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Christmas Stocking and canadian dollars.
Christmas Stocking and canadian dollars.

COMPENSATION

Is the old-fashioned holiday bonus dead? Add to ...

Correction: Clarifies that Shopify Inc. raised $100-million in financing recently, not $1-billion.

When the recession hit in 2008, many Canadian companies saw their revenues plummet, forcing them to reconsider their year-end bonus policy.

“We experienced a 30-per-cent drop in new business, and we as a company didn’t have a lot of money left over for bonuses,” said Chris Breikss, president of Vancouver-based 6S Marketing Inc., a digital marketing agency.

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“What we discovered is that it came to be expected, and it wasn’t really based on [any specific criteria],” he said. “The Christmas bonus kind of just rolled into an annual salary or compensation. There wasn’t anything special about it.”

Today, 6S Marketing – which has been named one of British Columbia’s top 100 employers for three consecutive years by Mediacorp Canada Inc., a publisher of employment periodicals – has a more effective means for recognizing employees. The company now uses a revenue-sharing model that provides a company-wide bonus based on quarterly revenue targets. The bonuses are calculated as a percentage of annual salary, and range in size depending on an employee’s seniority and involvement in major projects.

“We’ll identify our revenue targets for the upcoming year, and then on a quarterly basis we’ll examine how we’re achieving those targets,” Mr. Breikss explained. “If we’re 10 per cent ahead of target, there’s a bonus level there. If we’re 20 per cent ahead of target, we call that ‘bump two,’ and if we blow things out of the water and we’re 50 per cent above projected revenue, then there will be a bonus level that’s associated with that.”

The Vancouver head office has a number of screens that display the company’s real-time progress as it climbs closer to its quarterly targets.

“I think that we were doing [the holiday bonus] wrong, and I think a lot of companies are still doing it wrong, but that doesn’t mean it can’t be done right,” Mr. Breikss said. “I think we’ve just cracked the nut on finding a system that works for us.”

It’s a trend that has been seen countrywide in the years following the recession, as 6S Marketing is just one of many Canadian businesses that has scrapped year-end bonuses and replaced them with more innovative means for motivating employees.

In fact, year-end bonuses in Canada have been in sharp decline over the past few years. Back in 2011, a study by Bank of Montreal found that 29 per cent of Canadians anticipated a holiday bonus. By 2012, only 26 per cent were expecting a year-end payout. The numbers have declined further this year.

“Only 17 per cent of individuals we polled actually expected to receive a holiday bonus [this year], which is a very low number, and that number is getting lower every year,” said Cleo Hamel, a senior tax analyst with H&R Block Canada, which compiled the holiday bonus survey for 2013.

Ms. Hamel said that many employees, especially millennials – those born between 1980 and 2000 – work better when they receive feedback and recognition throughout the year, a trend that business owners have gradually identified.

“I would agree with millennials and say that it’s important for employers to provide recognition throughout the year,” she said. “It’s not like you started a project in January and completed it in December and that’s when you want to hear that you’ve done a great job,” Ms. Hamel said. “There are always the little challenges and the little victories along the way.”

Shopify Inc., an Ottawa-based e-commerce software company that just raised $100-million in financing, likes to reward its young work force with unusual, experience-based holiday surprises.

Three years ago, for instance, the company gave each employee $1,000 and a day off to use that money for holiday shopping. Two years ago, for instance, they supplied the entire office with custom-made iPad cases from one of their online retailers – and then surprised everyone by giving them iPads to go inside them. Last year, they gave the entire staff an extra week’s vacation, and reimbursed them for up to $1,000 worth of travel expenses.

Such experience-based rewards, explained Harley Finkelstein, the company’s chief platform officer, are meant to contribute to the personal lives of Shopify’s employees in a way that a lump sum never could.

“Giving out $1,000 is one thing, but giving $1,000 on the condition that they travel somewhere, I think that has a much bigger effect on people, and I think it’s actually a much more potent growth activity, something that helps them develop skills and experiences beyond Shopify,” he said.

Razor Suleman, founder and chief evangelist of Toronto-based recognition software developer Achievers Corp., believes that such creative solutions will increase in popularity as old-fashioned holiday bonuses continue to decline.

“[The recession of 2008-09], that’s behind us. It’s 2013, the stock markets are at an all-time high, the unemployment rate is 7.2 per cent, and the war for talent is on, especially in hotbeds of innovation,” he said. “There’s not only a war for talent, there’s a war for your talent. People want to hire the A-players from the most successful companies.

“It’s about aligning to the economy that we’re in now,” he added. “Companies need to pay and reward and incentivize and recognize people who perform.”

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