is eligible, how much is typically paid out, whether it is guaranteed or discretionary, how it is calculated, and when employees can expect to receive the payment.
Who is eligible for a Christmas bonus?
Eligibility for a Christmas bonus differs across companies. Here are some of the most common criteria:
- Full-time employees – Most companies restrict their Christmas bonus to full-time, permanent staff who work a minimum number of hours per week or months per year. Part-time, temporary, and contract workers may not qualify.
- Length of service – Some firms require employees to have worked there for a minimum period (e.g. 6 months, 1 year) to get the Christmas bonus.
- Performance – Better performing employees based on formal appraisal ratings may receive bigger Christmas bonuses in some organizations.
- Job level – Management and executive level roles often attract higher Christmas bonuses compared to junior staff.
- Employee status – Unionized staff may have Christmas bonuses built into their contracts, while non-unionized employees may get it at the company’s discretion.
So in summary, full-time, long-serving employees with good performance ratings and senior job roles have the highest chance of Christmas bonus eligibility. New joiners, part-timers, temps, and junior staff are less likely to get it.
How much is the typical Christmas bonus payment?
The average Christmas bonus payment ranges from $100 to $1,500 in most companies, depending on the company size, profitability, industry, and geographic location. Here is a breakdown of typical Christmas bonus amounts:
- Small businesses – $100 to $300
- Mid-sized companies – $300 to $600
- Large corporations – $600 to $1,500
- Top executives & management – Up to 1 month’s salary
Some of the highest Christmas bonuses are seen in the financial services, tech, pharmaceutical, and energy industries where year-end profits are higher. Employees in metro cities also tend to get higher bonuses than rural areas.
Is the Christmas bonus payment discretionary or guaranteed?
Most private sector companies treat Christmas bonuses as a discretionary payment that is dependent on the company’s financial performance and profits each year. The bonus amounts can vary or even be skipped in bad years.
In the public sector and some large legacy corporations, Christmas bonuses may be written into union contracts and employee agreements as a guaranteed benefit. For these workers, a fixed bonus amount is paid out regardless of profits or performance.
According to the Society for Human Resource Management’s (SHRM) 2019 survey, these are the most common practices:
- 61% of companies pay a discretionary bonus
- 39% offer a non-discretionary (guaranteed) bonus
So discretionary bonuses are more common, but a significant number of employers also commit to paying out a pre-fixed Christmas bonus annually.
How is the Christmas bonus amount calculated?
Here are some of the most common ways in which companies arrive at the Christmas bonus amount for each eligible employee:
- Percentage of annual salary – For example 1 week’s pay or 2% of annual salary
- Fixed dollar amounts by job level – For instance, $1,000 for VPs, $500 for managers, $250 for other staff
- Hours worked – Total bonus pool divided by total hours worked
- Company profitability – Bonuses higher in good years, lower when profits are down
- Individual performance – Higher rated employees get slightly bigger bonuses
- Combination of above criteria
Tying the bonus directly to profits and individual performance helps reinforce a pay-for-performance culture in the organization.
When will employees receive the Christmas bonus payment?
Most Christmas bonuses are paid out in the month of December in the weeks leading up to Christmas. Here is the typical timing:
- Early/Mid December – To help with Christmas shopping expenses
- Along with last paycheck before Christmas – Often added to a regular paycheck
- Day or week before Christmas – As a gift just before the holiday
- January (less common) – Due to year-end accounting schedule
Employees should check with their company’s HR department for the exact date when they can expect their Christmas bonus to be disbursed. The payment method (direct deposit, physical check) will match the regular payroll. Taxes and other deductions generally apply to these bonuses.
Some organizations also give employees the choice to forego the cash bonus in return for an extra paid day off around the holidays.
Do all companies offer Christmas bonuses?
Christmas bonuses are a common practice but not universally offered across all employers. According to HR industry surveys, here are the approximate percentages:
- 57% of companies in the U.S. paid holiday bonuses in 2019 (Aon Hewitt)
- 25% of employers offer guaranteed year-end bonuses (Mercer)
- 14% pay individual performance-based bonuses (SHRM)
So while over half of organizations pay some form of Christmas bonus, a sizable minority of around 40% do not. This may include smaller businesses, struggling startups, and companies that provide other employee benefits. Some firms prefer employee profit-sharing plans over one-time bonuses.
Are Christmas bonuses taxable?
Yes, Christmas bonuses are considered supplemental wages by the IRS and are fully taxable. The entire bonus amount is subject to federal and state income taxes, as well as FICA tax deductions for Social Security and Medicare.
Some special rules apply when bonuses push an employee into a higher tax bracket. But in general, the bonus will increase the tax liability of employees in the year it is disbursed. Any commitment by the employer to gross up or cover taxes is purely discretionary.
Are there any legal requirements around Christmas bonuses?
Unlike wages, overtime, and other compensation, there are no federal laws in the U.S. mandating that companies pay Christmas or holiday bonuses. The bonus is fully discretionary unless written into an employment contract or collective bargaining agreement.
State laws do not impose any Christmas bonus requirements either. Employers also have full discretion over eligibility rules, amounts, payment dates, and other terms. Taxes are collected when applicable.
However, any Christmas bonus promises made to employees in writing or verbally by management should be honored as a best practice. Dramatic reductions from past years should be communicated in advance to manage expectations.
What are the alternatives to Christmas bonuses?
While holiday cash bonuses remain popular, some employers are shifting to alternatives they consider more meaningful, such as:
- Holiday gifts – Restaurant vouchers, gift cards, hampers, etc.
- Vacation days – 1-2 days of extra paid time off
- Office parties & events
- Charitable donations – Company contributes to causes employees care about
- Spot bonuses & recognition awards throughout the year
However, most employees still appreciate and value a traditional Christmas cash bonus. Alternatives tend to work best as a complement rather than a full replacement.
Conclusion
Christmas bonuses help strengthen employee loyalty, morale, and engagement at a time of major expenses. While not guaranteed or mandatory, over half of employers pay some form of holiday bonus to the majority of their workforce. Typical amounts range from $100 to $1,500 depending on job level, company size, years of service, and individual performance. Some alternatives are gaining traction but cash bonuses remain the preferred norm.