Year-End Bonuses Rise as Small Businesses Close 2025 on Strong Footing
Key Findings
Year-end bonuses rose meaningfully in 2025. The average bonus paid to employees at small businesses increased 11.5% in December 2025 compared with December 2024, well outpacing inflation, which hovered around 3% for most of the year.
Bonuses reached more workers, not just larger checks. The share of employees at small businesses receiving a bonus rose to 18.0%, an 8 percent increase from the prior year, indicating broader bonus coverage across small businesses.
Growth in bonus payments was widespread across industries. Every sector saw an increase in the share of workers receiving bonus payments, and most industries also posted higher average bonuses.
Rising bonus payments point to underlying strength in the small-business economy. The growth signals that many firms closed 2025 on solid financial footing and entered 2026 with momentum despite ongoing macroeconomic uncertainty.
Introduction
End-of-year bonuses are a common way for small businesses to share success with employees after a strong year. Gusto end-of-year bonus data suggest that 2025 was a strong year for many small businesses, despite consumer pessimism and weak job gains, with employee bonuses at small businesses significantly eclipsing 2024 levels. These increases likely reflect strong business performance and solid worker productivity in 2025.
In December 2025, the average year-end bonus was $2,789, up 11.5% from December 2024. This marks a sharp increase from last year’s trend, when end of year bonuses increased by just 2% overall and many industries saw flat or declining bonuses. Additionally, bonuses also reached more workers this year; 18.0% of employees received a bonus in December 2025, an 8% increase from December 2024. Taken together, this means more workers received bonus payments this year, and those workers generally received larger checks.
While the year was marked by significant uncertainty, economic conditions finished the year on firm footing. When revenues are strong and year-end results exceed expectations, bonuses are often the simplest and most flexible way for employers to share gains with employees. Gusto research from late 2025 supports this sentiment, showing that even as many small business owners remain cautious about the broader economic outlook, most report that their own businesses are performing well. In addition, the latest Gusto Small Business Jobs Report for December shows small businesses ended 2025 with hiring stronger than expected, with 47,900 new jobs added.
One other possible contributor to this growth in bonus pay is productivity gains, particularly those stemming from AI adoption, which may be showing up first in variable pay rather than base wages. While these AI-related productivity gains have not yet clearly appeared in official government data, research from the Gusto Insights Group in 2025 indicates significant productivity gains for small businesses that use AI in their business.
Year-End Bonuses Rose Broadly Across Industries in 2025
Growth in bonus payments was widespread across industries. Most sectors saw higher average bonuses in 2025 than in 2024, with particularly strong gains in experience-driven industries. Tourism & Accommodations (+52%) and Entertainment & Recreation (+45%) posted the largest increases, far exceeding the overall average.
These outsized gains occurred even as consumer sentiment remained weak for much of the year. However, despite weak consumer sentiment,actual consumer spending stayed relatively strong throughout 2025. As a result, many small businesses in these customer facing industries likely performed better than expected, creating room for larger year-end bonus payments.
Bonus growth was not limited to customer-facing industries. Many knowledge workers also saw substantial increases, with employees in the Professional Services and Technology sectors receiving significantly larger average bonuses in 2025 than they did in 2024.
Average End of Year Bonus by Sector
More Workers Receive Bonus Payments This Year
Bonus growth in 2025 was not limited to larger payments—bonuses also reached a broader share of the workforce. Overall, the share of workers receiving a bonus increased by 8 percent compared with 2024, indicating that bonuses became more widespread across small businesses.
Every industry saw an increase in the share of workers receiving a bonus, suggesting that expanded bonus coverage was a common pattern across the small business economy in 2025. At the macro level, this pattern is consistent with an economy in which growth remained resilient but uncertainty stayed elevated. With interest rates still high, credit conditions tight, and the outlook for demand uneven across sectors, many small businesses appear to have favored variable compensation over permanent wage increases. Bonuses allow firms to share gains in strong periods while limiting long-term cost commitments, effectively shifting some short-run risk away from fixed payroll expenses.
The largest increases occurred in Manufacturing and Construction, where a notably higher share of employees received a bonus in 2025 than in the prior year. In these sectors, firms faced greater uncertainty around demand and financing conditions in 2025, which increased the appeal of compensation strategies that could reward and retain workers without raising fixed labor costs.
Share of Employees with an End of Year Bonus by Sector
Conclusion
Year-end bonuses rose meaningfully in 2025, both in size and reach, signaling a strong finish to the year for small businesses. More workers received bonuses, and average payouts increased across most industries, reflecting solid business performance despite ongoing economic uncertainty. Together, these trends suggest that small employers used bonuses as a flexible way to share gains, reward productivity, and retain workers as they closed out the year on firm footing.
Methodology
This report’s data comes from anonymized payroll data from more than 400,000 businesses across the country. The average bonus is measured as the average bonus paid to employees who received bonus payments greater than zero in December 2025. The share of employees who received a bonus measures the share of active employees in December 2025 who received a bonus payment greater than zero.
