With Christmas less than a week away, we tackle one of the most uncomfortable conversations happening in blue collar businesses right now: the holiday bonus.

What happens when bonuses have become an expectation rather than a reward?

We talk through why delaying bad news creates disengagement, how to communicate with empathy when bonuses aren't happening, and the critical mistake of buying yourself a new Denali while telling employees there's no money for bonuses.

Plus, we dive into the difference between base pay increases and true variable compensation, why you should never run bonuses through regular payroll, and how to set up incentive plans that actually motivate your team. Fair warning:

We don't agree on everything in this one, but that's what makes it interesting.

Highlights:

Delaying the bonus conversation creates disengagement and actively encourages your best people to start job hunting during the holidays.

The Denali problem where buying yourself a new truck to avoid taxes while canceling bonuses sends exactly the wrong message to your team.

Why running bonuses through regular payroll can cost you hundreds in unexpected overtime calculations.

The great debate on base pay increases versus variable compensation and which approach actually works for small to mid-sized organizations.

Celebrate the wins because forgetting what happened in January through November means you're missing opportunities to build morale year-round.

Subscribe to Blue Collar BS for more honest conversations about the tough leadership decisions you're facing right now. Share this episode with a business owner who needs to hear it before next week.

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Brad Herda:

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Hey everyone, welcome back to this episode of Blue Collar BS. I am Brad along with my famous and ridiculously millennial like cohost.

Steve.

There you go. Perfect. See, when you give me the intro, I get to do things like that.

I know, I know. It's all right. It's all right. Whatever. You just roll with it. dude, it's beautiful out today. It's an atypical fall day, even though it's uncharacteristically warm.

So what's happened today, Mr. Doyle? What's going on in your world?

A typical fall day.

You know when this episode's releasing, right?

I do know. So it'll be nice. Be nice and cool. It'll be nice and cool. I know I see that. And. On the day. Get it.

December 19th. December 19th. So that's the reason why I'm in my green and my red. And we're gonna get in the holiday spirit! Woohoo! We are here. Christmas is on the way. Here comes Santa Claus. Here comes Santa Claus, right?

It is.

my gosh, I can wait for. Absolutely.

So we are a week, even though physically we're a month away, a month plus away. But from the show perspective, we are less than a week out from from jolly old St. Nick, which means that we are end of the year. And what happens in many blue collar industries and construction firms and things like that at the end of the year? What's the topic of conversation that everybody's worried about?

Physically, we're not but yeah. Yeah.

Correct.

Yes.

Who's taking time off?

Sure, sure, that's one.

How are we covering? Are we working that holiday the week after Christmas? Are we working in between or do we get it off?

I have enough PTO to cover it.

You know and then and then you know the one of the other ones I hear is where's my holiday bonus?

Yes, the holiday bonus. The bonus, the Christmas holiday bonus. We are having that conversation with many people right now in our client base and it is...

Yeah.

Mm-hmm.

And it varies by industry. It varies by segment. It varies by all the things that are happening. And I have one one client in particular was like, Hey, typically we do this. And yeah, that's not going to happen this year. Like, well, you should probably tell them now. Right. So we can separate that out from end of the year performance reviews and other things. So you might as well just tell them now because

Mm-hmm.

Mm-hmm.

Correct.

If you've turned it into a habit, it is now an expectation.

yes.

Right? If you've had the habit of giving everybody 500, 600, a thousand, whatever your number is every year.

Mm-hmm.

before Christmas and now you're going to do something significantly different or nothing at all, you should probably let people know.

Yeah.

So as our resident EQ expert.

yeah, sure.

You like that stroke of confidence, don't you? Yeah, sure. All right. There you go. Yeah. There you go. Yeah. Yeah.

Wow. There's the authority level we're looking for. That's what's putting the show in the top ranked blue collar shows in the country. It's that type of confidence and foresight that just gets our audience going. But as our, as our emotional intelligence person here on the show, the expert, so to self-proclaimed expert you are, um, what are some of the ways a leader can go to either their office staff, their field staff, or just an all employee meeting to

It's a mall roundup.

Yes, sir.

