Holiday bonus letter to employees — 50 Christmas bonus letters & messages
A holiday bonus letter tells an employee what they did well this year, how much their bonus is, when it’s paid, and that it’s a one-time, discretionary gift. This page covers what to include, how holiday bonuses are taxed in 2026, how to keep a bonus from changing overtime pay, and the common mistakes. Then it gives you 50 copy-paste letters, card notes, team announcements, payroll and policy wording, and filled-in examples by business.
Samples only, not tax or legal advice. Payroll tax and overtime rules apply to bonuses; check with your payroll provider or accountant.
A good holiday bonus letter is short and has five parts: a specific thank-you (one real thing they did this year), the amount, when and how it’s paid (which paycheck, separate line or separate check), a tax note (it’s taxable, so take-home is lower than the gross), and a discretionary line: a one-time gift that doesn’t change their pay rate or promise future bonuses.
Sign it by hand. A specific line like “you handled 14 emergency calls during the October storm” is what people remember. The dollar amount matters less.
How holiday bonuses are taxed (US, 2026)
Cash bonuses and gift cards to employees are wages. They go through payroll with income tax withholding, Social Security and Medicare (7.65% employee share), and any state taxes, and they show up on the W-2. When a bonus is paid as a separate line, payroll can withhold federal income tax at a flat 22% (the IRS supplemental wage rate for 2026). Or it can be added to regular pay and withheld normally.
Gift cards are taxable at any amount, because they count as cash. A holiday ham, a turkey or a small gift basket is usually a nontaxable de minimis gift. Extra paid time off is taxed when it’s used, as regular pay.
Grossing up: to give exactly $500 take-home, the gross has to cover the withholding. In a state with no income tax, using the 22% flat rate: $500 ÷ (1 − 0.22 − 0.0765) = about $711. Your payroll provider can do the exact math for your state.
Bonuses paid by your last 2026 payroll date are 2026 wages. If you pay in January, they count as 2027 wages.
Holiday bonuses and overtime (FLSA)
For hourly, non-exempt employees, some bonuses have to be added into the “regular rate” used to figure overtime. A true holiday gift doesn’t, even if you give it every year and the amount varies by salary or length of service. It must not be measured by hours worked, production or efficiency, and must not be promised in a contract (29 CFR 778.212). A discretionary bonus can also be left out, but only if you decide both whether to pay and how much at or near the end of the year, with no earlier promise.
That’s why the letters on this page say “discretionary” and “one-time,” and don’t tie the amount to hours or production. Attendance, production and “stay until December” bonuses are different: they usually count toward the regular rate for overtime. If you pay those, ask your payroll provider to handle the overtime adjustment.
General business information, not tax or legal advice. State rules differ; check with your payroll provider, an accountant or your state labor department.
Mistakes to avoid
Paying cash off the books. It’s still wages, and it creates problems for both of you.
Announcing in January that there will be a bonus in December. A promise can turn a gift into a bonus that counts for overtime.
Tying a “holiday” bonus to hours worked. Scaling by length of service or salary is fine for a holiday gift. Scaling by hours or jobs completed generally isn’t.
Forgetting seasonal workers who left in November. Pay theirs with the final check, with a short letter.
Letting people find out on payday that there’s no bonus. Tell them early (template above).
Announcing amounts in front of the group. Thank people together; give amounts privately.
A worked example
A landscaping owner with one crew lead, three year-round crew members and two seasonal workers set aside $3,200 for holiday bonuses. In early November she asked her payroll provider to run bonuses on the Friday, December 18 payroll as supplemental pay. The seasonal workers got theirs, $150 each, with their final checks on Friday, November 20, so nobody was left out.
The lead got $1,200. The other three got $500 each, with $50 added for each year of service. That’s based on service, not hours, so it stays a holiday gift. Each person got a signed letter naming one specific thing they did. The team lunch on Wednesday, December 23 was thanks only; no amounts were announced.
In January two employees asked why their bonus was “taxed so much.” She sent the short 22% explanation reply from this page, and both seasonal workers said yes to coming back in March.
Holiday bonus letters to copy
Print one per person, sign it by hand, and hand it over with the check or the pay stub. Keep the amount, the pay date and “discretionary” in every letter.
Standard holiday bonus letter
The default: thanks, the amount, when it’s paid, and that it’s a one-time gift.
[Your Business Name]
[Friday, December 18, 2026]
Dear [Ana],
Thank you for everything you did this year. [You took on the Thursday route in August, and not one client went without a visit.] That’s the reason we had our best year yet.
As a thank-you, you’ll receive a holiday bonus of $[500.00]. It will be paid as a separate line on your [Friday, December 18] paycheck. Like your regular pay, it’s taxable, so the amount you take home will be lower than the gross.
This bonus is a one-time, discretionary gift for 2026. It doesn’t change your pay rate or promise a bonus in future years.
Happy holidays, and enjoy the time off on [Dec 24–25 and Jan 1].
[Signature]
[Name], Owner
Bonus letter with a grossed-up amount (“$500 in your pocket”)
When you want the take-home amount to be a round number. Ask your payroll provider to gross it up.
Dear [Marco],
Thank you for a great year. [Your callbacks were the lowest on the team, and three clients sent us notes about you by name.]
Your holiday bonus is $500 take-home. We’ve “grossed it up” so the taxes are covered: the gross amount on your pay stub will be higher than $500 (about $[711] [in a state with no income tax]), and after withholding you’ll receive $500.
It will be paid on [Friday, December 18, 2026]. This is a one-time, discretionary holiday bonus and doesn’t change your hourly rate.
Thank you, and happy holidays.
[Name]
Bonus letter based on length of service
Amounts can vary by years of service or salary and still be a holiday gift, as long as they aren’t tied to hours worked or production.
Dear [Priya],
This was your [third] year with us, and it showed: clients trust you with their homes, keys and pets, and new team members learn from you.
Our holiday bonus this year is $[150] for every full year with the company, plus $[100] for everyone. For you that’s $[550.00], paid as a separate check on [Friday, December 18, 2026].
The bonus is a discretionary holiday gift. It isn’t part of your pay rate, and future bonuses aren’t guaranteed.
With thanks,
[Name]
Bonus letter for a part-time or seasonal employee
Warm and specific, even for a smaller amount.
Dear [Devin],
Thanks for a strong first season on the crew. [You learned the mowing routes fast, and clients noticed how carefully you closed gates and picked up after the crew.]
You’ll receive a holiday bonus of $[150.00] with your final paycheck on [Friday, November 20, 2026]. It’s a one-time, discretionary thank-you and is taxed like regular pay.
We’d love to have you back in spring. I’ll be in touch in [February] about start dates.
[Name]
Bonus letter for a crew lead or key employee
Name what they carried. A larger bonus deserves a longer letter.
Dear [Jordan],
This year the business grew from two crews to three, and you’re a big reason it worked. [You trained both new hires, kept the second truck running, and handled the October storm callbacks while I was out.]
Your holiday bonus is $[1,500.00], paid as a separate line on your [Friday, December 18, 2026] paycheck (taxes are withheld as usual).
This is a discretionary, one-time bonus for 2026. Separately, we’ll talk about your 2027 pay at your review on [Friday, December 11].
Thank you — I don’t say it enough.
[Name]
Bonus letter for an employee who started this year
Some businesses scale the bonus by months of service. Say how it was figured so it doesn’t feel random.
Dear [Sam],
Welcome to your first holiday season with us. Since you joined in [August], you’ve [become the person clients ask for on Saturday mornings].
Our holiday bonus is based on time with the company this year. For you that’s $[125.00], paid on [Friday, December 18, 2026]. It is a discretionary gift, not part of your pay rate.
Glad you’re on the team.
[Name]
Bonus plus an extra paid day off
A day off can mean more than cash. Put both in writing.
Dear [team member],
Thank you for this year. As a holiday thank-you, you’ll get:
• A $[300.00] bonus on your [Friday, December 18] paycheck, and
• One extra paid day off, to use any day between [Monday, January 4] and [Wednesday, March 31, 2027]. Ask by the Friday before so we can cover your clients.
The bonus is taxable and discretionary. The extra day is in addition to your regular paid time off and doesn’t carry over past [March 31].
Happy holidays!
[Name]
Smaller bonus in a tight year (honest letter)
When it’s less than last year. Be straight about why, and keep the thanks big.
Dear [Ana],
Thank you for sticking with us through a hard year. [Fuel and supply costs went up, and we lost two commercial accounts in the spring.] You kept showing up and doing great work, and that kept the business steady.
This year’s holiday bonus is $[200.00], less than last year. I wish it could be more. It will be on your [Friday, December 18, 2026] paycheck.
If next year goes the way I expect, I want to do better by you. I’ll be honest with you either way.
