As the year winds down, perhaps you are thinking of showing your appreciation to your employees. Maybe you have thought of a cash gift, gift card, holiday event, or some other gift for your employees.
Appreciation is always a nice thought. But, you are an astute small business owner and you want your gift to work hard for you-you want the most bang for your buck.
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So, first, you want to ask yourself what you want to accomplish with your generosity? Do you want to express appreciation alone? Or, do you want to build loyalty and a sense of belonging? Do you want to build teamwork and better relationships across employees? Do you want to treat everyone equally? Or, do you want to reward some employees with more? Are all gift ideas the same and do they all deliver the same results? Of course not.
As a quick aside, the best appreciation programs with the most credibility and effectiveness take place on a year-round basis. They generally focus on milestone accomplishments, birthdays, company anniversaries, and the like. However, the holidays are close and we will focus on the end of the year in this article.
If you ask employees what they want, they always vote for cash or gift cards. Obviously, employees value cash and it offers the greatest degree of flexibility for the employee. However, cash can be expensive to give. There are tax consequences. For example, if you give employees an extra 0, after payroll taxes and federal and state withholding, they are going to get checks for odd amounts like .13. With social security matching, your 7.50 is only delivering of impact. Or, if you gross up the amount to make sure that each employee gets a check for 0, you are going to have to pay around 0. Either way, a huge percentage of your appreciation gift budget will go to the government. On behalf of Barack Obama, I thank you. Unfortunately, the government will not appreciate your generosity and will not work harder or better for you after your kind gift.
Gift cards can have the same tax consequences as cash. However, you might get a break from certain merchants by buying in volume. For example, you might get 5 in gift cards for every 0 you spend. It pays to shop around among merchants, restaurants, credit-card branded gift cards, and grocery stores to get the best deal on the most useful gift for your employees.
Be sure to talk to your tax advisor about the costs and implications of any appreciation program so that you understand your requirements and liabilities.
While cash and gift cards require little effort. Unfortunately, they deliver little in the way of lasting impact. The benefit of cash gifts is very short term. The check gets deposited and spent or forgotten. The small business employer gets very little, if any, brownie points or lasting appreciation from the employee. In fact, employees quit at a greater rate after receiving bonuses than at any other time.
A holiday party or event is a great way to build a sense of team and build stronger relationships in a non-work environment. A good party makes everyone feel better after a good time together. The benefit of better relationships can last years and increase productivity. However, you need to do a lot of planning and research to hold a successful event. Evaluate the make-up of your employee base. Can everyone attend your event? Do people have to travel to attend? Do you have issues with childcare, transportation, schedule conflicts, menus, etc.? Can you make spouses and significant others feel welcome? Can a family event work for you? It is very hard to please everyone with a function outside of work hours. Just a couple of complainers can affect the event for everyone.
A holiday party or event will not have the same payroll and withholding consequences as cash or gift cards. However, your entertainment business deduction may be limited. Once again, consult your tax advisor.
What is the number one reason good employees quit? They think they never got anything or any appreciation from the employer. Forget the fact that they got paychecks, insurance, vacation, bonuses, retirement plans, and other benefits while employed. Those are expected entitlements these days. It is the logo products, the special team-building functions, the holiday turkey, the gift basket delivered to the spouse at the house, and the birthday remembrance that make the lasting impact and impression. These are all gifts that require a degree of thought and planning. Perhaps you want to give all of your employees some polo shirts or dress shirts embroidered with your company logo. These build a sense of team and belonging. They also save your employees money that would otherwise go to work wardrobe. And, if they wear your logo outside of work, they are showing their pride and doing a little advertising for you. Perhaps you want to think about other high-end logo-product gift ideas? You might want to consider blankets, jackets, sporting goods, coolers, barbeques, watches, MP3s or other electronics, gift baskets, luggage and travel items, or similar. Many of these items will come from your marketing and promotions budget, but, consult your tax advisor.
So, think about your goals. How was your year? What can you afford? You probably want to express appreciation and gratitude to your employees. You also want to build some long-term loyalty and appreciation on their part. You want to build a sense of team and identity and belonging to something good and important. You want to enhance morale and improve productivity. You also want people to work together better and serve customers with enthusiasm and pride.
Many people are glad just to have a job right now. You have an opportunity to set yourself apart and build loyalty for the long run. Do it right.
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Tips For End of Year Employee Appreciation, Events, and Bonuses
Jim Personius is the founder of SmallBiz123.com. A recognized small business expert, he has helped numerous small businesses start up and improve strategic operations. He is the founder and chief consultant at Personius & Company. He is the co-owner of CHIMPP Promotional Experts, Florida's leading promotional products/logo apparel/marketing consulting firm. He is a US patent holder.
He has served clients on three continents. He has opened an overseas operations office in China, developed custom overseas factory production in China, and developed export markets for his small businesses.
Personius previously served as an Associate Partner in the Financial Services practice at Andersen Consulting (now Accenture) and as Chief Information Officer at Bristol West Insurance Group (a KKR portfolio company). Personius received his MBA in finance, with distinction, from the University of Michigan. He received his BSBA in marketing from the University of Illinois.