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Holiday bonuses may be casualty of economy

The year-end bonuses or holiday gifts that many small business employees are hoping for may end up a casualty of the stumbling economy.
/ Source: The Associated Press

The year-end bonuses or holiday gifts that many small business employees are hoping for may end up a casualty of the stumbling economy as owners decide they can't afford them. But at some companies, bonuses are turning into incentives to help boost sales and profits.

While some business owners budget early in the year for bonuses or gifts, many don't start thinking about what or how much they'll give their staffers until the fourth quarter. And with cash flow shaky at some firms, owners are probably thinking about forgoing what might now seem like a luxury.

"We're holding our own," said Susan Solovic, chief executive of SBTV.COM, a small business Web portal, but she also said the company is running behind on its projections. In past years she gave employees small gifts as signs of appreciation, but "we're not going to be doing that this year," she said.

Staffers at Solovic's St. Louis-based firm will get something else instead — time off. The company will be closed during the week between Christmas and New Year's Day.

Solovic believes most employees would rather have time than a gift from the boss. "A lot of times you end up giving something that isn't wanted," she said. But just about every worker loves having even one extra day off, she said.

Susan Tellem believes that forgoing bonuses isn't an option at her business. Last year was difficult for her Century City, Calif.-based public relations firm, Tellem Worldwide Inc., but she still gave bonuses to her staff, although the amounts were smaller than in 2006,

"When your staff gives it their all and participates and is there when you need them and has been a really strong part of the team, it's really critical to thank them in some way," Tellem said.

Tellem recalled the reaction of a freelancer who was having a hard time financially: When he received his bonus, he started to cry.

"It's the kind of behavior that makes you say, 'Let's give less to me and to my partners in the business and make sure everybody shares in some way, even if it's a small amount of money,'" Tellem said.

Although some companies don't differentiate between bonuses or holiday gifts, many owners believe bonuses should be based on criteria such as performance or how long a staffer has been with the business. A gift tends to be something employees receive as a sign of appreciation, or they're given as morale boosters.

Tellem gives bonuses based on how big a contribution employees have made during the year. She said her business is actually doing well this year, so there won't be a problem giving cash to her staff.

When Vanessa Horwell did the quarterly planning for her Miami-based public relations firm four weeks ago, she found her cash flow wasn't where she wanted it to be. Horwell said there were "question marks about receivables — everyone is slowing down." Bonuses were suddenly in question, too.

At the same time, "I didn't want to be in a position of saying, 'I'm sorry, I'm Scrooge this year,'" said Horwell, president of ThinkInk.

So she told her staff that they could get bonuses, but that they have to meet certain goals to receive them.

"I wanted them to be accountable and feel like they were responsible for the growing of the company as well by tapping into their networks and seeing where opportunities for new business were available."

Horwell has devised a two-tier system of rewards for employees. Those who bring in the most business get a cash bonus. Those in the second tier get a vacation to the Bahamas.

Horwell does plan a gift for all employees, whether or not they get a bonus. She's giving them allowances to be spent on wellness items such as gym memberships, or for health insurance. And if gas prices return to extremely high levels, she'll consider a fuel allowance as well.