Guide To UK Christmas Bonuses: Spreading Festive Cheer
Xmas bonuses are a fantastic way for businesses to reward employees for their achievements and spread festive cheer. Not only do end-of-year rewards lift up employees during the holiday season, but they also drive employee engagement, morale and productivity. Oh, and they help companies attract and retain top talent, further helping to increase business success!
By delivering the right type of bonus, you can boost both your employees and your business throughout the festive period and beyond. So, keep reading to discover all you need to know about types of Christmas bonuses, UK rules and regulations, the benefits, and why festive rewards may be a better alternative. But most importantly, get ready to celebrate your people with meaningful boosts…
A bonus is a payment, gift or any other type of reward that is given to an employee on top of their regular salary, typically to recognise and reward their hard work at the end of the year. While there are several types of bonuses, they tend to be awarded based on an employee achieving a certain goal or the company’s overall performance.
Nowadays, more and more employees expect to receive rewards. There’s no requirement or obligation for businesses to provide bonuses, but an employee may be entitled to one if it’s stated in their contract and they’ve met the required conditions.
WHAT IS A CHRISTMAS BONUS?
Finally, it’s also worth saying that your business may not be required to deliver holiday bonuses, but it’s definitely something worth considering. They’re a fantastic way to spread festive cheer, celebrate achievements, motivate your people and lift them up with meaningful boosts!
WHAT’S THE DIFFERENCE BETWEEN A DISCRETIONARY AND NON-DISCRETIONARY BONUS?
Discretionary bonuses are similar to gifts in the sense that they’re not awarded based on performance or for reaching specific goals. Employers aren’t obligated to deliver discretionary bonuses so employees can’t expect to receive one.
On the other hand, non-discretionary bonuses are awarded based on pre-defined criteria. Employers will outline what the requirements are in advance, and if an employee meets them, they’ll be rewarded. Simple!
It’s also worth mentioning that even though a bonus might be described as discretionary, it doesn’t always mean that’s the case! For example, employers aren’t required to provide bonuses for reaching work anniversaries. But if it’s stated in an employee’s contract, the bonus must be delivered regardless of whether it’s labelled as discretionary. The same goes for Xmas bonuses and it’s up to you as an employer to clearly outline which type you’re delivering to your people.
ARE EMPLOYEES LEGALLY ENTITLED TO A CHRISTMAS BONUS IN THE UK?
In the UK, there’s no legal requirement for employers to offer any kind of bonuses. However, employers are contractually obligated to deliver them if it’s stated in an employee’s contract or in any company policies and the conditions of the bonus being awarded are met.
It’s also worth saying that while it’s not a legal requirement for companies to offer festive rewards, having a bonus scheme or reward-based scheme in place is recommended. Why? Because it’s a great way to boost your people and drive engagement, motivation and business success!
DIFFERENT TYPES OF CHRISTMAS BONUSES
There are several types of rewards that your company can offer to employees. Let’s take a look at the most popular ones and explore the benefits to help you decide whether they’d work for your company and your employees.
Straightforward and simple to deliver, flat-figure bonuses involve paying every employee the same value for their bonus. As flat-rate bonuses are given to employees regardless of salary or performance, they’re an excellent way to ensure fairness and inclusivity within your company. If that wasn’t beneficial enough, this type of bonus is easy to manage and calculate, making it a popular choice for companies wanting to deliver simple yet uplifting boosts to their employees!
FLAT-FIGURE BONUSES
What they say on the tin, performance-based bonuses are delivered to employees when they’ve successfully hit specific performance targets. While they require tracking and management throughout the year, performance-based bonuses are a fantastic way to motivate your team, reward their achievements, and provide healthy challenges that encourage individuals to go the extra mile. All these things help create a culture of hard work, appreciation and recognition that will benefit both your people and your business.
