Almost half of small firms risk damaging staff morale by cutting back on Christmas celebrations and parties this year, according to a new report commissioned by communications company Pitney Bowes.

The research found that 48% of 500 SMEs questioned are not planning a Christmas party this year, and that 91% of the businesses that are will spend the same or less than last year. Despite this, two thirds of business owners recognise that cutting back or cancelling Christmas parties damage staff morale.

SMEs are not entirely turning their back on tradition though, with nearly half of companies (48%) still planning on sending out Christmas cards, with a further 20% intending to send a mix of physical and digital cards. It is this integrated approach to communication that companies find generate the most business, with 27% saying that a combination of mail, email and web campaigns provide the most success compared to standalone channels. Only 7% said they would be only sending e-cards.

Recent tough times were blamed for a decline in Christmas related activities over the past few years. Phil Hutchison, Pitney Bowes Tactical Marketing Director, said: "Christmas is a great time to engage with staff and customers, especially when times are tough and festive activities need not be expensive. In place of parties, companies can try other ways of showing their appreciation, such as more flexible working, relaxed dress codes or setting time aside for activities such as a festive quiz."

"Controlling costs is always important, but staff Christmas parties are a valuable way of showing recognition and appreciation of your employees," said Phil McCabe, Senior Policy Adviser at the Forum of Private Business, a leading small business body. "In turn, good employee engagement delivers bottom line results. Choosing not to recognise staff at Christmas in some way could have a negative effect on morale and therefore productivity so companies need to introduce other ways of motivating - it doesn't have to be costly."

Pitney Bowes' top tips for motivating staff over Christmas:

1. Allow flexibility where it can be accommodated. This gives staff more options to find a balance with parties, shopping and being with their family.

2. Relax staff dress codes where appropriate - if workers aren't in a customer-facing role, give them the option to wear more casual clothes - don't make suits compulsory.

3. Set some time aside for fun activities such as a Christmas quiz, Secret Santa, lucky dip with a pair of theatre tickets as a prize, or even a festive karaoke.

4. In place of a party, have an informal gathering. If there's no budget, then maybe the team can bring their own refreshments.

5. Consider giving each team member a contribution towards their own Christmas celebration for them to use as they wish. It doesn't have to be a lot, £10 can go far.

For more info visit www.pitneybowes.co.uk