A History of the Holiday Bonus – When Did Cash Bonuses Become Big for Business?

Around the turn of the 20th century, the Christmas holiday represented much needed time off for factory workers, who regularly worked six days a week, 11 hours a day. Another perk of the season was the highly anticipated Christmas bonus, the extra wage or gift meant to encourage productivity and, for employers, assure loyalty.   

The custom of “remembering the workers” began in the 19th century with offerings such as turkeys, candy, gold coins or watches.  Cash bonuses were first introduced by the F.W. Woolworth Company who, in 1899, rewarded employees with $5 for each year of service. In 1902, J. P. Morgan & Co. ushered in big money bonuses by giving each employee a full-year’s salary as a Christmas present. Going forward, gifts of cash became increasingly standard and calculated as a percentage of wages. While some companies offered a bonus to every employee, others made the Christmas present contingent on length of service or a worker’s performance. By the 1950’s, the Christmas bonus was starting to lose its "gift" status as workers began to expect the year-end entitlement. Around this time, cash bonuses became a separate category of payment from the regular paycheck and therefore, taxed differently.  

While many companies have moved away from the holiday bonus, there are still some countries which require a "thirteenth salary," the equivalent of one month salary, be paid to employees. Argentina, Brazil, Italy, Costa Rica, the Philippines and Angola are just a few countries who mandate it. 

Are holiday bonuses on your list this year? See what else you need to include in a competitive compensation plan with our checklist!

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