PERFORMANCE-BASED BONUSES
Percentage-based bonuses involve calculating a set percentage of each employee’s salary and paying it back to them as a reward. This makes it easy for you and your employees to work out how much they can expect to be given. However, more importantly, percentage-based bonuses allow you to reward employees fairly. They’re a great way to show your appreciation and ensure each of your employees feels valued equally.
PERCENTAGE-BASED BONUSES
A strong option for larger companies, profit share-based bonuses are another simple and fair way of lifting up employees. Companies will save a portion of their annual profits and split them equally between their team members. This type of bonus is highly recommended for companies that experience consistent annual growth. If you decide this is the right choice for your company, remember that you must update your employees throughout the year to let them know how the business is performing.
PROFIT SHARE-BASED BONUSES
Looking to deliver more personalised and unique bonuses? Recognition-based rewards are the perfect choice! This type of bonus focuses on sharing appreciation in the form of thoughtful gifts, rather than monetary rewards. While we all love a bit of extra cash in our back pockets, nothing beats receiving a meaningful gift that makes you feel valued and seen. From shopping vouchers to reward points, there are plenty of ways you can deliver rewards that will lift your people up during the festive period and beyond – because boosts aren’t just for Christmas!
RECOGNITION-BASED BONUSES
THE BENEFITS OF HAVING A CHRISTMAS BONUS SCHEME
Rewarding your employees during the holiday season is a great way to spread cheer to your employees and, in turn, positively impact your business. Let’s take a look at just a few of the benefits of winter bonuses:
IMPROVED MORALE
A whopping 84% of workers agree that Xmas bonuses improve employee morale which shows how powerful they can be. By delivering the right rewards, you can recognise your people’s achievements and say a special ‘thank you’. This will help them feel valued and appreciated for their hard work which will mean they’re more likely to go above and beyond. In other words, take care of your people and they’ll take care of your business!
BETTER ENGAGEMENT
Employees who receive recognition are twenty times more likely to be engaged, and engaged employees equals higher productivity and lower employee turnover, among other things! End-of-year rewards are a fantastic way to recognise your employees’ achievements, boost engagement, and motivate your employees to hit their targets throughout the year.
INCREASED PRODUCTIVITY
Spread some Christmas cheer and drive employee productivity. By showing your employees that you appreciate their dedication and efforts, you’ll encourage them to be more productive as they know their work doesn’t go unnoticed.
FESTIVE BONUSES: UK RULES AND REGULATIONS
If your company decides to deliver Christmas bonuses, UK regulations state that you may have to declare them to HM Revenue and Customs (HMRC), then deduct and pay tax and National Insurance on them. This will depend on the type of holiday bonus you choose.
Any cash you pay your employees as a holiday bonus is considered earnings. Therefore, you must add the value of the bonus to each employee’s other earnings, then deduct and pay Pay As You Earn (PAYE) tax and Class 1 National Insurance through your payroll.
CASH BONUSES
If you deliver goods to your employees as Christmas gifts that aren’t considered trivial benefits, you must declare them on form P11D and pay Class 1A National Insurance on the value of the gift.
Trivial benefits are non-cash gifts that cost under £50 and aren’t mentioned in the employee’s contract.
GOODS
REWARDS: AN ALTERNATIVE TO CHRISTMAS BONUSES
While festive bonuses provide many benefits to both employees and businesses, a top-tier employee reward programme may be a better alternative for your business. Alongside being able to boost employee morale, motivation, productivity and engagement, there are plenty of other benefits to choosing rewards. Here are just a few examples:
- Easy to deliver
- Provide a personalised touch
- Tailorable
- Fewer tax implications
- Plenty of options for rewards
- Cultivating a culture of appreciation
And the list could go on!
If you’re looking to deliver truly uplifting holiday rewards, we’re here to help. With our reward and recognition solutions, we can help you create a tailored benefits package that is sure to lift up your employees throughout the holidays and beyond. Ready to start boosting your people? Book a demo today and let’s chat about how we can deliver your ‘Boost Christmas’ with the rewards that will genuinely resonate with your people. Bring on the festive boosts!
