By Liz Wilke and Tom Bowen
Millions of workers in America look forward to end-of-year bonuses. Employers use these year-end incentives to acknowledge performance throughout the year and motivate retention and performance in the year to come. Yet, bonuses have gotten smaller over the last two years, due to a stabilizing labor market and a squeeze on employers from inflation.
In 2023, year-end bonuses were down between 3.8% and 36.2% relative to 2022, and down between 12.3 and 36.7% relative to 2021. This indicates a continued easing of labor market pressure for businesses. Though still healthy, employment and job growth have slowed through 2023, and business expectations for employment growth in the year ahead declined dramatically in 2022 and remained low through 2023.
In December, bonuses paid by firms on Gusto’s platform averaged $2,145, a 21% decline from the $2,730 average in December last year (and well below the $3,583 average in December 2019, a 40.1% decline).
Bonuses were down across all industries, ranging from a 3.8% decline in the Technology sector to a 36% decline in the Transportation sector.
Despite layoffs and slow employment growth in 2023, one of the most resilient industries for end-of-year bonuses was the Technology sector (-3.8% year over year), which offered relatively stable end-of-year bonuses compared to last year. After a rocky year, tech companies may be more optimistic about their business prospects going into 2024.
In contrast, for the Transportation sector, down -36.2% since last year, the drop is very large relative to last year’s bonuses, which were essentially the same as the average 2021 bonus. This is a strong indicator of easing conditions in the Warehousing and Transportation sectors feeling the effect of decreased shipping demand. Additionally, some of the most significant year-over-year declines occurred in many sectors that have had significant labor challenges over the last few years, indicating that labor challenges may be easing for these industries.
- Retail (-16.1%)
- Food and Beverage (-26.1%)
- Healthcare and Social Assistance (-15.9%)
The share of workers who receive a bonus is also declining.
16 of 22 industries saw declines in the share of workers that received a bonus from 2022 to 2023. The largest drop was in Arts & Entertainment, with 18.5% fewer workers receiving a bonus relative to 2022. On average, 2.7% fewer workers received a bonus relative to last year. 6.9% fewer received a bonus than in 2021.
Table 1: Average Bonus Sizes by Sector, December 2023, 2022, and 2021
| Sector | Average Bonus in December 2023 | Average Bonus in December 2022 | Average Bonus in December 2021 | Pct Change (2022 to 2023) | Pct Change (2021 to 2023) |
| Technology | $4,806 | $4,998 | $5,478 | -3.84% | -12.27% |
| Automotive | $1,065 | $1,174 | $1,188 | -9.28% | -10.34% |
| Finance | $13,255 | $15,097 | $14,999 | -12.20% | -11.63% |
| Legal | $4,177 | $4,817 | $5,027 | -13.29% | -16.92% |
| Salon & Spa | $381 | $442 | $558 | -13.71% | -31.62% |
| Accounting | $2,529 | $2,979 | $2,979 | -15.10% | -15.10% |
| Manufacturing | $1,714 | $2,023 | $2,035 | -15.28% | -15.75% |
| Non-Profits & Associations | $1,237 | $1,465 | $1,434 | -15.53% | -13.74% |
| Arts & Entertainment | $3,188 | $3,779 | $5,314 | -15.64% | -40.0% |
| Healthcare & Social Assistance | $734 | $873 | $1,040 | -15.90% | -29.43% |
| Retail | $1,279 | $1,524 | $1,978 | -16.11% | -35.36% |
| Construction | $1,866 | $2,242 | $2,411 | -16.77% | -22.62% |
| Insurance | $1,756 | $2,118 | $2,029 | -17.06% | -13.46% |
| Wholesale | $2,717 | $3,375 | $3,832 | -19.49% | -29.09% |
| Consulting | $4,404 | $5,499 | $6,511 | -19.91% | -32.37% |
| Real Estate | $2,828 | $3,582 | $5,522 | -21.04% | -48.78% |
| Communications | $3,579 | $4,662 | $5,184 | -23.22% | -30.96% |
| Facilities | $692 | $904 | $1,023 | -23.45% | -32.35% |
| Food & Beverage | $423 | $572 | $731 | -26.14% | -42.17% |
| Education | $1,130 | $1,530 | $1,983 | -26.16% | -43.03% |
| Transportation | $997 | $1,563 | $1,574 | -36.22% | -36.65% |
| Tourism & Accommodations | $937 | $1,475 | $1,530 | -36.44% | -38.7% |
Table 2: Percent of employees receiving a December bonus, by year
| Sector | Pct Employees with a Bonus in December 2023 | Pct Employees with a Bonus in December 2022 | Pct Employees with a Bonus in December 2021 | Pct change 2022 – 2023 | Pct change 2021 – 2023 |
| Arts & Entertainment | 11.4 | 13.9 | 14.7 | -18.5% | -22.9% |
| Tourism & Accommodations | 16.1 | 18.7 | 15.7 | -14.0% | 2.2% |
| Education | 12.8 | 14.0 | 15.1 | -8.2% | -15.2% |
| Non-Profits & Associations | 17.9 | 19.4 | 20.0 | -7.4% | -10.4% |
| Salon & Spa | 15.4 | 16.6 | 17.5 | -7.3% | -12.0% |
| Communications | 26.4 | 28.4 | 29.4 | -7.3% | -10.4% |
| Transportation | 18.9 | 20.2 | 21.9 | -6.4% | -13.7% |
| Technology | 16.4 | 17.2 | 18.4 | -4.5% | -11.1% |
| Real Estate | 18.5 | 19.3 | 21.5 | -4.2% | -13.9% |
| Manufacturing | 18.9 | 19.5 | 20.5 | -3.4% | -7.8% |
| Consulting | 19.6 | 20.2 | 21.2 | -3.2% | -7.7% |
| Accounting | 24.6 | 25.0 | 23.7 | -1.8% | 3.8% |
| Food & Beverage | 7.5 | 7.6 | 8.6 | -1.6% | -13.0% |
| Healthcare & Social Assistance | 20.9 | 21.1 | 23.0 | -1.3% | -9.3% |
| Automotive | 19.3 | 19.4 | 18.9 | -0.6% | 2.2% |
| Retail | 18.5 | 18.6 | 19.5 | -0.4% | -5.2% |
| Construction | 20.0 | 19.9 | 19.9 | 0.2% | 0.2% |
| Facilities | 18.2 | 18.1 | 18.0 | 0.7% | 1.3% |
| Legal | 31.7 | 31.4 | 32.7 | 1.0% | -3.2% |
| Finance | 18.8 | 18.5 | 21.0 | 1.7% | -10.6% |
| Wholesale | 23.3 | 22.6 | 24.0 | 3.1% | -2.9% |
| Insurance | 24.5 | 23.1 | 23.4 | 5.9% | 4.5% |
Conclusion
Many workers were likely disappointed with their end-of-year bonus this year as bonuses were down across all industries this year compared to last year. As we enter the new year, this trend signals a continued easing of labor market pressure for businesses.
