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Expect bonuses, not pay raises, this holiday season

  • Only 38 percent of employees earned a bigger salary at their current job in the past year.
Boss giving big bonus. Christmas and new year.
Chaliya | Getty Images

The holidays are a time for giving, and that's no exception for employers.

A number of workers should expect bonuses — but not pay raises — this holiday season, according to recent studies by Bankrate.com and Accounting Principals.

Only 38 percent of employees earned a bigger salary at their current job in the past year, Bankrate found after surveying about 1,000 participants in November.

Among that minority, an increasing number of raises came from promotions and new job responsibilities (24 percent this year vs. 10 percent last year).

U.S. unemployment hasn't been this low since 2000, according to the Bureau of Labor Statistics. This would normally force businesses to increase salaries in order to keep employees, but that hasn't been the case. Wages rose only 2.4 to 2.5 percent for the 12-month period ending in September, 2017.

"There's slow growth in economy, inflation is slow, [and] productivity growth is abysmally low. All of that makes it difficult for employers to pass along higher wages when they're not able to pass on higher prices to customers," Bankrate.com chief financial analyst Greg McBride said.

Pay raises may be elusive, but there are other ways to earn extra cash this season.

The average anticipated holiday bonus is up 66 percent this year at $1,797, compared to $1,081 in 2016 and $858 in 2015, according to a recent study by Accounting Principals.

While payouts are up, they will also be more scarce — only 63 percent of companies plan to give employees a monetary bonus, down from 75 percent in 2016, according to Accounting Principals.

Of course, some industries are more apt than others to award holiday bonuses. More than 70 percent of respondents in the science, technology, engineering, and medical areas said they're planning to give employees bonuses this year. That's according to a separate August survey by employment recruiter Modis.

Looking to secure that extra cash? Hiring managers surveyed by Accounting Principals say the most surefire way to do so is by staying motivated throughout the year. Simply asking your employer may not hurt either.

"Employees who ask their boss directly for a bonus are twice as likely to be successful in that request than last year, so making proactive, bold moves in 2017 could pay off, but one always needs to approach these conversations with care," said Accounting Principals president, David Alexander.

Let's say this courageous approach works and you suddenly find yourself with a handsome bonus — what now?

"First of all, if there's any debt to pay off, pay off debt— [such as] credit card bills or any high-interest credit," said Harvey Bezozi, CPA, and founder of YourFinancialWizard.com. "Unless it's debt on an asset that's going to produce wealth, debt on credit cards is very, very costly. You're not earning interest; you're paying interest."

If you're debt-free, Bezozi recommends investing in your education.

McBride agrees, especially if you want to snag one of those uncommon pay raises.

"In this competitive labor market, there's a premium on those who have unique skills, whether it's technology or particular knowledge or expertise — higher levels of education, [or] additional certifications. If you're looking for a pay increase, you've got to pursue those avenues to keep yourself relevant in the workplace. You have to distinguish yourself from your colleagues," he said.