What are some of the best ways or ideas to potentially deliver this message? Now granted, this is coming out on the 19th, so hopefully the message has already been delivered. But for those that have not, what's your suggestion given that we're a week away from the holiday spirit?

Mm-hmm.

Well, I'll tell you what most people do. And then I'll provide a little insight on what you could potentially do that's different that would be a little bit more impactful. So what typically happens in these situations is people dance around the topic and they'll be very evasive and coy about the conversation and delivering the message. People will be like, is that?

Are we on track for a bonus? And the message that comes out is, yeah, we're still crunching the numbers. You already know the answer, but we're still crunching, yep. We're waiting for some of those last minute things to come in and deals. so we don't, know, there's a lot of deflection, so to say, so to speak, of.

I'm only laughing because I've lived through this too many times.

Exactly. We've all lived through this, right? And every week management is hearing the same thing. Well, you know, what are we getting? Employees are talking about it. Some employees have already quote unquote spent the money that they haven't received yet because it's the expectation and habit. if it's, you know, like it has been in the past five years, every year has been this amount. So I know I'm getting this amount and

Whatever this amount is, it's irrelevant because they've already spent it because it's an expectation. And the fact that you're delaying it, especially if you've never had to deliver this before, and you're waiting until either the last day right before the holidays or whatever time frame you're doing because you haven't delayed this yet or you haven't, you have not spoken.

like, hey, this is what's going to happen. Once you deliver that message, there is zero productivity, zero morale with your employees because you didn't level set it early enough. And you weren't clear when you truly knew the answer. Weeks in advance, a month in advance, two months in advance, you weren't clear in that. Now you have a very ticked off disengaged workforce.

Right? So ways to hand. I will say it's not 100%.

Well, let me, hang on. just want, I want to go on the disengag, I want to go, I want to go morale versus disengaged. Cause those are two different things. I think you're going have shitty morale, but you may not end up with bad, you may not end up with disengaged employees. You may end up with both bad morale and disengagement, but you may also have a high probability of shitty morale and

Yes.

And engaged employees, cause they still want to do a good job. They still believe this will be the disappointment in that period of time. Not just a, Hey, go screw yourself. now I'm shitty morale and disengaged at the same time.

Mm-hmm.

Mm-hmm.

Yes, so the disengaged are going to actively, they're going to turn in resignations in January or February, most likely, because they are actively, once they have that free time, that is what they're going to be spending their free time on, is finding new employment in the new year. Those that are low morale but still engaged, I'm going to, because you're getting closer to the holidays, their level of engagement,

may slightly decrease, they won't forget and they are going to be picking up the phone if recruiters call them. Right? So, so you're setting a tone in a message by not conveying the message. Once you know if it is or isn't going to happen, the more you delay, the more frustration that your teams are going to have, the more frustration your leadership team is going to have to deal with.

the lower morale that people are going to have around Christmas time, around the holiday time when, you know, usually people are a little bit more upbeat. And with those that are disengaged, be mindful that they are going to be working together to create more disengagement with other people.

yes. So for your, smaller to midsize, construction firm or where I was in the firm and things like that, I know Steve used the, they're going to pick up the phone from recruiters, which is all well and good. Many of those positions aren't recruiting, there aren't recruiters doing it. However, when they're out at the, local Christmas parade or they're out at the,

Mm-hmm.

You know, the family gathering or the bar or the holiday things, they're going to be actively listening or actively asking their network, their family, their friends. Hey, do you know anything that's going on? Because these guys screwed me this year and I'm really pissed about it. And it's going to be a emotional reaction versus potentially a rational reaction at times. which is why it's so important to communicate sooner rather than later. Own up to it.

Mm-hmm.

Mm-hmm.

state the facts, be transparent as transparent as you can, and then have the conversations one on one if they're disappointed. If a organization can only support so much, they can only support so much, right? There's only so much an organization can give.

Mm-hmm.

Correct.

Yes.

And, at the end of the day, we're, we're in business in order to generate profit. Profit is there to be able to do those things. And if profits are down because of all the things that have happened throughout 2025, then you got to kind of figure out where this is going to take place and how you're going to make up for it or distributed or, prepare for the following.

Mm-hmm.

Right.