Happy holidays,
[Name]
No holiday bonus this year (letter)
Don’t let people find out on payday. Tell them early, say why, and offer what you can.
Dear team,
I want to tell you before the holidays, not on payday: there won’t be a cash holiday bonus this year. [Our costs rose faster than our prices, and two large clients paid months late.] Keeping everyone’s hours and pay steady through the winter came first.
What I can do:
• Paid holidays on [Fri Dec 25 and Fri Jan 1] as usual
• A team lunch on [Wednesday, December 23], on the company
• [An extra paid half day on Thursday, December 24]
Thank you for a year of hard work. It matters, and I notice it.
[Name]
Short notes for the card or envelope
Two or three lines, by hand. The letter covers the details; the card says thank you.
Card note: general
Use for everyone.
[Ana], thank you for everything you did this year. We couldn’t do it without you. Happy holidays! — [Name]
Card note: specific moment
Pick one thing that happened.
[Marco], I still think about the October storm week, when you handled 14 emergency calls in four days. Thank you. Enjoy the holidays with your family. — [Name]
Card note: new hire
Short and welcoming.
[Sam], glad you joined us this year. The clients already ask for you. Here’s to a great 2027! — [Name]
Card note: long-time employee
Acknowledge the years.
[Priya], [six] years now. Thank you for your loyalty and for the care you give every client’s home. Happy holidays. — [Name]
Card note: with a gift instead of cash
When the envelope holds a gift card or a gift.
[Devin], a small thank-you for a great season. Treat yourself. Happy holidays! — [Name]
Text when the bonus is on the paycheck
For staff who get paid by direct deposit and won’t see an envelope.
Hi [Ana] — you’ll see an extra line on Friday’s paycheck: a $[500] holiday bonus. Thank you for this year. A card is waiting for you at the shop too. Happy holidays!
Text to a remote or route employee
For walkers, sitters or techs you rarely see in person.
Hi [Priya]! Since I don’t see you often enough to say it in person: thank you for this year. Your holiday bonus of $[300] is on the Dec 18 paycheck. Enjoy the holidays!
Team announcements
For telling the whole team at once: email, group text, or a few words at the holiday lunch.
Team email: holiday bonuses and holiday schedule
Combine the good news with the dates people need.
Subject: Holiday bonuses + holiday schedule
Hi team,
Thank you for a great 2026. Holiday bonuses will be paid on [Friday, December 18], as a separate line on your paycheck. Each of you will get a short letter this week with your amount.
Holiday schedule:
• Thu Dec 24 — half day, done by 12:00
• Fri Dec 25 — closed, paid holiday
• Thu Dec 31 — done by 2:00
• Fri Jan 1 — closed, paid holiday
• Mon Jan 4 — normal schedule
Team lunch is [Wednesday, December 23] at [12:30] at [place], on the company.
Thank you all,
[Name]
Group text: bonus heads-up
Short, no amounts in a group chat.
Hi team — holiday bonuses go out on Friday’s paycheck (Dec 18). Everyone gets a letter with their amount this week. Thank you for a great year!
What to say at the holiday lunch
Thirty seconds. Thank people by name; don’t announce amounts in front of everyone.
“Before we eat: thank you. This year we [added a third crew, kept almost every client, and got through the October storm]. [Jordan], [Ana], [Marco], [Priya], [Devin], each of you made that happen. Your holiday bonus is on Friday’s paycheck, and there’s a card with your name on it by the door. Enjoy, and happy holidays.”
Payroll note to your bookkeeper or payroll provider
Send early in December so it runs on the right check.
Hi [name],
Please add holiday bonuses to the [Friday, December 18, 2026] payroll as a separate supplemental pay line (not added to the hourly rate):
[Jordan R.] — $1,500.00 gross
[Ana M.] — $500.00 net, please gross up
[Marco D.] — $500.00 gross
[Priya S.] — $550.00 gross
[Devin T.] — paid Nov 20 with final check, $150.00 gross
These are discretionary holiday bonuses, not tied to hours or production. Please confirm the gross-up amount for Ana before you run payroll.
Thanks,
[Name]
Gifts instead of (or with) cash
How to word non-cash thank-yous, and how each one is treated for tax.
Holiday ham, turkey or food basket note
A low-value holiday food gift is usually a nontaxable de minimis gift.
Happy holidays, [Ana]! Here’s a [ham / turkey / basket from (local shop)] for your holiday table, with thanks for everything this year. — [Name]
Gift card note (and the tax line)
Gift cards are cash equivalents: taxable wages at any amount. Tell your payroll provider.
