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The Honolulu Advertiser
Posted on: Wednesday, December 27, 2006

Small outfits downsize bonuses

By Jim Hopkins
USA Today

SAN FRANCISCO Amid worries about a slowing economy, small companies are revamping workplace holiday plans, adopting some of the strategies big corporations have used for years.

Just 47 percent of small businesses are giving holiday bonuses this year vs. 54 percent last year, American Express found in a survey. Instead, 55 percent are giving time off, up from 47 percent a year ago, the survey says.

Nearly 6 million small companies employ about half the nation's private-sector workers. With higher energy prices and warning signs of weakening economic growth, many owners are tempted to eliminate bonuses altogether, said Alice Bredin, a consultant to American Express' OPEN small-business division.

Instead, they could replace traditional end-of-year checks with performance-based awards to drive sales higher, says Joe Vocino of Mercer Human Resource Consulting. Some big employers made the switch years ago.

Near Phoenix, business owner Cynthia Hammersley offered employees a European vacation if they hit ambitious revenue goals at her seven-employee interior-decorating business. They pulled it off, selling $420,000 in services, more than doubling revenue, she said. The reward: a $36,000, weeklong cruise around Greece.

Here are tips for small companies considering changes to holiday rewards plans:

Money. Cash remains king. "Nothing says I love you, I appreciate you, I want to retain you, than making sure they are paid competitively," Vocino says.

Even if the company's overall performance has been soft, owners should gauge each worker's individual work for a reward even if it is a small check.

"Those kinds of things can really build loyalty," he said.

But simply handing out checks that aren't tied to company or individual performance means workers may treat the gift as an "entitlement," Vocino says.

Get-togethers. More than big corporations, small firms benefit by hosting holiday dinners and outings to places such as a day spa to promote the family atmosphere typical at small businesses.

"That can be an even better retention tool than cash," Bredin says.