The office Christmas party has always been an opportunity for employers to reward their employees for all their effort and hard work and to celebrate the company’s successes of the year.  However, given the choice, over 90% of staff would rather their employers spent money on a Christmas bonus rather than a party.

As an employer, the Christmas bonus is often a thorny issue which in the run up to the holidays can weigh heavily on the mind. How much to give and indeed, whether to give a bonus at all are just some of the considerations.

It’s not simply a case of either being generous or being Scrooge-like, you may actually be legally obliged to pay a bonus to staff at Christmas.  To ensure that the only headaches you have over the Christmas period are alcohol related, it's important to consider any employment law issues and carry out some due diligence before making your decision.

Here are five things you really need to consider:

1. The terms of employment 

Your first port of call must be your contracts of employment. They may include a specific term about the payment of Christmas bonuses and if they do, that pretty much makes it final. Your contract of employment may also include a discretionary Christmas bonus and describe the conditions to be met and the amount to be paid if they are.  Or your terms of employment may include a mixture of the two. If any of those situations apply, how many lumps of coal you need to provide is probably (but not definitely) decided for you.

2. Check all other documentation 

But of course, life isn’t always that simple and it’s also important to cross check any company policy handbooks, correspondence or other documentation that may have dealt with the question of a bonus. These may have given rise to an expectation or even an implied term. If they have and you then don’t pay or pay too little, apart from damaging staff morale, you may find yourself facing a claim.  

3. Precedent

If you’re not familiar with what’s happened in previous years, you need to find out. If a large bonus has been paid every year for the last 15 years, it may now rightly be considered an implied term of the contract. Sporadic payments of varying sizes make it much more likely that you don’t have a specific obligation about the amount.

4. Implement a policy

If you’ve checked all the above (and if you’re in any doubt it’s really important to take professional advice as early as possible) and there’s no clear guidance or specific terms, where does it leave you?

Any bonus you decide to give should be fair and judged on a clear and transparent basis for all concerned, including those who you don’t pay a bonus to or who you pay a smaller amount. Take into account achievement and targets. And remember that a lump of coal is unlikely to do much towards helping employee morale in increasingly stressful financial times.   

5. An important last word of caution 

Before you make any payments, you really need to take professional advice. You do not want to set a precedent by badly worded correspondence or find yourself facing claims of unfair. And even if this year’s payment is only meant to be a one off, the next thing on your to-do list needs to be consulting on and putting in place a Christmas bonus policy well in advance of next year.

Christmas bonuses are always a delicate issue and can give rise to a number of pitfalls. Don’t fall victim to your own generosity by failing to take advice about the legal consequences. The savings you make by failing to do so, may, in fact, end up costing you dear. 

Merry Christmas!