[Marco], here’s a $[100] gift card to [store] with thanks for a great year. Happy holidays! — [Name]
[Note for your records: report gift cards to employees through payroll as taxable wages, even small ones.]
Extra paid time off as the gift
Free for cash flow, and many employees value it more.
Happy holidays, [Priya]! Your gift this year is an extra paid day off. Use it any day from [Mon Jan 4] to [Wed Mar 31, 2027]. Just ask a week ahead so we can cover your clients. Thank you for a wonderful year.
Company jacket or gear
Practical gifts with your logo are often welcome; put a note in the box.
[Devin], a new [insulated jacket] for the cold mornings, with thanks for the season. Stay warm, and see you in spring! — [Name]
Holiday meal or event instead of a cash bonus
Say it plainly so nobody waits for a check that isn’t coming.
Hi team — this year our holiday thank-you is a team dinner at [restaurant] on [Friday, December 11] at [6:30], with a plus-one, all on the company, and an early finish at 3:00 that day (paid). There won’t be a cash bonus this year, but I want us to celebrate together.
Subcontractors, helpers and 1099 workers
A year-end thank-you to contractors is a payment for the business relationship, not a payroll bonus.
Thank-you payment to a subcontractor
Pay through your usual vendor payments. It counts toward their 1099-NEC total.
Hi [Luis],
Thanks for all the [drywall] work this year. You never missed a start date, and clients loved your finish work. I’ve sent an extra $[300.00] with this week’s payment as a year-end thank-you.
It will be included in your [2026] 1099-NEC total. Happy holidays, and I hope we get a lot more jobs done together in 2027.
[Name]
Holiday card to a regular helper or vendor
No money. Just a card and thanks.
[Sandra], thank you for always fitting us in, from emergency parts to Saturday deliveries. We appreciate you and your team. Happy holidays! — [Name], [Business]
Year-end note asking for an updated W-9
Pair the thank-you with the paperwork you need in January.
Hi [Luis], thanks again for a great year! Quick one before the holidays: can you send an updated W-9 if your address or business name changed this year? I’ll have your 1099-NEC out by January 31. Happy holidays!
Bonus policy wording and pay-stub questions
Copy into your handbook, offer letters or replies. The wording keeps holiday bonuses discretionary.
Keeps bonuses at your discretion. Check with your payroll provider or an advisor if you also pay production or attendance bonuses.
Holiday bonuses. The company may, at its sole discretion, give holiday bonuses or gifts at the end of the year. Whether a bonus is paid, and its amount, is decided by the owner at year end and may vary by year, by role, and by length of service. Bonuses are not earned by hours worked, production, or attendance, and are not part of any employee’s regular pay rate. Payment in one year does not create a right to a bonus in any later year. Bonuses are taxable and are paid through payroll.
Offer letter line about holiday bonuses
For new hires who ask whether there’s a bonus.
Holiday bonus: [Company] has given holiday bonuses in past years. Any bonus is discretionary, decided at year end, and not guaranteed.
Reply: “Why was so much tax taken from my bonus?”
Explain the 22% federal flat rate simply, without giving personal tax advice.
Good question! Bonuses are taxed like regular pay, but payroll often withholds federal income tax on a bonus at a flat 22% when it’s paid as a separate line, plus Social Security and Medicare (7.65%) and any state tax. That’s withholding, not your final tax. If too much was withheld, it comes back when you file. For your own situation, a tax preparer can tell you more.
Reply: “Can I get my bonus in cash, off the books?”
Kind, firm, and short.
I get it, and I wish I could. But bonuses have to go through payroll like regular pay. It protects both of us, and it counts toward your Social Security. If you want a round number to take home, I can gross it up so the taxes are covered. Want me to do that?
Reply: “Will there be a bonus next year?”
Don’t promise. Promised bonuses can change how overtime is calculated.
I hope so, and I’ll do my best. Bonuses depend on how the year goes, and I decide at the end of the year, so I can’t promise one now. What I can promise is that I’ll tell you early either way.
Filled-in examples by business
Finished letters you can use as models.
House cleaning company (4 cleaners)
Equal base amount plus a little extra for years of service.
Dear [Rosa],
Thank you for your third year with Sparkle & Co. In October two clients emailed me just to say how much they love having you in their homes.
Your holiday bonus is $[400]: $250 for everyone this year, plus $50 for each full year with us. It’s on your Friday, December 18, 2026 paycheck as a separate line. It is a discretionary holiday gift and doesn’t change your hourly rate.
