Fewer workers are receiving year-end bonuses despite a rise in their frequency, according to a report.

• According to Gusto's exclusive data, the average end-of-year bonus increased by approximately 2% in 2024.
• To retain their top performers, employers frequently employ bonuses in a competitive job market.
• Studies indicate that workers increasingly prioritize other benefits, such as flexible hours and work-life balance, in addition to salary.

A new report found that after a long period of job growth and salary increases, employers ended the year by giving their employees larger year-end bonuses.

According to Gusto, the average bonus awarded in December 2023 was $2,503, up from $2,447 in 2023, representing an increase of just over 2%. This data is based on more than 400,000 small- to medium-sized businesses nationwide.

Nich Tremper, Gusto's senior economist, stated that the average paycheck is equivalent to one paycheck, which translates to a substantial sum of money, particularly at the end of the year.

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Tremper stated that the economy ended in 2024 better than expected, and small businesses are benefiting from this improvement, particularly in terms of wages and compensation for their employees.

Sectors that saw bigger, or smaller, bonuses

Several white-collar industries, including communications, technology, and professional services, saw a significant increase in their average end-of-year bonuses, according to Gusto.

Adam Beasley, owner of Adam Up Accounting firm in Payson, Utah, determines bonuses for his staff based on the prior year's profitability. "Our profitability increased by 8% in 2024, resulting in a larger bonus for our staff."

Beasley, who provides accounting services to small business owners, expressed increased optimism about 2025. "I work with a variety of blue-collar companies, including plumbers, electricians, and those involved in infrastructure, and many of them are thriving due to the abundance of work available."

In 2024, many service industry workers received smaller end-of-year bonuses compared to the previous year, according to Gusto. This was due to reduced demand in sectors such as transportation and warehousing, resulting in significant declines in year-end bonuses for workers in these trades, as reported by Tremper.

Despite the challenges faced by the global economy, the jobs market in 2024 remained resilient, with employment rates steadily improving and the unemployment rate dropping to 4.1% in December. Additionally, average hourly earnings increased by 0.3% in the previous month.

To retain their top performers, some employers use bonuses as a tool in a tight labor market, with fewer companies paying bonuses to the entire staff, according to Tremper. The share of workers receiving a bonus decreased by almost 2% in 2024 compared to 2023.

Money is key, but so is work-life balance

"Bonuses are an additional benefit that employees consider when deciding whether to remain in their current job or search for a new one, according to Michelle Reisdorf, district president at Robert Half, a recruitment and staffing firm."

In November 2024, 62% of managers reported that bonuses were higher compared to the previous year, while 28% offered bonuses that were the same as in 2023. Only 5% of managers stated that bonuses were smaller than they were previously.

Workers prioritize work-life balance, flexible hours, and mental health support over money as perks, according to Reisdorf.

Flexibility is the key one, said Reisdorf, as workers increasingly value flexible or hybrid work schedules, extra paid days off, additional options for health insurance or more robust retirement saving plans.