Does this sound familiar?

You appreciate your employees’ efforts, but frankly, this year’s profits haven’t been as high as expected. Ever since you can remember your employees have received a holiday bonus, but it just isn’t in the company budget this year. But, do your employees know that? You risk the potential for a lawsuit if promises regarding employee pay have been made, but not fulfilled.

Holiday bonuses are a way for employers to recognize and reward employee accomplishments throughout the year and have become a tradition in many companies. Whether it’s a reward given to an employee for their individual contributions or a holiday gift that all employees receive, bonuses have been known to drive productivity and foster employee commitment.

Given the current state of the economy, bonuses may become a thing of the past. But, employers interested in keeping this holiday tradition alive can do so rather cost effectively. Just remember, there are some important considerations that should be made before you begin administering this year’s bonuses.

When divvying up employee bonuses, use the tips found below to ensure employee commitment is retained, company budgets aren’t squashed, and you aren’t setting yourself up for legal trouble:

1. Is it even in the budget? The amount offered or whether a bonus will be provided at all, should depend on company earnings and whether the company has achieved certain targets throughout the year.
2. It’s supposed to be about appreciation. If you can’t afford a holiday bonus this year, think of other creative ways to show your employees that they’re appreciated.
3. How much should we give? The amount of the bonus should be based upon company financials. While there is no widespread formula used to calculate employee bonuses, 5-10% of an employee’s salary is typical for lower-level staff and 10-20% is more common for management level employees.
4. Tie bonuses to performance. When rewards are tied to job performance, employees are more likely to put forth the effort and produce quality results. On the contrary, when employees come to expect pay increases “just because”, their performance is likely to remain marginal.
5. Plan a bonus structure carefully. Large differences in pay-outs may cause hostility among employees – especially if some have been with the company longer than others. When dishing out bonuses think fair and equitable distribution, either based on seniority, job performance, or some combination of the two.
6. Involve everyone. If at all possible, try to ensure everyone receives some form of bonus. While it may not be realistic to give your temp a 10% bonus, a gift card or other form of appreciation may be more practical. Whether it be monetary or not, everyone should be recognized in some way during the holiday season.
7. Manage employee expectations. There may be some years in which administering holiday bonuses just isn’t practical. Because they aren’t always predictable, company bonuses should never be etched in stone or in any way promised to employees. If your company has regularly given holiday bonuses, but will be unable to this year, try to let employees know as early as possible; many factor in their holiday bonus as part of their yearly earnings.
8. Never make any promises. Bonuses that are discretionary are not usually viewed as implied contracts. But, those offered to encourage employees to achieve some desired goal are likely to be held enforceable once employees satisfy whatever criteria you have established to qualify for the bonus. Employers promising this for that will likely be required to uphold their end of the bargain. One way to avoid liability is to communicate publicly (and often) that bonuses are awarded entirely at the discretion of management and are not intended to be binding.

Given the country’s current economic state, bonuses may not be on the top of your company’s year-end to-do list. But, to be effective bonuses don’t have to dip into company budgets.

Alternatives to monetary bonuses include:

1. Time off. Consider giving employees a few days off after completing a particularly stressful project, especially one they pulled off exceptionally well. This will benefit both you and the employee by preventing burnout, exhaustion, and frustration – allowing the employee to return to work refreshed and ready to go.
2. Handwritten notes. Give employees a handwritten note expressing your appreciation for all the hard work that they do. Simply writing a letter explaining an employee’s exceptional performance and why they are so valuable to the company, can be a great way to recognize noteworthy performance. Consider making a copy of the letter and placing it in the employee’s personnel file or forwarding it to other key members of your organization.
3. Flexible schedules. During periods of extra responsibilities, such as the holiday season or when an employee’s child is in a school play or has a “big game”, employers should really consider accommodating employee schedules. You may want to offer flextime, which would allow an employee to start work early and leave early – or vice versa. Compressed workweeks, in which employees get in all their work hours in a shorter period of time (say 40 hours in four days, rather than five) can also help employees meet outside demands. Something as simple as rearranging an employee’s work schedule can be extremely valuable to employees who are juggling multiple responsibilities.
4. Seek employee input. This can include asking them what types of perks they’d appreciate or what sort of things could be done in order for them to be able to work more effectively.
5. Gift Cards. A gift card to an employee’s favorite restaurant is a gift an employee and their whole family can use. It shows you not only take interest in your employees but also make note of their likes and dislikes. Maybe you know their favorite food and give them a gift card to a restaurant they have never been.
6. Holiday food. Tis the season for fresh baked breads, cookies, pies, chocolates and even turkeys. Passing out one of these items to each employees shows your appreciation and at the same time, ensures everyone is given a gift that’s monetary value is equal to everyone else.
7. Promote development. Facilitate your employees’ professional development, whether it’s through college sources, seminars, conferences, a membership in a professional organization, or even cross-training for career moves within your company. This is truly a win-win.

Basic appreciation can go a long way in motivating your workforce. The simple choices you make in showing employees that you value them can lead to more committed staff members likely to stay with your company for the long-haul.