We’re closed Thu Dec 24 (after noon), Fri Dec 25 and Fri Jan 1. Enjoy the rest!
— [Owner]
Landscaping crew (seasonal)
Paid with the last check of the season.
Dear [Devin],
Thanks for a great first season with Greenline. You learned every route, you never missed a day in the August heat, and the Hillcrest HOA asked for “the guy who always closes the gates.”
You’ll get a $[150] bonus with your final paycheck on Friday, November 20, 2026. It’s taxable and discretionary. We want you back. I’ll text you in February about the spring start (around Monday, March 22, 2027).
— [Owner]
HVAC / plumbing shop (lead tech)
Larger bonus, specific results, and a separate review.
Dear [Jordan],
In 2026 you ran 640 calls with a 1.9% callback rate, trained two apprentices, and covered the October storm week. Thank you.
Your holiday bonus is $[1,500], paid on Friday, December 18, 2026 as supplemental pay. It’s discretionary and separate from your annual review on Friday, December 11, where we’ll set your 2027 rate.
— [Owner]
Dog walking / pet sitting company
Part-time team, with holiday coverage thanks.
Hi [Priya],
Thank you for 386 walks and visits this year, and for taking the Thanksgiving and Christmas week shifts so our clients could travel.
Your holiday bonus is $[300], on your Friday, December 18, 2026 paycheck. It’s a one-time, discretionary gift. Happy holidays to you and [Biscuit]!
— [Owner]
Hair salon (stylists and front desk)
Same thank-you, different roles.
Dear [Chris],
You kept the front desk calm through the busiest December we’ve had: 1,100 appointments booked and almost no double-bookings. Clients notice the welcome before they notice the haircut.
Your holiday bonus is $[350], paid on Friday, December 18, 2026. It’s discretionary and taxable. Thank you for being the first face people see.
— [Owner]
How much to give (and what it really costs)
There’s no standard amount. Small service businesses commonly use one of these, and the worksheets below show the math:
A flat amount for everyone (simple, and nobody compares).
A flat amount plus a per-year amount for length of service.
About a week’s pay, or a small percentage of the year’s wages.
A pool split by hours worked, which is fair to part-timers automatically.
Whatever you choose, budget for the employer’s share of payroll taxes on cash and gift-card bonuses: 7.65% for Social Security and Medicare, plus state unemployment tax for anyone who hasn’t reached your state’s wage base. A $3,000 bonus pool costs about $3,230. Write down the method you used, so next year’s bonuses (and any “why did she get more?” questions) are easy to answer.
Bonus split worksheets (with the math done)
Copy into a spreadsheet or the notes for your bookkeeper. All amounts are gross, before withholding.
Pool split by hours worked
Fair to part-timers: everyone gets the same amount per hour worked this year.
BONUS POOL: $3,000.00
Hours worked Jan 1–Dec 11, 2026:
Ana 1,920 h
Jorge 1,600 h
Sam 1,000 h
Lena 480 h
Total 5,000 h
Rate: $3,000 ÷ 5,000 h = $0.60 per hour
Ana $1,152.00
Jorge $960.00
Sam $600.00
Lena $288.00
Total $3,000.00
Tiers by length of service
Easy to explain and to repeat every year.
Under 1 year: $150
1–2 years: $300
3–4 years: $450
5+ years: $600
This year: 2 people under 1 year ($300), 3 people at 1–2 years ($900), 1 person at 5+ years ($600)
Total: $1,800.00
Flat amount plus per year
A base for everyone plus a thank-you for each full year.
Formula: $200 + $50 for each full year of service
Ana (6 years) $200 + $300 = $500
Jorge (3 years) $200 + $150 = $350
Sam (1 year) $200 + $50 = $250
Lena (5 months) $200 + $0 = $200
Total $1,300.00
Percentage of the year’s wages
Scales with hours and pay rate. Use gross wages from payroll.
Rate: 2% of 2026 gross wages (through the last December payroll)
Ana $42,240 x 2% = $844.80
Jorge $30,400 x 2% = $608.00
Sam $17,000 x 2% = $340.00
Total $1,792.80
Prorated bonus for a part-timer or mid-year hire
Same full-time bonus, prorated by hours.
Full-time bonus: $500 for a full year (2,080 hours)
Lena worked 780 hours this year.
780 ÷ 2,080 = 0.375
$500 x 0.375 = $187.50
Letter line: “Your bonus of $187.50 is based on the hours you worked since you joined us in June. Thank you!”