Right? So, um, the sooner you can communicate the better. So today's Friday, December 19th. Uh, next week is Christmas. You may want to, you may want to do it today. you show releases at 5 37 AM. If you're listening to this and you know, it's going to be none and it's Christmas is next week. You may want to, you may want to just call everybody in this morning and say, Hey guys, uh, here's what's going on. Um,

Yep. And you haven't done it.

Mm-hmm.

we're not doing that this year or hey you know it's been a thousand dollars and you're get a hundred dollars.

Do that sooner than later. It's only, it's gonna suck for the day, but it's going to pay dividends in the long term.

Mm-hmm.

correct. Because now people know whether or not they like it or not. It's on them. But convey the message and really convey it with a level of empathy, a level of understanding. And understanding. Yeah, no. I didn't say sympathy.

Just so you know, empathy is Steve's greatest strength.

You

Which I don't I don't have any sympathy. That's zero empathy. I'll understand. Right, but but but sympathy, right? We're drawing the line. So I like the tactical empathy terminology, right? I'll understand. But I don't have to care anyways. Respond with a respond with a level of empathy that. Your employees.

Yeah, that's a zero. That's a zero.

Just don't care.

truly feel like you understand how they feel right that yeah, this this isn't the best news to deliver. I get you're probably going to be frustrated. This is where we're at. This is how we're here.

and by the way, Mr. and Mrs. Small Business Owner that might be thinking, Hey, December 19th and your tax advisor is telling you, you made too much money. So therefore you got to spend a bunch of cash to go buy that new Denali in order to take full advantage of your depreciation. So you have to pay as much taxes. Yeah, that's not going to look good.

Correct.

Just so you know, if you're going out and buying this Denali for cash or buying the new, you know, 350 series pickup truck or whatever, just to avoid taxes for the year, and you're not paying out bonuses because that's part of your tax plan, you may want to reconsider that with your financial advisors because you are not going to set yourself up well.

Mm-hmm. 100%. Optics is very important when you're delivering news like this.

So hopefully you have not already purchased those vehicles or vehicle for yourself and then come back with, by the way, too bad. So sad, screw you guys. But I got this brand new 2026, whatever it is with all the bells and all the whistles I just paid cash for. So I don't have to pay as much taxes.

Mm-hmm.

Mm-hmm.

Yeah, this is where you this is where especially as the small business owners, you stop talking about money that you currently have. And really focus on how are you conveying the message, especially if we're conveying a message of not receiving to employees? Right, this is this is that emotional intelligence that really reading the room and really understanding. Am I conveying the right message to the room?

Because doing those extra things definitely is not committing the right message to the room.

So, all right. It's December 19th, end of the year. And this year we're either going to have Christmas bonuses or holiday bonuses, end of the year bonus or not. how.

Yeah.

Mm-hmm.

Sometimes, so technically, you've behaved as it is an expectation over the last three, five, 10 years, whatever it's been. It's been the expectation to happen. It's not necessarily been budgeted. It's not necessarily been planned for. Your staff seem to believe that this is part of my fixed income, just delayed compensation till the end of the year, the lump sum.

Mm-hmm. Yep. Mm-hmm.

Mm-hmm.

Right? Yep.

What are your thoughts on churning that from a true bonus into a portion of explainable, executable, measurable, variable compensation moving forward into 2026?

I'm huge fan of it, honestly. I'm more of a fan of, if we're, and I like doing it quarter by quarter, is, if we crush Q1, let's put a percentage into your base compensation versus have it at the end of the year. So if we crush Q1, we hit certain targets in Q1, everybody gets

Maybe it maybe it's a half a percent. Maybe it's a full percent. Maybe it's two or three, depending on who's really crushing it and who's not. But hey, let's put this as part of your your actual compensation. And bump. And do it quarter by quarter.

So, so, yep. So here's a little insight and you need, this is, I am not a HR person. I'm not a payroll expert. I'm not any of those things. So do not take this as this is the gospel or whatever you need to talk to the other professionals in your circle of life from there. But Nope, I did not. I was at a conference earlier, earlier this month, actually, that was the end of October.

