In recent years the Christmas Bonus has been a species in decline. Once an American staple, it went out of favor for a couple of reasons.

First, you couldn’t call it the Christmas Bonus anymore if you wanted to be politically correct. And unfortunately, Year End Bonus or Holiday Bonus just doesn’t have the same cache with most of us.

Second, and more importantly, the argument began amongst compensation professionals that an obligatory bonus at the end of the year doesn’t really affect behavior. The goal of compensation is to incent employees’ performance. If they get a bonus every year just for showing up, where’s the motivation?

2008 and 2009 saw all bonuses decline a great deal due to economic conditions. And I suspect most employees were fine with that decision. Obviously, if the company goes under they don’t have a job. However, now we’re seeing an uptick in the economy and the overall numbers say that more companies are bringing back the bonus. Highlighted in this article, Christmas Bonuses Are Back, by Tom Johansmeyer, is a study done by Challenger, Gray and Christmas.

So why bring it back?

Because right now it’s the perfect gift. By my definition, the perfect gift follows two basic principles. It’s needed by the recipient. It’s not expected because nobody thought the giver could afford it or because the giver isn’t known for such generosity (or they just usually aren’t paying attention to others’ needs.)

Giving a Christmas Bonus sends some powerful messages to your employees:

  1. We are a strong company.
  2. We care about our employees. Even at the expense of our bottom line.
  3. We don’t want you looking around when the economy recovers.

Sure, the Christmas Bonus may not affect performance directly but it does a lot of good for the psychology of the work force. Positive things are said about a company who takes care of their employees. Great performers recognize loyalty as well. I’ve personally heard co-workers talk about maneuvers like this for years.

Yeah but, they really took care of us during the dot-com bust.
I’m going to stick with them.

This could be a great competitive advantage as well as talent starts to become scarce again. The companies who choose to keep the money locked up for a little while longer will lose employees to those companies who are willing to pay for it. And the cost now is much, much lower than it will be during another boom.

So go ahead, show the Christmas Spirit (or Holiday Spirit) and part with some gifts. Even a nice spiraled ham might do it for most employees. But please do something; you won’t be disappointed.