The document discusses holiday bonuses and whether they should be considered an entitlement or tied to performance. It notes that while bonuses can motivate employees, they may not encourage development if not linked to measurable results. Millennials in particular want meaningful work experiences over cash bonuses alone. The history of bonuses shows they evolved from discretionary gifts to expected payments. Most companies now tie all rewards to individual and company performance to avoid mixed messages and legal issues from untied bonuses. Ideally bonuses should encourage strategic goals and development, not reinforce poor performance. Employers must determine if current bonus programs achieve business needs or encourage resentment.

1. Holiday Bonus – entitlement or pay for performance
I am sure that there would be a growing under swell of discontent, if as an HR professional, I
recommended that businesses link employee bonuses to performance ( individual and
organisation), or eliminate them altogether but with a line of sight toward a fully developed
compensation plan - underpinned by a well thought out compensation philosophy. Granted,
this would require that businesses themselves have clearly defined strategic goals and targets
with requisite systems and structures to capture same.
While I recognize that holiday bonus (something of value), can be a powerful tool to motivate
and engage a workforce, it can also be problematic if it is not tied to measurable results instead
of subjective opinions. The reason being, employees may not be encouraged to strive for higher
levels of performance and development. Moreover, recipients treat the bonus as an
entitlement and the additional gift/income (apart from base compensation) becomes a right.
The issue becomes even more complex when the “Millennial Factor” is added to the
employment mix. This newest employee cohort is a growing proportion of the workforce with
drastically different outlook from “Boomers”. They need to be managed and motivated
differently than other generations. Research conducted by PWC has underscored that
generous cash bonus, though important, may not convey the appropriate message or be as
motivating as employers had hoped. Instead, the focus should be on creating positive work
experiences, provide value recognition and real time performance feedback, since this cohort
thrives on being challenged and stretched. Evidently, therefore, organizational culture must be
improved through positive psychology.
Interesting milestones in the history of the bonus and its evolution from gift to entitlement, as
recounted by sociologists, provides background and context to this phenomenon. Sociologists
have stated that at the turn of the 20th
century, employers began substituting the traditional
19th
century Christmas offering to employees (turkeys, watches, candies etc.) with a cash
bonus. However, the custom of “remembering the workers” was treated by most employers as
a discretionary gift. And, while some companies offered a bonus to every employee, other
employers’ made the Christmas present contingent on efficiency record or employee’s
disposition of the bonus, according to the Huffington Post. During the 1950s due to the fact
that the bestowal of bonus was standardize and expected, Christmas bonus officially lost its
status as gift. Today, the “benefactor-beneficiary component of the employer-employee
relationship seems to be vanishing and is not so traditional anymore”.
The aforementioned conclusion was derived from a survey (452 national companies) conducted
by Hewitt Associates of Lincolnshire- where 64 percent of companies today do not offer any
type of holiday bonus. Of these organisations 80 percent cancelled their programmes between
1990 and 2000, citing that they now tie ALL employee rewards to company and individual
performance.

2. Holiday Bonus – entitlement or pay for performance
Ideally, bonuses should be geared toward encouraging certain types of behaviour by rewarding
it. Hence a blanket policy or a free floating bonus programme that is not linked to positive
performance will create serious problems for businesses; reinforcing undesirable behaviours.
The following example underscores the point - a Customer Service Representative continually
fails to meet “Top Draw” customer service and is regularly reprimanded for poor customer
service, as delineated by the company. However, each year receives a holiday bonus, invariably
at the same rate as an excellent performer. It can be concluded therefore, that apart from
sending mixed signals and creating potential legal implications, the organisation ( Private or
Public) is not rewarding for increased customer satisfaction – the bedrock upon which
competitive advantage is built.
The wrong kind of bonus can backfire and encourage employee resentment and hostility
toward management. The questions that each employer has to ask: Should the company
continue to routinely pass out substantial cash bonuses unrelated to performance? How does
the company create a bonus programme that generates business, achieves strategic goals and
encourages employee development? How does the company dismount the bonus horse (as it
currently exists) once the ride has begun?
Suzanne Joachim  Managing Director
Joachim & Associates HR & Business Consulting
Linking people, strategy and performance.
Phone: 784-451-2227  Fax: 784-485-6455  Mobile: 784-528-8518
E-mail: sjoachim@joachimandassociates.com  Website: www.joachimandassociates.com
P.O. Box 170  Murray's Road  St. Vincent & the Grenadines  West Indies