By Brandon Hess, CVPM, CCFP
Holidays are stressful, and will likely be more so this year given the challenges 2020 has thrown our way. Between an increased number of upset clients, increased euthanasia rates and organizing personal holiday plans, there will be plenty on our plates; that’s why, this year more than ever, practices should be considering a staff appreciation bonus around the holidays. Notice it wasn’t called a “Christmas Bonus”? Be careful not to create an expectation that the practice cannot guarantee. By coining a staff bonus as a “Christmas Bonus” it would certainly cause a buzz around each winter holiday, and disappoint staff if they do not receive it.
Considerations for Staff Bonuses
Before digging into how to calculate staff bonuses, let’s look at some general considerations:
(NOTE: Consult with your accountant regarding any tax liability questions)
- If you received PPP money, and it is forgiven, it will likely be reported as revenue to the practice. Thus, as it flows to profit, it will increase the tax liability of the organization. The IRS has not released a final ruling on this.
- Any monies provided to staff will be reported as payroll, which will decrease your profit, thus decreasing organizational tax liability.
- Ensure that bonuses are consistent and fair between staff. Establish criteria that makes it less about personal opinions of staff, and more about things like: longevity, roles, seniority etc.
- If the practice has had stifling revenue, or decreased profits, consider lower bonus amounts.
Establishing Staff Bonuses
Step 1: What system will you use?
Going with tenure with the practice is a solid way to go. Let’s see what that would look like. You do not need to know how much you will be giving to set up your structure. HINT: Microsoft Excel can make this much easier.
| Name | Years w/Practice | % of Bonus |
|---|---|---|
| Employee 1 | 6 | 24% |
| Employee 2 | 4 | 16% |
| Employee 3 | 3 | 12% |
| Employee 4 | 1 | 4% |
| Employee 5 | 1 | 4% |
| Employee 6 | 6 | 24% |
| Employee 7 | 4 | 16% |
| Total | 25 | 100% |
In the above example, we simply calculated the total number of years in the practice, and gave each employee their respective % of their years compared to the total. You could take this a step further and break employees into positions, and designate a certain % of the bonus to each position. From there you can then give each employee their respective % in respect to their tenure in that position.
Step 2: Decide on Total Bonus Amount
You can base it off a few things: profit, revenue or PPP loan amount. If you received a PPP loan you can pick a % of that loan amount to distribute as bonuses. Since PPP loans were based off of organizational payroll, and it is anticipated to impact revenue and profit, it would make the most sense to use this method. Let’s say the practice from step 1 received a $60k PPP loan, and decided to give 10% of that total to staff. The employee(s) with 6 years of employment would get $1,440 (24% of $6k).
Step 3: Decide when it will be given to staff, and how it will be explained.
Regardless of if you are or are not having a holiday party this year (we hope our newsletter will make having one much easier) explaining to the team “why” they are getting the bonus is important. Without an explanation, you could be inadvertently increasing the likelihood that it will be an expected bonus moving forward.
For example, an explanation around the following would communicate to the team a why:
“2020 has been a challenging year for everyone, not so much from a business perspective as the practice has prospered. That is thanks to each of you. In addition, we received a PPP loan that allowed us to weather the unpredictability of the pandemic. Since the practice did not need to use the full amount, we want to give a portion of it to you, our team. Without you we certainly would not have weathered the storm as well as we did, and we appreciate you. We know it wasn’t easy, and we don’t know when or if we will get back to normal. However, please know we appreciate you.”