What should you give your employees for Christmas?
Cash. Money. Moolah. Dinero.
That’s what they want, and that’s what you should give them.
Maybe you’re thinking, “But we have a nice Christmas Party at a fancy restaurant that isn’t cheap.”
That’s great—throw your party, but don’t think it replaces a bonus.
Your employees still want cash. They always have, and they always will.
Or, maybe you shuttled your whole team to the AMSPA show in Vegas a few months back and feel that should cover it. It doesn’t – the two do not have anything to do with each other.
Worried that giving cash will set expectations for every year? Sure it will, so what?
You MUST give your employees a Christmas or End of the Year or Holiday (whatever you want to call it AND no, it doesn’t matter how much you already pay them) gift.
So make it something they’ll appreciate.
Which, is Cash.
Are Gift Cards a Good Bonus?
“What about gift cards?” you ask.
Sure, gift cards are okay, but they’re not cash.
And here’s what usually happens when gift cards end up in the hands of busy working women with families:
they often become last-minute solutions to make everyone else happy. That thoughtful gift card you gave might very well end up in Drunk Uncle Bob’s stocking or be thrown into a hastily assembled gift bag because someone’s nomadic brother decided to show up with no notice.
Cash Bonuses Are Simple and Fair
So, back to cash.
“How much?” you ask.
You probably have a variety of employees—some who’ve been with you for years, some newer hires, part-time and full-time staff.
Easy solution: give a percentage of what they earned for the year. It’s simple and fair. 3% is a solid number. Run it through payroll, apply the same percentage across the board, and you’re done. No complaints, just happy people.
And hey, if you want to throw in a lovely plant because you gave them one last year, go for it. Just don’t forget the cash.
Tax and Legal Implications of Giving Christmas Bonuses
Now, let’s talk about the tax and legal implications of giving end-of-year or Christmas bonuses. Cash bonuses count as taxable income, so you need to run them through your regular payroll system. This ensures that all appropriate taxes—like federal, state, and FICA—are withheld correctly. Your employees will be taxed at their regular income rate, so there won’t be any surprises come tax time, and you’ll avoid compliance issues.
Running the bonus through payroll keeps everything above board and documented. The IRS frowns upon “off-the-books” bonuses, and it’s just not worth the risk. If you’re giving gift cards, keep in mind that these are also considered taxable income. The IRS treats gift cards like cash equivalents, so they must be reported as well.
To keep things simple and avoid surprises, maintain a consistent bonus plan. This way, expectations are managed, employees stay happy, and there’s no confusion about the tax side of things. Remember: simple, cash-based, and properly taxed is the way to go for a successful employee Christmas bonus.