You didn't stay at a Holiday Inn Express? Come on.

and we had an HR person there and we were talking about the...

overtime opportunities for exempt and non exempt. So if you decide to take the easy way out, let's just say you're going to take the easy way out and pay your bonus as part of the same payroll as you normally would in that quarter end of Q1 as an example. So let's just say they're making 30 bucks an hour. They work their 45 hours that week. Right.

Mm-hmm.

and you're also going to give them the thousand dollar bonus that same week as part of the payroll. Don't do that.

No.

Mm-hmm.

Mmm.

because the overtime for that week is based off of the payroll rates for that week.

huh. Yep.

Correct. Correct.

so it could cost you significant dollars. you can still run it as a through payroll, through your payroll system and checks and do all the taxes, but it should not run on the, it should be a separate check on a different day than your normal payroll run. So if you pay on Friday, bonus on Tuesday has a separate run. Do not put your bonuses into your normal payroll opportunities, because you are opening yourself up to significant back.

Yeah.

Mm-hmm.

Mm-hmm.

pay chances. Consult with your accounting and tax and payroll professionals. But that was a tidbit that I got. I did the math on it wasn't a thousand dollar bonus, but it was like some, holy shit, that those four hours overtime just cost you $900.

Yes.

Mm hmm. Yep. It was interesting.

Sorry, that was a side note. I apologize.

Yeah, you got that right that we did go off on the but not too far off.

But yes, I think the, so, so when you do a compensation or a variable comp plan that's tied to performance and results basis, would you potentially say, Hey, here's the annual plan and we're to issue it quarterly, but we're going to pay out only half of what's ever for the quarter. So that way it's if we're doing poor second quarter, we were not having to hold back dollars and, and true up at the end of the year. How do you tip? What would be some of your ideas there?

that's a cool. I don't want to give you the compliment of that's a great question, but it's a great question. It's what we do.

As I always say, it's what I do. No, no, it's what I do. You just ask questions. I ask great questions.

You asked you did ask that question. So that's what you do. I got it. It's about you. It's about you.

See, all its glory. Holiday spirit. Here comes Santa Claus. Here comes Santa Claus.

Yeah, all in Mm hmm. Yep. I am more of a personally, I'm more of a fan of if we're like I'm incentive, I'm more of fan of incentive based. you in like true incentives? And if you're hitting certain targets? Do you achieve?

And so for me, it's establishing what is the percentage of the overall budget that's going to go to the raises from a budget perspective, right? So let's say

So so so you're taking your variable comp as part of your base pair you taking your variable comp as part of truly its variable compensation? See that's where you and I differ.

bass play.

Yep, I understand. Yep, I'm on base pay.

Yeah, see,

Mm-hmm. Well, why? Why, why, why no, Brad?

if it's a very, if it's a, unless it is, unless it is a, individual, like I'm, I'm perfectly okay with setting up roles and saying, Hey, if you hit these targets, you get your promotion where you get to move micro movement within a certain area, like communal warehousing and right. 50 unit, 50 picks an hour gets you this rate. A hundred gets you this, right. And you move up and down that scale based on how you do on a daily basis.

Mm-hmm.

or weekly basis or quarterly or whatever it is, but from a metrics of the organization viewpoint that we often impact on, whether we're tying it to EBITDA, gross margin, whatever that financial performance is from a variable perspective, I think it is a variable compensation package that is, here's my fixed income, here's my fixed income from my base pay, and then here's my variable amount.

Mm-hmm.

Hmm.

And then here's my potential total compensation for the year based on the budget that we're on hitting. And that variable truly becomes a variable, not a guarantee because if I hit my targets in Q1 and let's just say for the year, it's going to be a $1,000 bonus. I have the opportunity to make $1,000 over the year if we hit these targets each quarter. So Q1, we kill it. Awesome. So it's supposed to be $250. Let's just say.

All right.

Sure.

Yep.

My recommendation is I'm going to give you $200 of the 250 and I'm to hold on to that $50.

Mm hmm. Sure.

Q2, we don't make it.

Right? Cool. But we're still on target to meet the end of the year, but I didn't make my 250 in the quarter. Q3, maybe we hit it and I'm going to get you the 200 again, another 50 out. And at the end of the year, we finally hit it and I'm going to true up that thousand dollars along the way at the end, at the end of the year, because Q2, I didn't make it.

