December 17, 2021
It’s the holidays, shopping is in full swing, people are planning holidayvacations—and many are hoping for a holiday bonus .
While bonuses may be hoped for or even expected, there may be some bumps inthe road for your multinational business when it comes to working out thedetails of your holiday pay and bonus payments.
Here’s what you need to know to avoid snags.
Deciphering between mandatory bonuses, cultural expectations and perks for ajob well done can be a compliance headache—that only gets more complicated asyour company grows geographically.
Here’s why it can be confusing:
Holiday pay typically refers to a customary payment of wages on a designatedholiday. While most employees take the day off with pay, schedulingarrangements can vary. Some employees may receive holiday pay on top of wagesfor hours worked. The extra pay is added to the employee’s regular paycheck.
While a holiday bonus is typically an extra paycheck that is issued around theholidays to fulfill mandated requirements and/or boost employee morale. Thesepayments are not tied to hours worked. Some companies may use flat-ratebonuses for discretionary holiday bonuses. But the most common arrangement isto calculate bonuses based on a percentage of the employee’s base salary.
The “bonus check” seems to be the most universally understood bonus option,regardless of language, culture or common practice. This added financialincentive paid in addition to an employee’s regular salary may come in theform of:
Deciding when to pay bonuses and how much to cut the checks for can vary bycompany—and sometimes by country. As long as the bonuses meet legalrequirements, employers are free to structure bonus payments as they see fit.
You’ll need to work out details as to what bonuses you might offer toemployees, when you will pay bonuses, what the criteria are for receiving abonus, and how the bonus amount will be calculated.
For mandatory bonuses, you're a the mercy of the local government—whichdecides what, when and how you are obligated to comply. Mandatory bonuses aretypically based on salary and paid one to two times per year.
For performance-based bonuses, it’s best to keep things simple. Theseincentives are designed to motivate employees to meet goals. In order to work,they need to be clear and easy to follow with fair and uniform enforcement.These bonuses can be paid monthly (like sales commissions), quarterly orannually.
For salary-based bonuses, choose a percentage and a frequency. For example,it’s common to pay a holiday bonus equal to 5% of an employee's annual salaryonce per year on December 1st.
Knowing what is common practice or legally required in each country youoperate in can help inform your bonus structure. Here are some bonus examples:
For many, the holidays are a time of giving and heartfelt thanks to the people in our lives that matter—and your employees are certainly at the heart of that. However, it’s important to stay apprised of what is commonand culturally acceptable when it comes to bonus pay, as well as what islegally mandated; by doing so, you can avoid fines and penalties due tonon-compliance while also retaining top talent by offering them a greatincentive.
But keep in mind that the holidays aren't the only time you can sweeten thepot by offering your employees a well-earned bonus. However, at the end of theday, your global bonus structure should be carefully constructed while keepingboth your bottom line and your employees in mind. And with the right globalpayroll partner, paying bonuses—holiday or otherwise—is a cinch.
Is it time for you to outsource? Don’t miss our recent webinar: Globalizing payroll – why now?