How to Surprise Your Employees with a Year End Bonus
Year end bonuses is a concept that many business owners struggle with, due to the economic climate. However, it’s well worth the reward if you take the chance of showing how much you appreciate your employees. They are a great way to inspire loyalty as well as establish a sense of value and worth – something a regular salary does not offer. We have provided you with three types of year end bonuses for you to consider.
1. Longevity Bonuses
Longevity bonuses are bonuses provided to employees who have stayed at the company for a certain amount of time. In order to determine longevity bonuses, divide your employees up into groups according to their employment length, and then give each group a set amount of money based on your budget.
2. Non-performance Bonuses
Non-performance bonuses are based on a collective job well done, which awards everyone in the company with a bonus. Based on your budget, you can either determine the bonus based on a percentage of everyone’s salary or give the same amount to everyone in the company. If cash flow is an issue, think about providing an extra day of paid time off, gift cards or holiday treats. If your company is small, consider fairly distributing bonuses to everyone to avoid hard feelings during the holidays.
3. Performance Bonuses
Performance-based bonuses are bonuses provided to employees based on an individual goal given at the beginning of the year and rewarded if that goal is met. Typically performance-based bonuses motivate employees to meet their goals and result in higher profits for the business.The best way to set up performance bonuses is to set a specific percentage or dollar amount per goal. Goals should be tracked quarterly, so that employees know their status.
Whatever your year end bonus strategy, make sure to include it in your financial plan for the year, and review your options with your tax professional. The IRS considers a year end bonus as a supplemental wage, which are subject to taxes.
At Verdeja & De Armas, our team of Miami tax consultants is dedicated to providing independent and unbiased tax recommendations for businesses and business interests of all sizes. Contact us today for a tax consultation.