When it comes to end-of-year gifts – whether financial year or calendar year – small business owners have found a cash bonus is not always what their employees really, really want. Find out what they would prefer – and what would be cheaper for your company budget!
Why cash bonuses aren’t a winner
Tim Houlihan, Vice President of global provider of business incentive solutions BI Worldwide, says that even though your employees may say they want cash, it’s actually not the best for boosting staff motivation and morale.
He also warns against store-specific gift cards, since these rarely cover the full purchase cost of any item and end up acting like a discount. No employee wants to receive a Groupon as an EOFY bonus.
“The best rewards are meaningful and luxurious—something we’d love to have but wouldn’t buy for ourselves,” says Houlihan.
But Kara Simon, general manager of 3Cheers!, a creator of staff motivation programs, remind us that these “luxurious” rewards don’t need to break the bank in order to work.
“Non-cash gifts have a longer-lasting impact on the recipient, resulting in stronger motivation and heightened performance.”
So… what are better motivators than cash bonuses?
What’s better than cash?
Employee rewards that make a difference include:
- Cinema gift vouchers: Houlihan’s research shows this is the number one most-redeemed gift card employers give out.
- Paid time off: Second in the running is paid time off such as “loyalty leave”, where employees get an extra day of annual leave for every year they’ve been working for the company.
- Merchandise treats: Female employees might love Body Shop gift packs and pashmina scarves since they are luxurious and much-desired, but we can rarely justify buying one for ourselves, even though they’re not terribly expensive. The latest and greatest (affordable) treats for men include beard oil, portable power packs, beer soap, and Batman or other superhero-themed USB flash drives.
- Handwritten notes of appreciation
- Food hampers
- Office parties: Make it potluck if money is really tight.
Or you can sign up with a service like 3Cheers!, which will provide personalised employee rewards and gifts any time you need.
Of course, the best gifts are thoughtful ones that show you know what your employee likes. My favourite employee bonuses have been gift cards for my local book chain, QBD, since my Canstar co-workers know I am an avid reader and cannot get my hands on enough words!
Keeping staff motivated
Giving away a bonus obviously comes to mind more often at the end of financial year or at Christmas, but it’s a good strategy to keep the motivational rewards coming all year long.
The rewards don’t always need to be expensive. A “thank you” email to one team that copies in the rest of the company can say a great deal for free.
And it’s important to link rewards to the time and effort that someone has actually put in. Simon says if you wait until the holidays to give hard-working employees a reward, it seems arbitrary rather than motivating.
Houlihan adds that our memoirs are quite short when it comes to recognition, so it’s important to make these moments smaller and more frequent. You can keep a chart, as he does, where he records how often each staff member has been encouraged with words or given a bonus as a reward for their efforts.
Don’t pay tax on it or make your employees pay tax
First things first – how can you make sure your EOFY bonus/gift doesn’t get taxed harshly for either you or your employee? And can you make your EOFY bonuses into tax deductions for your business instead?
Tax for employers
As an employer, you want to make sure the gift or bonus doesn’t fall under Fringe Benefits Tax (FBT). You would pay FBT if the gift or bonus costs more than $300 per person and doesn’t fall under the minor benefits exemption.
So make it a minor benefit – a small thing that:
- Costs less than $300 per person,
- Is given on an infrequent and irregular basis, and
- Is not a reward for services.
All of the non-cash reward ideas we’ve listed above are tax deductible because they are gifts that fall into this minor benefit category. This aspect of tax law is thankfully the same in Australia and New Zealand, for all you businesses that straddle the ditch.
Tax for employees
Your employees want to make sure the gift or bonus is not a cash bonus because that is taxable income. Giving your employees an EOFY bonus could make them way less happy if they have to include it in their tax return.
All of the non-cash reward ideas we’ve listed above are not taxed for your employees because they are non-cash gifts. So feel free to get started on your around-the-year employee motivation program!