Office Christmas parties make good business sense

Christmas parties make business sense November 2010

Office Christmas parties fell victim to recession last year but firms are rekindling the seasonal spirit. Celebrations reward staff in tough times and make good business sense

Notorious for inappropriate behaviour, copious amounts of alcohol and nights that are memorable for all the wrong reasons, office Christmas parties were low on the priority list last year. Most employers slashed budgets or cancelled festive parties altogether as belts were tightened in the wake of recession.

But it seems this year Christmas parties are back on the agenda, with an upward swing in the number of companies planning to host an event. A poll of Chartered Institute of Personnel and Development (CIPD) members shows 72 per cent are holding a party this year, compared to just 58 per cent in 2009.

Event organisers have also noticed the shift. “Last year there was a huge drop in the number of Christmas parties-people just weren’t spending,” says Kevin Waters, managing director of corporate events agency Elysium Events. “But this is improving, and in the last six months there have been significant increases. The whole marketplace is returning.” He thinks the reason for this is two-fold. “People are feeling the green shoots of recovery and companies also need a morale booster to encourage and reward those employees that they still have,” he says.

The reward factor is crucial. After another difficult year of job losses, budget cuts and heavier workloads, it’s more important than ever to boost staff morale and provide some welcome downtime for stressed employees. “A Christmas party can be used as a way of reinforcing that you’ve come through a tough year and survived,” says Charles Cotton, CIPD reward adviser. “It’s a good way of recognising and rewarding contribution over the previous 12 months and engaging employees.”

It could seem improper for a company to spend on a party if there have been job losses and pay freezes earlier in the year. This was a factor that deterred many firms from hosting events last year. Cotton says timing and sensitive communication is vital. “If you’ve just announced or made redundancies, you may find a lot of people wouldn’t enjoy a party anyway,” he explains. “But if it’s a few months on, companies can maybe say to staff that they’ve had tough times and had to make people redundant, but they are still standing as an organisation and want to recognise staff contributions by keeping the Christmas party.”

Debi O’Donovan, editor of Employee Benefits magazine, agrees. “Staff engagement is crucial in a recession,” she says. “Last year there was a bit of a backlash when staff who had stuck with companies through tough times didn’t even get a party at the end. This year employers are seeing that what looks like a frivolous spend is quite wise in tough times, where we need to motivate staff.”

Christmas parties can provide big returns for employers for relatively little outlay. They are useful for boosting employee engagement when financial incentives might not be an option. A company that can only afford to give staff small bonuses at the end of the year could find it is more effective to put the money towards a party instead. Not only do economies of scale mean the cash will go further, but the event is likely to register more strongly with employees. “The cost per employee of a Christmas party is relatively low compared to the engagement that a company is likely to get from the event,” says O’Donovan. “In terms of bang for your buck, it’s highly effective.”

An added benefit for employers is the tax allowance on corporate events, which allows businesses to spend up to £150 tax-free on each employee. There are caveats, though. The £150 limit is an annual events allowance, so employers must take into account combined costs throughout the year. And if spending goes over the £150 allowance the full amount becomes liable to income tax and national insurance payments. But companies that keep within the threshold can benefit from a maximum return on their investment in a party, whereas bonuses are quickly eroded by national insurance and income tax charges.

So how do companies make the most of a party? It’s all about boxing clever, says O’Donovan. “Everything needs to tie back to your business strategy. Think about what you’re going to achieve from this Christmas party,” she explains. “If it’s simply that you’re going to give staff loads of alcohol and they can all drink far too much, that’s probably a lost opportunity. Instead, it can be an opportunity to all get together and share in what has been successful that year so you can engage people long-term.”

Approaches can vary depending on the business. Some companies use the opportunity for chief executives to present annual speeches to staff, while others host awards ceremonies to reward employees for their achievements. Cotton advises companies to take into account the size and type of their organisation, and what they think will work for staff. He believes it’s important to define outcomes clearly, while still making the event enjoyable. “If you want to increase sales next year, think about how a sit-down meal at a Christmas party is going to help you do that,” he says. “If you can’t think of a link then it may be best to think of another approach-perhaps a pub quiz or bowling, which could be linked to team bonding.”

It’s also important to communicate with staff, and find out what they’d like. O’Donovan says being transparent about budget restrictions and involving staff in planning the event pays dividends. “If you’re a managing director, and you are on a significantly different salary, you can forget what’s important to staff, so you need to ask them what they want as well,” she says. “Don’t just impose, or else it could be the biggest waste of money all year.”

Careful planning means that events don’t have to be expensive to work. Smaller venues, cheaper food options and “shared parties”—where different organisations share a venue to split costs—can still have the desired impact. “People need to be clearer than ever on what they require,” says Waters. “It doesn’t need to cost a lot and be in an upmarket venue. People like to enjoy each other’s company. As long as they’ve got food, a few drinks and music to dance to, they’ll enjoy themselves.”

Under the new Equality Act, employers also need to mitigate against the potential legal risks a party can pose. Inappropriate comments or alcohol-fuelled sexual advances can lead to legal action for harassment or discrimination, and because an office party is seen as an extension of the workplace the employer bears some responsibility for what takes place there.

“There are potential repercussions for an employer if there is poor conduct,” says Alex Lock, a partner in Beachcroft LLP’s employment law team. “It may be attacked by both the victim and perpetrator, while not having done anything other than lay on a party. The employer is liable for the acts of its employees so would likely be responsible in law for the acts of the harasser, while the perpetrator may also attack the employer, citing its culpability in providing too much alcohol and too little guidance.”

Businesses should make clear to employees that bad behaviour won’t be tolerated. But Charles Cotton at the CIPD says there’s a fine line to tread. “It’s got to be done in such a way that you don’t end up with so many ‘don’ts’, that it becomes negative,” he explains. “You should treat individuals as adults and see the whole thing as an opportunity rather than a gigantic risk that has to be managed.” Lock also reassures, saying the amount of cases that arise is “tiny” compared to the number of events that take place each year.

by Niki Corfield

Read more on office Christmas parties

12 office Christmas party ideas

About author

Director Magazine

Director Magazine

Director is the magazine for business leaders. Free to IoD members and available to purchase through subscription, each edition is full of insightful interviews with entrepreneurs and company directors.

No comments

Time limit is exhausted. Please reload the CAPTCHA.


UK spa industry booming

UK spa industry is booming

With stress-relieving treatments becoming part of busy people's routines we review how the UK spa industry is poised to take advantage