As the job market begins to show signs of cooling down and wage growth slows, the tradition of the year-end holiday bonus continues to thrive.
According to a recent survey conducted by Robert Half among approximately 1,700 professional services companies, a staggering 96% of these firms plan to offer year-end bonuses. This figure marks a significant increase from 77% in 2021 and a substantial jump from 57% the previous year. This trend signifies a robust commitment to rewarding employees, particularly in financial, information technology, marketing, and other white-collar sectors.
What’s noteworthy is that 54% of the surveyed firms intend to provide larger bonuses compared to last year, while 37% plan to maintain a similar payout. On average, these bonuses range between 1% to 10% of an employee’s salary, according to Mike Steinitz, the Senior Executive Director at Robert Half.
Despite the broader economic landscape witnessing a slowdown in the job market, the prevalence of these year-end bonuses remains surprising. The job market, once red-hot, has seen a shift in 2023 due to waning consumer demand, persistent inflation, and sharp interest rate hikes by the Federal Reserve to counter these factors. Moreover, the easing of the health crisis has encouraged more Americans affected by COVID to return to the workforce, consequently alleviating widespread labor shortages.
The data from the Labor Department reflects a decrease in average monthly job growth from 300,000 earlier this year to approximately 200,000. Additionally, job openings advertised have reduced from a record 12 million in early 2022 to 9.5 million in September. The number of people leaving jobs, often in pursuit of higher-paying alternatives, has also decreased from 4.5 million to 3.7 million, aligning closely with pre-pandemic levels.
This shift suggests that employers no longer need to exert as much effort to attract or retain talent. While average yearly pay increases have dipped from 5.9% to 4.1% in October, they still surpass the pre-pandemic average of 3.3%.
Despite these changes, the job market remains dynamic by historical standards. Many industries continue to grapple with labor shortages, prompting companies to focus on employee retention. With unemployment at a historically low rate of 3.9%, firms are likely prioritizing measures like holiday bonuses to retain their workforce.
As employers navigate a slightly different landscape in 2023, the continued prevalence of holiday bonuses suggests a concerted effort to retain talent, potentially compensating for smaller pay raises. This strategic approach underscores the ongoing importance of retaining skilled employees in a shifting job market.