Why Holiday Bonuses Are Actually Awful
Money

Why Holiday Bonuses Are Actually Awful

by Career Contessa
December 10, 2015

IT'S THAT TIME OF YEAR WHEN OFFICES GIVE EMPLOYEES SURPRISE BONUSES. IF YOU'RE STRAPPED FOR CASH, THAT MIGHT SOUND LIKE A GREAT THING. BUT IS IT ACTUALLY? 

Sadly in most cases, the answer to that question is: no. But for the sake of argument, we'll weigh the pros and cons. 

THEY'RE A GREAT THING IF YOUR BOSS IS UNUSUALLY GENEROUS

Do you have an annual review coming up in the New Year? If it's likely that you're up for a raise in early 2016, and the bonus really is just a bonus, then it's icing on the cake. We suggest putting at least some of it in savings, but use the rest to help you deal with increased costs over the holiday season.

Another time bonuses are a pro? It's a miserable thought, but if you know your company never gives raises, a bonus is better than nothing. 

BUT NOT SO GREAT IF YOUR BOSS IS LIKE MOST BOSSES

Here's the issue: many, if not most, companies have started using bonuses as alternatives to raises. And that's where bonuses start to kind of suck—at least for you.

Bonuses are actually great for your employer. They don't have to commit to paying you more indefinitely, which means simplifying the budget and saving the company money long-term. With that in mind, many HR departments are allotting more money to "variable pay," a.k.a. signing and holiday bonuses at the expense of raises, which have slowed to a trickle in the U.S. In 2013, the average number of white collar workers who received a raise was less than 3%, according to TIME. That's barely better than the number of raises given during the worst part of the recession in 2009. {Click to Tweet}

If your company substitutes a bonus for a raise, there are several reasons you should consider pulling your hair out (or at least politely asking whether raises are on the table at your next review): 

1. Salary: While the money's great now, there's no guarantee of a bonus or raise next year, meaning your income for 2016 might wind up being less than what you make in 2015. 

2. NegotiatingYou're not actually moving into a better salary bracket, which cuts down on your bargaining abilities inside (and outside) your company when you ask for a raise or apply for a new job.

3. Benefits: Certain benefits, such as the retirement matching your company offers, are usually based on income. Your bonus doesn't apply to that final number so the allottment will stay the same.

4. Big Life Changes: Thinking about buying a house or applying for a car loan? Yep, that's a problem too. When banks review your financial records, that bonus doesn't count toward your salary. On paper, you'll look like you make less than you actually do—not ideal if you're trying to make a big purchase. 

You can read all the sad, unfestive reasons why bonuses aren't such a bonus on TIME

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Are you one of the unlucky (or lucky) few who gets a bonus this year? What are you spending it on?