A Guide to Giving a Holiday Bonus

Dec. 6, 2017

Tips on how to effectively plan and budget for your annual holiday bonus giveaway


Being in the industry full time since 1972, Tony Passwater has been through several holiday seasons.

So Passwater, the president of AEII, a coaching and consulting company helping collision repair shop owners worldwide, understands shop owners’ desire to incentivise their employees, especially around the holidays.

But for a lot of shop owners, the desire to give holiday bonuses is more emotionally charged than it is grounded in reason, according to Passwater. A failure to efficiently plan for such bonuses can cause an unorganized system in which no employee expectations are set and your budget goes awry.

While it’s important to make your employees feel valued around the holidays, sufficient planning and goals need to be set in the beginning of the year in order to give those bonuses at the end of the year.

Passwater spoke with FenderBender to give some tips to keep in mind when planning for your next holiday bonus giveaway.

First of all, you have to establish some kind of qualitative measure for your bonuses. What I see as a big challenge is that some shop owners get into the spirit of the season and then they just start deciding they need to give a bonus and there’s never any rationale. It causes problems because great employees that have been there for a long period of time are not treated any differently from the person who started last week.

You have to establish criteria in which those bonuses are given, such as performance-based criteria. The criteria needs to be expectations that are important to the company and not just focused on how many hours are turned. Discuss what is expected of your employees based on the criteria in the beginning so they know what benchmarks they should be hitting.

Those criteria need to be adjusted depending on the different positions in your shop. Sales team criteria should differ from your tech’s criteria.

I have seen that in some employee handbooks, the holiday bonus is mentioned. You just need to word it so it’s clear the bonus is based on the company’s performance.

Some mention the holiday bonus while negotiating employment with a new hire. You tell them that this is what we pay, plus the opportunity of a holiday bonus, etc.

If you don’t have a process in place that establishes what the bonus is going to be, then it’s an emotional thing at the end of the year. Let’s say all of a sudden, the week before the bonuses are given out, the owner has a problem with an employee. The owner then takes it out the next week on his bonus, but the employee was there the entire year and doing a good job. They take a small sampling of what they feel like at that moment, versus what the employee contributed throughout the year. Once the criteria is set, you need to be diligent in tracking it with your employees.

One of the biggest mistakes is that shop owners expense the bonus out in the same month that it is being given. In the beginning of the year, you need to establish how much you are going to set aside for bonuses and accrue that money throughout the year. If it’s a year-end bonus, one-twelfth of it needs to be expensed out every month. That way, it is not as financially hard on the bank account in the month that you plan on withdrawing that money.

Instead of giving the bonus the week before Christmas, give the bonus at the beginning of the month so that they can go holiday shopping ahead of time. Also, if you wait until the third week in December to decide to give bonuses, it becomes based on a very small window of what your employees are doing in the moment versus their overall performance throughout the whole year.

I think it’s good to have a combination of both monetary and non-monetary bonuses, like giving time off around the holidays. For example, if Christmas Eve falls on a weekday, finish up the work the day before so your employees can have that day off. If it falls on a weekend, give them an extra day (either before or after) off.

Otherwise have a holiday gathering of some sort in the beginning of the month where you can give out your bonuses. If you do both, the monetary incentive doesn’t have to be as high of a value. You’ve also got a lot of holidays that you can take advantage of for rewarding employees throughout the year to make them feel like they’re important to the company.

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