Total cost check before you commit
Run this before you announce any amounts.
Bonuses (gross): $3,000.00
Employer Social Security + Medicare 7.65%: $229.50
State unemployment tax (only for anyone under the wage base): check with payroll
Payroll processing fee for an extra run: $[ ]
TOTAL COST: about $3,229.50 + extras
Pay date: [Friday, December 18, 2026], on a separate check or as a separate line on the regular paycheck.
Year-end, performance and other bonus letters
Bonuses that aren’t only about the holidays. If a bonus is promised in advance for meeting goals, write the conditions down clearly.
Performance bonus letter (goal met)
Ties the bonus to a specific, measurable result.
Dear [Name],
At the start of the year, we set a goal: [fewer than 2% of jobs needing a callback]. You finished 2026 at [0.8%], the best on the team.
As promised, you’ll receive a performance bonus of $[750], paid on [Friday, December 18, 2026] with your regular paycheck (taxes will be withheld).
Thank you for the care you put into every job.
[Owner]
Profit-sharing bonus letter
Explains the formula without opening the books.
Dear [Name],
2026 was a good year for [Business], and you helped make it happen. As we described in the spring, [10%] of the year’s profit is shared with the team, split by hours worked.
Your share is $[1,152.00], based on [1,920] hours. It will be paid on [date].
Thank you for a strong year.
[Owner]
Retention bonus letter (stay through busy season)
State the conditions plainly. Have someone review it if the amount is large.
Dear [Name],
We’d like you with us for the busy season. If you’re still employed with us on [Friday, April 30, 2027], you’ll receive a retention bonus of $[1,000], paid on the next regular payday after that date.
If we end your employment before that date for reasons other than misconduct, we’ll pay the bonus on your last day. If you leave on your own before then, it won’t be paid.
Thank you for being a big part of the team.
[Owner]
Safety bonus letter
Rewards a team result. Don’t discourage reporting injuries.
Team,
We went all of 2026 with no lost-time injuries. That’s because of how you set up ladders, wear your gear and look out for each other.
Everyone on the crew will get a $[200] safety bonus on [date]. And to be clear: reporting an injury or a close call never costs anyone this bonus. Report everything.
Thank you,
[Owner]
Employee referral bonus letter
Thanks someone whose referral was hired and stayed.
Hi [Name],
[New hire] has now been with us for [90 days], and that’s thanks to you. As our referral program says, you’ve earned a $[300] referral bonus, paid on [date].
If you know anyone else who’d be a good fit, send them our way.
Thanks!
[Owner]
Team goal bonus split letter
When the whole team hits a target together.
Team,
Our goal for the fall was [400 completed cleanings in October and November]. We finished at [436].
The $[2,000] team bonus will be split by hours worked during those two months. Each person’s amount is in the envelope with this note and will be paid on [date].
Thank you all. That was a lot of work.
[Owner]
Common questions
How much is a typical holiday bonus for a small business? There’s no standard. Many small service businesses give a flat amount (often a few hundred dollars), a week’s pay, or a base amount plus extra for years of service. Pick an amount you can repeat in a normal year, and be consistent among people in the same role.
Do I have to give holiday bonuses? No. Holiday bonuses aren’t legally required unless you promised one in a contract or offer letter. If you skip a year, tell people early.
Are holiday bonuses taxable? Yes. Cash bonuses and gift cards to employees are taxable wages and go through payroll. A low-value holiday food gift, such as a ham or turkey, is usually a nontaxable de minimis gift.
What’s the bonus tax rate in 2026? When a bonus is paid separately, federal income tax can be withheld at a flat 22%, plus 7.65% for Social Security and Medicare and any state tax. That’s withholding, not the employee’s final tax.
Can I give a bonus to an independent contractor? You can send a thank-you payment, but it’s a business payment, not payroll. It goes through your vendor payments and counts toward their 1099-NEC total.
When should I pay the bonus? Before the holidays, usually on the last paycheck before Christmas (for example, Friday, December 18, 2026). Paying in December makes it 2026 wages; paying in January makes it 2027 wages.
How to use this template
Pick the letter that fits each person, add one specific thing they did this year, and fill in the amount and the pay date. Send the payroll note to your bookkeeper or payroll provider early in December. Sign each letter by hand and hand it out with a short card. For year-end client messages, see the Christmas messages for clients. For reviews and raises, use the employee evaluation form.