Bonuses are starting to reappear at small companies as business shows signs of picking up.
Many companies had to eliminate employee bonuses last year as cash flow dwindled and banks began cutting or even shutting down credit lines. A yearend payout was also unthinkable at companies that were laying off staffers or slashing their costs so they wouldn't have to let anyone go.
While there are still many firms struggling, some owners who had to forgo 2008 bonuses are reinstating them. But the checks are likely to be smaller than in the past.
Denise Kanaar couldn't pay bonuses to her employees last December because her freight management company's cash flow dropped.
"This broke my heart because I am so blessed with a wonderful team who worked so very hard for the company," said Kanaar, CEO of D & D Logistics in Muskegon, Mich.
But she had no choice. Customers were paying later and "it was really very frightening."
At this point in 2009, "we're kind of staying on a flat line now, and it's promising and I can see a little bit of light coming through and things are getting better," Kanaar said. So, "I was able to give a little cash bonus, more of a gift" before Thanksgiving.
Each of her eight employees got $700, less than she'd given them in the past.
"That way they'd be able to buy some things for Christmas or whatever they wanted to do with it," she said.
In any economic climate, owners who believe in paying bonuses are looking to foster goodwill with their staffers, and, if the money is based on performance, give them an incentive to keep working hard. In the current economy, these owners say they have even more reason to show gratitude to their workers.
Sandy Hunter's company, which provides industrial management consulting and also is a custom manufacturer of industrial components, did well in 2008 but has seen business level off this year. She's giving bonuses to her three employees, but the amounts are smaller than last year's. And she'll be giving money to some but not all of the independent contractors who work for her.
"Times are so tough for so many people," said Hunter, owner of Concord, Calif.-based Hunter Hawk Inc. "Those (employees) that hang in, I feel they need to be rewarded."
Some owners who still can't give bonuses are trying instead to give them gifts. Bonuses generally are considered to be based on performance, the company's and the individual employee's, and also a staffer's tenure. Gifts tend to be given as a token of goodwill and loyalty and also tend to be smaller.
Leslie Saunders describes business as "horrible" but still plans to give her eight staffers gifts. She runs an employee benefits brokerage in Tampa, Fla., and has struggled through a weak economy and the loss of her company's credit lines. This year has been the second in a row that she's given no raises, and again there won't be any bonuses.
But Saunders still wants to give something to her employees, who she said have been troupers, understanding that "this is the way it's going to be for the foreseeable future." Some of her staffers will be getting gift cards, while others will receive electronics.
"I know they would like additional compensation, but frankly, it's just not available," she said.
Bonuses are so important to some owners that they're willing to sacrifice their own compensation to reward their workers.
"You need to demonstrate that you value your loyal employees, even if it means cutting your own salary back," said Margaret Wilesmith, who owns Wilesmith Advertising/Design in West Palm Beach, Fla.
The advertising industry has had a rough year, but Wilesmith is giving her five employees bonuses.
"If we couldn't do it, absolutely we wouldn't," Wilesmith said. "But I'm not going to use the condition of the economy as an excuse to deny them some reward for keeping the agency stable in the year that was difficult."
Some companies have flourished through the recession as they found greater demand for their goods or services, and they'll be giving bonuses as usual.
Adam Kluger's New York-based public relations firm has picked up business as companies shied away from traditional advertising. Changes to his business model also brought in more revenue.
As a result, the seven employees at Adam Kluger Public Relations can look forward to getting bonuses this year, and a little something extra: Tickets to see pop star Lady Gaga in January.
Sure, a cash bonus is great. But getting employees in to see a hot show is a way to "reward the young folks with something they really want," Kluger said.