Company Holiday Parties: How Much Should You Spend?

Company Holiday Parties: How Much Should You Spend?

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The office holiday party — love it or hate it, if you’re like 80% of business owners polled, you’ll be throwing one this year. These festive gatherings provide employers with an opportunity to thank their employees for the work they’ve done all year and to give them some company-sanctioned timed to relax and mingle.

While many business owners aren’t opposed to the holiday party, they often struggle with the planning. Where should I hold it? What type of food should we have? Music? Decorations? But perhaps the most notable question is, “how much should it cost?”

I hate to disappoint, but there is no single answer to that question. What you “should” spend on a holiday party depends on two things: your budget and the size of your company.  

Throwing a small, very casual, offsite lunch for 25 people? You should be able to keep it under $1,000. Planning on hosting a formal evening event complete with music, fine food, guests and gifts? You’ll likely be looking at several thousand dollars.

There may not be a single number or formula to help you determine what it should cost, but there are a few decisions you can make to keep cost under your control.

Before we dig into those, let’s briefly touch on budget. The holiday party should be a time to celebrate, but it’s hard to celebrate (or at least honestly enjoy it) if visions of tax liens and bankruptcy are dancing in your head. (A holiday party should never push you to these lengths, but it could be the tipping point if you’ve had a bad year and are trying to keep good employees by making them feel valued.)

Before you start your planning, take time to honestly review your finances. Your holiday party should never put your business in jeopardy. Be honest with yourself about how much you can afford on this tradition. Many employees will enjoy the party, but I can guarantee a majority of them wouldn’t want to do it at the cost of their jobs in the new year.

Assuming you’ve checked the books and you’re prepared with some budget in mind, here are the major considerations that will drive cost.

1. Location

This is pretty straight forward. Do you want to/can you host the event on-site or is it more practical or desirable to hold it off-site? Hosting a party on-site can cut costs (assuming you don’t use pricey caterers), make it convenient for employees who are already in the building, and eliminate some of the effort that goes into finding and reserving an off-site location.

Conversely, off-site parties create a clearly defined line between work and party, meaning employees can make the mental shift from their tasks at hand to the holiday cheer. A party outside the office also will likely take the prep (after the reservation) out of your hands — no paper product and décor purchases, no set-up or clean-up. 

Also consider liability — are you prepared if someone has an accident on-site at the holiday party after drinking wine you provided? There are different types of business insurance (here’s a quick guide to some of the most common), so make sure you’re protected. You don’t want to potentially put your dream in jeopardy because of a holiday party gone awry.

2. Time

Though it may not seem like it, the time and day you host your event can play a huge role in the price tag that comes with it. Luncheons are notoriously cheaper than dinners. Not only is the fare typically lighter and less expensive, but the expectation of alcohol (another cost driver) is lower.

Lunches are great if you want to keep the affair short, sweet and limited to employees only (we’ll get to that next), but if you were thinking of something a bit more “party”, hosting your event after hours is likely best. Gourmet, sit-down affairs or casual happy hours are obviously more suited for 5 p.m. or later.

3. Guest List

If you’re throwing an office party, then you should invite everyone in the company. However, the real question is, “can employees bring guests?” On average, more employers expect to limit attendance to employees only this year, which can decrease cost and liability.

If you do choose to limit your event to employees only, that’s perfectly acceptable. Consider on-site parties held during working hours, which are typically less “guest friendly”, making it easier to limit costs. Though guest allowances aren’t required for more formal dinner gatherings, many employees will expect the option. Want to limit guests but not a fan of lunch? Consider letting employees out an hour early for a 4 p.m. dinner or hosting an employee-only cocktail/happy hour immediately after work.

The holiday office party should be a fun affair for all, and that includes those planning and paying for it.  If your planning a festive gathering, be sure to look at your budget and select the party option that best fits your needs.  

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About the Author — Jennifer is a alum of the University of Denver. While in the graduate program there, she enjoyed spending time identifying ways in which non-profits and small businesses could develop into strong and profitable organizations that while promoting strong community growth. She also enjoys finding unique ways for freelancers and start-up businesses to reach and expand their goals.

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