Each year in December many churches, non-profits and businesses decide that they want to give their employees a “Christmas Bonus.” We, of course, think this is a great idea that rewards your employees and helps with company morale. When our firm was just starting out, we didn’t have a lot of money or a lot of employees. Using the de minimus rules on gifts to employees, we would give gift cards of less than $100. In attempts to be creative, we usually gave our employees a “date-in-a-box” assortment of gift cards. This box (usually a gift bag) contained a movie theater gift card, a restaurant gift card, maybe a Target gift card (which is what my wife and I used to do for fun when we didn’t know what we wanted but knew Target knew), and then finally a Starbucks gift card. They seemed to go over well and aside from running all over town to pick up the cards, it was relatively easy. These gifts of under $100, not in cash, were deductible (how easy it was to go on a date under $100 then ;) ).
Now, with increased number of employees and some employees at higher pay than others and some who have been with us longer than others, the Christmas Bonus is a bit more complicated. I still sometimes give gift cards as well (still have fun with those), but we now also give cash gifts over $100. These must be run through the employees payroll and have all the necessary withholding. Some years we gave flat amounts to each employee regardless of years of service or regular compensation, other years we based the amount on just their pay. I recommend those employers who want to favor tenured employees over new hires but also want to recognize the varying wage amounts use a combination percentage of compensation times years/months of service calculation. If you would like help calculating your employees Christmas Bonus’s, please don’t hesitate to call our office.