Mm-hmm.

Okay. Yep. Okay.

Now granted adds complexity and not every organization is going to have that complexity ability to deal with it or have the metrics and other things. But, to me, that is a, it creates the incentive plan that allows it to happen instead of waiting till the end of the year. I liked the quarterly distribution and the reward along the way. The problem I see it from that perspective is if I, if I get it here at the Q1 and nothing happens at the end,

Yeah.

correct.

I've paid out something that I didn't really get because it's based on an annual number, not a quarterly number because most can't do it. Most can't set up bonus programs quarterly and effectively.

Hmm.

Correct. Well, and I'm more of us try to keep it simple. For if we hit it, great. If we don't, we don't. And if we don't, there's nothing paid out. Plain and simple.

Correct.

Right. But if we if we hit our targets in Q1 and we didn't hit it in Q2, three or four.

I'm more of a fan of giving a slight, giving the based on base compensation a payout and then no payout the rest of them. Because you didn't hit your target.

If I'm putting in my base compensation, I'm being paid for the rest of the year. Help me understand.

so you did pick up on that. You did pick up on that. Yes.

Yeah, I did. That's why I'm talking about base versus variable. like, why are we, what are we, I'm like, okay. So now I'm just, and it's costing me as the business owner, the tax implications of that increase to base play, base pay as well every week for the next, for perpetuity.

Mmm.

Mm-hmm.

Mm hmm. Yep. I'm more of a fan of those small increments. And while those small increments. Well over time, yeah, it does add up. But if you're doing a half a percent. In Q1, it's actually cheaper. You're actually when you crunch the numbers, depending on where your your wages are, it actually is cheaper for you for that year.

Employees feel better because of overall base rate.

I'm I'm not, I'm not disagreeing. I'm struggling with the, I'm struggling from, from a personal perspective, completely, totally right. Pay them what they're worth, pay them for the results for their individual contribution within their role and allow that flexibility to move up within their, within their departmental role within their organizational role. But when it comes to the organizational payout, that's where I struggle.

I know where you're at.

Yep.

and

Mm. That's all right.

particularly in a 200, 300 person or less type organization.

Mm-hmm. Yep. Yep. I understand that. And it's okay to agree to disagree. Different strokes, different folks.

No, now you're just being a dick. There's that empathy showing up again.

Yeah, it's showing up real strong right now. I understand. I understand what you're saying.

You're just wrong. I get it. I hear you. I hear that in your voice. I hear that in your voice. You're just wrong. I got it, Steve. No, you did. You said it without saying it. Trust me. We could ask the audience. We could put up a poll and we could put a poll up there. Was Steve disagreeing or? Yeah, if I knew how I would do that, but you're the millennial tech guy, so you figure it out.

I'm not saying you're wrong because I do understand where you're coming from. Interesting. I think we should put up a poll. I think we should put up a poll.

I know. If I was a millennial, I'd be butthurt right now. Guess who's not this guy?

Wow.

Sorry to all the millennials out there, know, we all love you. It's all good.

It's all right. It's all right. It's all good. It's all good.

It is good. All right, that's all. You anything else on the variable comp side of it or bonus pay or end of the year? All right, well, our next episode releases December 26th with Jeff Schur talking about how his grandmother had it right in the wealth and wisdom, et cetera. does release on the 26th, the day after Christmas. So everybody please have a.

No, no, no. Just be honest with everyone.

Merry Christmas. Happy Hanukkah all the things that go along with the holiday season Enjoy time with your family and please do not forget to celebrate the wins of the year as We often forget about what happened in January February March to get to this point go. shit We got all these other things to do there are wins every day and please celebrate some of those with your family friends over this holiday season

Yeah.

Mm-hmm.

Right?

Yes, please enjoy.

Thanks for the add on Steve. There you go. This feels like we're in major league. You got your bottle of booze next to you like in major league with the guy. Okay, here we go. You got that? Because you're not the best color man in the industry for nothing.

There you go, everybody.

No, today. Not Not today. I love it. I love it. Well, thank you, Brad, for the vote of confidence today. You too.

sorry.

Well, have a Merry Christmas, Thanks.