Outsourced Payroll Specialists

Christmas bonuses – Are they worth it?

When you run a business, Christmas can either be the busiest or quietest time of the year, depending on your industry. Then there are all the holiday extras to consider – organising the rota, when staff will be paid over the festive period and sorting out the Christmas party. Finally, you need to think about Christmas bonuses for your staff; whether you should give them and, if yes, how much should you give.

Benefits of Christmas bonuses


Rewarding your staff will definitely help with staff retention and employee morale. With the ever-mobile nature of employees today, it’s important to ensure your staff feel valued at your company. Well trained, experienced and successful staff will often receive offers of work from your competitors and this means the bonus package you put together for them, including the Christmas bonus, can be key to keeping morale and wellbeing high.

Christmas bonuses are also motivational. If Christmas is the busy period for your business, then it rewards staff for their extra effort and recognises what they have done for the company for the whole year. If Christmas is a quiet time, it recognises the work done earlier in the year at a time when people often need more money for the expenses of Christmas.

How much to give


The question of how much to give is a tricky one – you want to reward staff without bankrupting the company! Some businesses take the approach of giving a flat amount to all staff or pro-rata that set amount by the number of hours they work to avoid part-time staff being compensated more than full-time staff.

There are also different types of bonuses that look at the work done by the employee, more of a performance related bonus. This needs to be worked in with other bonuses to ensure everyone is rewarded fully for their work and also that it acts as a motivating, not demotivating, factor. While the best always do the best, there should always be something for those who try but just don’t have the same talents.

Tax considerations


Another matter to remember with Christmas bonuses are the tax considerations. If you give a cash bonus or gifts of goods to staff, then you need to declare this on your tax returns to ensure everyone remains legal. This means adding the value of the gift to employee’s other earnings and ensuring that PAYE tax and Class 1 National insurance is deducted from the bonus through the normal payroll process.

If you give goods and they aren’t classed as ‘trivial goods’ which cost less than £50, then you also need to report these on the form P11D and pay Class 1A national insurance on the value of that benefit.

Christmas bonuses can help motivate and retain staff, especially if it is a busy time of the year. A special thank you at Christmas can help keep your employees happy but you do need to set up a system that is fair to everyone, however you pay it, and ensure you remember tax considerations.

If you’d like assistance with your payroll services, whether over the Christmas period or all year round, then get in touch with Trace Payroll. We have years of experience for all your payroll and HR requirements so reach out by filling out a contact form or using the details below.

Get in touch

To find out more about fully managed payroll outsourcing with a personal touch, contact Trace Payroll Services today.

Call Trace Payroll Services on 0845 873 5619