Businesses Reconsider the Holiday Handout

Two surveys find fewer small-business owners plan to offer gifts and parties this season. Another finding: employees prefer cold, hard cash

by Karen E. Klein

A couple of recent surveys conducted by American Express (AXP) measured holiday gift-giving and -getting expectations in U.S. companies this holiday season. The OPEN from American Express Small Business Monitor and the Business Gifting Survey turned up a number of interesting findings about the gifts business owners plan to bestow on staff and clients, whether employees are obligated to reciprocate, and how everyone really feels about that office holiday party (BusinessWeek.com, 10/07).

The Small Business Monitor, a semi-annual survey of U.S. small business owners, surveys a representative group of 625 owners and managers of companies with fewer than 100 employees. The Business Gifting Survey surveyed 501 human resource managers working for companies with 100 or more employees and 511 employees working for a company with 100 or more employees. The findings are summarized below.

Fewer small business owners plan to give employee gifts and throw holiday bashes for their staff this year as opposed to last year, according to Small Business Monitor. Although 70% of small business owners surveyed said they will do something for their staff this month, only 43% said they planned to give gifts. This compares to 52% of small-business owners surveyed in 2006, and 92% of human resource managers at mid-sized and large companies surveyed this fall in the Business Gifting Survey.

The Gift of Time

Other thank you's small business owners expected to give their employees included yearend bonuses, raises, and extra time off. Participation rates for all these voluntary expressions of thanks were down compared to 2006, however. Nearly a quarter of small-business owners said they intended to ask their staffs to take part in a group volunteer activity this month.

Alice Bredin, an OPEN from American Express small business adviser, says she was surprised that more entrepreneurs did not plan to take advantage of time off as an employee thank you. "Even when spending is down, the gift of time is an easy way to thank staff without breaking the bank. And with improving customer service top of mind, it becomes that much more important to take steps to retain valued employees," Bredin said.

Employees may be pleasantly surprised to be acknowledged at holiday time, since only 64% of those who participated in the gifting survey said they expect a gift from their employer. "It's kind of advantageous for employers whose staff have low expectations because it's easy to meet them," says Stefan Happ, general manager of American Express Gift Cards. For the large companies who said they were giving individual employee gifts in 2007, 42% planned to give gift cards while 37% said they would dole out spot cash bonuses.

Everybody Loves Cash

Company products, food gifts and baskets, and time off were additional items mentioned by large employers as holiday gifts of choice for employees. "We used to get company paperweights or pens, which is nice, but giving gift cards gives the employees a greater degree of freedom to do what they like," Happ says. "Cash disappears into the wallet and you may end up paying for your dry cleaning with it instead of treating yourself to a night out or a day at a spa."

For employees, however, nothing beats cold, hard cash. Nearly half of large company employees—44%—said they would like to get cash as a year-end gift, followed by time off and gift cards.

When it comes to the holiday office party, small businesses won't be quite as festive this year. The number of entrepreneurs who said they planned to throw holiday parties for their staffers dropped to 44%, down 10 percentage points from 2006. Among larger companies, 86% are planning to host an employee lunch, dinner, or other special event to mark the holidays. Nearly half of those events will include invitations to employees' spouses and friends.