Employee Retention Human Resources Salary

What to Know About Year-End Holiday Bonuses

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One of my previous employers didn’t give year-end holiday bonuses. When I first found out about this, I was a little annoyed, but the more I have thought about this, the more OK I am with no bonus. However, this employer was generous with yearly reviews and merit-based performance increases. When everything is said and done, one-time year-end holiday bonuses are nice, but I would rather have a wage increase. If you think about it, bonuses are one-time, and they are taxed at a much higher rate than normal income. A wage increase, on the other hand, permanently increases your annual income and is taxed lower. Bonuses are nice, but if there’s a choice between a bonus and a wage increase, choose the wage increase.

A different strategy I have used in the past when negotiating bonuses and/or wage increases is to ask for increased paid time off (PTO), rather than more money. PTO costs an employer much less than a bonus or a wage increase and comes to you tax-free. True, there are times when a wage increase or bonus is needed financially, but if you ever find yourself in a position where your time is more valuable to you than a wage increase, think about negotiating for PTO. Each time I have done this, my employers have been more than willing to make this accommodation, and in one job I managed to negotiate up to six weeks of PTO per year.

Read these five things to know about year-end holiday bonuses.

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