Lisa Hephner

Tips for Small Business Tipping and Bonuses

Posted by in Tip of the Week

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According to the latest Wells Fargo/Gallup Small Business Index survey conducted November 11-17, 2016 (after the election), small business owners are the most optimistic they’ve been in over 8 years about their ability to obtain credit, their ability to increase cash flow, and the overall outlook for the business environment in 2017.

As a small business owner, hopefully you share this optimism and are looking to build on 2016 wins for an even more successful 2017. And though we all know that small business owners wear many hats, the recipe for current and ongoing success always involves more than one person. The importance of saying Thank You—to your team, to your customers, to your partners, and also to your vendors—can’t be emphasized enough. And while there are many ways to go about The Art and Science of the Small Business Thank You, the end of the year always brings up the question of whether to give bonuses to your team and tips to your service providers; as well as how much these bonuses and tips should be.

Clearly, if you had a tough year stretching things further to give year-end bonuses can be ultimately self-defeating. But if you’ve had a banner year, sharing the wealth can go a long way towards motivating your team, and the third parties that support your business, to work even harder to make the next year even more prosperous.

Knowing how other small businesses like yours handle tipping and bonuses can be useful in making your own decisions. The following trends and survey results may be helpful.

 

Small Business Bonuses


Small business bonus plans for 2016 appear to depend on whom, and perhaps when, you ask.

A Bank of American survey conducted prior to the election (August – October, 2016) found that only 31% of small business owners planned to give bonuses in 2016, down from 52% in 2014 and 2015. The same survey found that only 27% planned gifts to employees (down from 40% in 2015), and only 37% planned to close during the holidays (down from 44% in 2015). Even more striking, a full 28% reported not planning any type of holiday/end-of-year bonus or perk, down from just 6% in 2015.

Fast forward to a November survey of its small business readers by Business Know How, started just before and closed just after the election. It found that 75% of businesses with fewer than 100 employees plan to give employees a cash bonus this year. Another survey of microbusinesses (those with 1-10 employees) found that 64% planned year-end bonuses. While one might be tempted to chalk this up to the election result (or perhaps just the overwhelming sense of relief that the election is over), an Accounting Principals survey conducted prior to the election had a similar conclusion, finding that 75% of respondents (from businesses of all sizes) planned some type of year-end bonus for 2016.

 

Determining the Just Right Bonus


Once you’ve decided to give bonuses to your team, finding just the right amount can be tricky. While you want to be generous and motivating, you don’t want to set future expectations too high. Wanting to reward high-performers handsomely is understandable, but it must be done carefully so as not to demotivate and demoralize other non-rockstar but nonetheless vital and valued members of your team. If times are tough, but you want to give something, it must be carefully presented so that it is received commensurately with the appreciation with which it is given.

Looking to the surveys again can provide some guidance. The microbusiness survey found that 20% of small business owners plan larger bonuses than last year while 67% will keep them about the same. The Business Know How Small Business survey found that when flat dollar amounts are given as bonuses they range from $50 to $5,000, with the median being $300; and percentage based bonuses ranged from about 1-10%, with the most commonly reported bonus equaling between one and two week’s pay for full time employees.

The Accounting Principals survey got concrete with the numbers:

  • Average bonus for businesses of all sizes: $1,081
  • 13% give bonuses of $1-99
  • 37% give bonuses of $100- 499
  • 21% give bonuses of $500-999
  • 29% give bonuses of $1000+

However much you can afford to give, how you give it is just as important.–Don’t just plop some extra cash into payroll. Take the time to present the bonus with a personal note that tells your employee just how much you appreciate their hard work and dedication. That little bit of extra effort can go a long way towards promoting loyalty and future performance.

You should also check out Everything You Need to Know (Taxwise) About Year-End Bonuses from the SBA to ensure that your generosity doesn’t end up causing your business, or your employees, tax problems.

 

Small Business Tipping


Along with your employees there are many third parties that provide critical, though sometimes largely unnoticed, services for your small business. These include office building staff (such as doormen, greeters, cleaning, and security staff), delivery people of all stripes (US mail, UPS, FedEx, restaurant, pizza, coffee, water, groceries, office supplies, newspaper, etc.), trash collectors, garage attendants, personal coaches and personal trainers, drivers, and anyone else providing services to your business throughout the year.

But, before you start doling out cash, it is important to know when tipping is appropriate or even permitted so that you do not inadvertently place someone in an uncomfortable position. Holiday Tips vs. Holiday Gifts from the Emily Post Institute helps you determine when a small thoughtful gift is appropriate and not a tip. For example, tipping a US postal worker is prohibited but small clearly inexpensive gifts (such as cookies or a mug with your company logo) are fine.

How much to tip is a case-by-case personal decision. Factors to consider include your budget, the extent and frequency of the service provided, the cost of the service provided, the quality of the service provided, and your (or your team’s) personal relationship with the service provider.

Unless you work in a home office, tipping building staff will likely be important. In some cases all tenants contribute to a pool that is distributed amongst the entire building team. This can be a very useful approach, particularly if tenants do not interact with all staff on a regular basis.

However, if you are tipping individually check out Tipping the Building Staff: Brick Underground’s 2016 Guide for some guidelines and ideas. Keep in mind that this guide was written for New York City residents, so every dollar amount you see is going to be on the very highest end, but it is an interesting and entertaining read nonetheless, and may provide some useful advice for tipping in many situations.

Gleaned from various sources, the following are some suggestions for tipping common providers used by small businesses:

  • Building Handyman or Janitor: $10 to $25
  • Building Superintendent: $20 to $100+
  • Doorman: $30 to $100
  • Garage or Parking attendant: $10 to $30
  • Office Cleaners: One week’s salary (if you hire them directly) or $25-$50
  • Trash Collectors: $10 to $20 each
  • Water Delivery Person: $10 to $20
  • Regular Food Delivery Person: $10 to $30 extra on a delivery near the holidays
  • Personal Trainer/Coach: cost of one session
  • Newspaper Delivery Person: $10 to $30
  • Driver / Limo Service:$20-$50+ extra on an occasion near the holidays
  • FedEx: Non-cash gifts valued up to $75 (per company policy)
  • USPS Mail Carrier: Non-cash gifts valued up to $20 (per USPS policy)
  • UPS: $10 – $30 (the company discourages employees from accepting cash, but does not prohibit it. So, you may want to consider a gift instead.)

For a comprehensive A-to-Z list of tipping suggestions (including those not to tip) for every possible provider in your business and personal life see The Care.com Holiday Tipping Guide.

One more thing to keep in mind is taxes. You can deduct tips of up to $25 per person per year for people providing services to your small business. See this IRS guide for all the rules.

And finally, remember that holiday tipping isn’t just about the cash it is about the sentiment. As the Emily Post Institute reminds us, Holiday tipping is really holiday thanking.

 

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Lisa Hephner

Lisa Hephner

My name is Lisa, and I'm the Vice President of Knowledge, responsible for the management of corporate, product, competitor, marketplace, legal, and regulatory knowledge, and creation and dissemination of knowledge tools using these assets to PaySimple prospects, customers, employees, and partners.

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