How Do You Celebrate the Holidays with Your Employees?

As colder weather approaches, individuals and companies alike begin thinking about and planning for the holidays. If you’re among the many business owners who plan to celebrate the holidays with your employees, you’re in good company. You’re also engaging in a smart business practice. As it turns out, celebrating the festive season not only increases good will around the office or factory floor, doing so is good for the company’s bottom line.

Workplace Satisfaction and Job Performance

As a businessperson, you may recognize value in keeping your workers happy. Employee turnover is expensive, not to mention disruptive. However, maintaining employee satisfaction also helps your company’s bottom line in boosting productivity. In fact, studies cited by the Harvard Business Review showed that companies experienced 31 percent more productivity and 37 percent higher sales when employees were happy or satisfied.

Why Holiday Entertainment Spending Pays Off

At the height of the Great Recession, many companies cancelled so-called extras such as holiday bonuses and parties. In fact, only 68 percent of companies responding to an annual survey conducted by Challenger, Gray and Christmas in 2011 planned to hold holiday parties. By 2015, the number of companies that planned to host holiday festivities had rebounded to 80 percent.

There’s a good reason for the upswing. Holiday entertainment spending demonstrates that the hard work and effort employees put in is appreciated. The money spent on holiday parties, bonuses and gifts can be viewed as an investment in maintaining stability among your company’s workforce. Workers who feel appreciated are more willing to put in extra effort when needed and less likely to be shopping around their résumés to look for new jobs.

Best Practices for Spending the Holiday Budget

There are five major elements of any get-together: guest list, venue, food and drink, ambiance and entertainment. Many big companies splash out on big-ticket celebrations during the holidays, including celebrity entertainment, all-expense-paid getaways to exotic locations or lavish feasts featuring dancing accompanied by live music and open bars.

However, it is not necessary to break the bank to throw an enjoyable holiday party. If your budget is limited, you can either opt to cut back expenses overall, or limit some areas while splashing out on others. For instance, holding the holiday celebration on company premises incurs few or no additional expenses. However, logistics may be a challenge if your company is large or you plan to host spouses, vendors and others along with your employees.

The guest list for a holiday party is often determined by the nature of the celebration. In-house lunches are often limited to employees, while employees often expect to be allowed to bring spouses to evening events held over dinner. Adding vendors and other non-employees to the guest list also increases costs.

The tab for food and drink for a holiday celebration can be as inexpensive as a potluck lunch or as extravagant as an all-expenses paid, multi-course sit-down dinner along with an open bar and a live band for dancing. Entertainment for holiday parties can also translate into major expense. As a rule, live entertainment is more expensive than pre-recorded tracks spun by a deejay. Ambiance and lighting are often neglected. Fortunately, creating an inviting ambiance is often as simple (and inexpensive) as strategic lighting and well-placed, unobtrusive speakers.

If you intend to serve alcohol at your holiday party, it’s smart to minimize the risk of partygoers driving home while intoxicated. Reserving a block of hotel rooms is a generous option, especially for parties held off premises. Complementary rides home by cab or shared-ride service is a somewhat less expensive option that accomplishes the same purpose.

If your holiday party budget is more generous, an evening celebration where spouses are invited and which features live entertainment and a sit-down meal may be viewed as more memorable by employees. On the other hand, a limited budget does not mean limiting the fun of a holiday party. A catered lunch allows a welcome opportunity for downtime and camaraderie among employees, and between workers and supervisors.

Invitations represent one aspect of a holiday party that involves little or no cost. Online sites such as Evite allow hosts to create secure, private sites for their celebrations, with customized invitations distributed via email or text, and running tabs of acceptances and regrets.

In-Office Versus Offsite Parties

In-office parties are often more convenient, especially for lunchtime celebrations — after all, your workers are already there. Parties on company premises also tend to be less formal and more relaxed, which often suits the culture of smaller companies.

On the other hand, many larger companies opt to host their holiday festivities offsite, especially if alcohol is served. Many offsite venues include provide food and drink, covering two aspects of your company’s holiday celebration. Offsite celebrations signal that the get-together is social, rather than an extension of the workday, and lend themselves to more formal celebrations.

Informal holiday celebrations provide opportunities for employees at all levels to relate to one another in a relaxed atmosphere. Secret Santa exchanges with preset spending limits or outings to see a popular family-friendly movie are fun ideas for smaller companies. Planning a date to serve meals in a soup kitchen honors the spirit of the season while providing a means for companies of all sizes to give back to others who are less fortunate.

Tax Implications of the Holiday Party

While the recently-passed Tax Cuts and Jobs Act eliminated several formerly-allowed entertainment-related tax breaks, some deductions for company holiday parties were left intact. Specifically, hiring a popular entertainer for an evening to entertain vendors is probably no longer eligible for a tax break. However, expenses for parties held for employees and spouses (except for “highly compensated employees”) likely remain 100 percent tax deductible.