The office holiday party; love it or hate it, it’s a staple. 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 time to relax and mingle.

While many business owners aren’t opposed to the holiday party, they often struggle with the planning. That’s especially true now, with some companies unsure how to celebrate with remote or hybrid working arrangements. 

That adds an extra complication to questions like, “Where should we hold it? What type of food should we have? Music? Decorations? Gifts?” 

But perhaps the most notable question is, “How much should it cost?”

How Much Should an Office Holiday Party Cost?

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.  You’ll often see a rule of thumb that suggests spending about $75—$200 per employee. But that’s a very rough guideline and your individual budget may vary widely. 

Throwing a small, very casual, off site lunch for 25 people? You may 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 costs under your control.

Before we dig into those, let’s briefly touch on the budget. The holiday party should be a time to celebrate, but it’s hard to celebrate (or even to enjoy it) if visions of unpaid invoices or looming layoffs 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 to spend on this tradition. Many employees will enjoy the party, but they 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.

Where Will You Hold Your Office Holiday Party?

Time was, this was pretty straight forward. The two choices were on-site or off-site. With many employees working remotely it’s become more complicated. In the 2021 Holiday Party Survey by global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc., 26.6% of companies were planning to hold an in-person holiday party, 7% reported they planned on holding virtual events and 22% were unsure. 

In-Office Holiday Party

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. In the Challenger survey, 42% of those surveyed who said they would be holding a party in 2021 also reported they would hold it on company premises. 

It’s also easier to create an in-office holiday party on a budget; for example with a potluck or cookie exchange. 

However, there are cons to this option. There’s no separation between work and the festivities. And since these Christmas parties are usually held on a workday, there may not be a lot of work getting done that day. You’ll also need to make sure you have space for this type of party. Will the conference room or common space really be big enough? And will employees feel comfortable relaxing there? 

Also consider liability — are you prepared if someone has an accident on-site at the holiday party after drinking wine you provided? Make sure you’re protected with business insurance. You don’t want to potentially put your business in jeopardy because of a holiday party gone awry.

Holiday Party Venue 

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. 

This option will cost more, though. Venues may include restaurants, experience destinations (bowling alley, karaoke bar, escape room, or theater, for example), or retreat centers.

This can easily become the most expensive option but it does offer the advantage of allowing someone else to handle the major details. 

Virtual Holiday Party

While this was a popular option in 2020 due to the pandemic, only 7% of companies surveyed in the Challenger survey reported they would hold a virtual party in 2021. Still, many companies have remote workers and bringing them together for an in-person party isn’t practical or cost-effective. 

If this describes your workforce, you’ll need to come up with creative holiday party ideas that allow you to get into the holiday spirit across multiple locations and time zones. A gift exchange may be out, but interactive games like an online scavenger hunt or an ugly sweater contest may be in. 

Employers with many employees may want to look into event apps that help you plan corporate events and connect employees remotely. 

After Work Holiday Party Vs Weekend Party

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

Holding an office Christmas party at lunch is great if you want to keep the affair short, sweet and limited to employees only, but if you were thinking of something a bit more “party”, hosting your event after hours is likely best. Gourmet, sit-down affairs or big bashes are obviously more suited for 5 p.m. or later.

Holding a holiday party after work may make it easier for some employees to attend. But those with children at home may still need to arrange child care, so keep in mind the additional cost your employees will incur. If you can afford to offer on-site childcare, those employees will no doubt be grateful, but don’t be upset if they need to leave early to get those kiddos to bed!

Weekend holiday parties will truly feel like an event, but the holiday season can be hectic and some employees may have conflicts.

One option is to survey employees as to what they want. While you can’t cater to everyone, you may see a clear preference emerge. 

Who Will Attend?

If you’re throwing an office party, then you should invite everyone in the company. However, the real question is, “Can employees bring guests?” Due to the pandemic, more employers have been limiting attendance to employees only, which can decrease cost and liability, but that’s opening up again. 

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.

How Do You Plan A Christmas Party On A Budget?

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

5 Ideas To Stay On Budget

Here are several ways office Christmas party ideas that don’t cost a lot of money: 

Hold a Gift Exchange: In the office setting, gift-giving is always a bit of a minefield. (How much do you spend? How do you figure out what your coworker/manager, employee wants?) 

One way to keep this cost down is to hold a Secret Santa where employees pick names and buy a gift under a certain dollar amount for that one person. Even better, consider giving employees gift cards in small denominations they can use to buy those gifts so the party doesn’t cost them money. 

A “white elephant” gift exchange can also be fun. That’s where each person contributes a fun and largely impractical gift. Employees pick a gift then can choose to keep it or take another open gift. This idea won’t work for remote employees, though. 

Potluck or Cookie Exchange: If you’re holding an in-office event, one low-cost idea is to invite employees to contribute to a potluck or cookie exchange. You can supply the main dish and ask employees to make complimentary side dishes, for example. 

Or you can supply the main dish and drinks like hot chocolate or eggnog, then ask employees to bring appetizers or desserts. Employees get to show off culinary skills while enjoying a variety of dishes. 

Play Games: Holiday games like a scavenger hunt, or Christmas movie trivia can be both inexpensive and a welcome diversion from work. Get lots of Christmas party game ideas here. 

Use Credit Card Rewards. If you use a business credit card with cash back rewards, consider saving the cash back you earn throughout the year to splurge on your holiday party. Those funds can add up, and you may be able to put on a great event you wouldn’t otherwise be able to afford. 

Stick to a Plan. Figuring out your budget before you buy the very first decoration will help you avoid overspending. You probably don’t want to take out a small business loan just to pay for your holiday party. Start your party planning with must haves, then see what money is left over for extras. 

Create A Holiday Party Budget Checklist

Here are items you’ll want to consider as you create your holiday party budget.

Number of expected attendees: __________

Item	Amount budgeted	Notes
Invitations:
Venue rental
Food- appetizers
Food- main dish
Food- desserts
Servingware rental
Waitstaff
Alcoholic beverages/bar
Non-alcoholic drinks
Ice
Bartender
Paper products
Party favors
Decorations
Gifts
Games/Apps
DJ/ Entertainment
Other:
Other:
Totals: