How can employers manage year-end bonuses?
Bonus payouts are slowing down and fewer employees are receiving them, according to a new report from ADP, despite expectations that they will increase.
Findings from ADP's analysis of six years of payroll data revealed that median bonus payouts in the US dropped to $1,786 in 2024, down from $1,857 a year earlier.
Just 39.7% of employees received a bonus in 2024, according to the report, down from 40.9% in 2023 and continuing the declining trend since the 2021 peak.
"In 2024, payouts ranged from no bonus at all to a high of $50 million. Bonus amounts in the 75th and 25th percentiles were $6,500 and $600, respectively," said Jeff Nezaj, senior principal data scientist at ADP.
"Among job-stayers—people who have been at the same employer for the past 12 months or more—the median growth rate for 2024 bonuses was 1.3% from the prior year."
There are various types of bonuses offered to employees, such as performance, attendance, sign-on, and retention bonuses, among others.
According to ADP, bonus payments are granted throughout the year, with 13% of employees receiving them in December. Others, however, get them as early as November (9%) or in January (9%).
Employees' bonus expectations
The drop in bonuses comes despite strong employee expectations that these payments, particularly year-end ones, will increase.
Data from Robert Half in 2024 found that 62% of employees expected their year-end bonus levels to be higher than the previous year.
This mismatch between employees' expectations and workplace reality could lead to consequences for employers, according to reports.
Bonus payments are among the top reasons why employees decide to stay in an organisation.
Data from JobHire.AI recently revealed that 72% of employees lose trust in their employer when bonuses are cut or cancelled.
Nearly a quarter also said they decided to quit altogether.
"Trust is hard to earn and easy to lose. A cancelled bonus is one of the fastest ways to burn a relationship," said JobHire.AI on LinkedIn.
Managing year-end bonuses
Jen Leigh, a Senior Product Specialist with Inflection HR, said planning and organising year-end bonuses is an integral part of providing employees with seamless payroll and compensation management.
"Payroll software can simplify how year-end bonuses are paid when incorporating them with employee wages or salary," Leigh said in a blog post.
"Compensation Management Software can help uncover industry trends and streamline the planning process, proving to be a valuable tool for evaluating budgets to determine if and what bonuses can be awarded."
There are employers, however, that cannot offer year-end bonuses amid financial constraints.
Artem Zakharov, CEO of JobHire.AI, advised employers to be honest about them.
"Employees don't feel betrayed because bonuses don't happen - they feel let down when the news comes late or is unclear," he said.
Zakharov also cautioned against making promises of "making it up" the following year, as it could further damage credibility and break trust.
Instead, the CEO advised employers to train their line managers for hard conversations, as well as offer alternatives to bonus payments.
"If bonuses are not available, flexibility becomes important," he said. "Options like extra PTO and remote work show that leadership cares about employees' lives, not just what they contribute to the company."
