Lavish office parties are out of vogue this holiday season after such a tough economic year, but companies are still finding ways to celebrate with their employees.   Instead of sumptuous cocktail gatherings where champagne flows freely, many businesses are planning less expensive celebrations while others are giving staff extra time off or launching charity initiatives that give staff the chance to give back to the less fortunate. So if you are wondering how your company stacks up or needs a good idea, read along.

Melissa Matarese, a regulatory affairs associate at Stryker—a medical equipment manufacturer based in Mahwah, New Jersey—is looking forward to not one, but two holiday luncheons this year and the Toys for Tots toy drive that her company participates in. “It’s nice to see that my company is still recognizing my hard work, especially when so many companies have cut back on holiday events,” Matarese said. “It doesn’t have to be over the top or extravagant but it is nice to feel valued.”

One of the most prevalent ways that companies are celebrating the holidays this year is with charity initiatives. Carlson, a travel and hospitality company whose holdings include the Radisson hotel chain and T.G.I. Fridays, traditionally gave its employees gifts in a program leading up to the holidays called the “Twelve Days of Christmas.” The company decided to change the program to the “Twelve Days of Giving” last year. Molly Biwer, Carlson’s vice president of corporate communications, says the company first surveyed employees to see if they would prefer for the company to cut back on their holiday festivities or to switch gears and have the program be charity focused. “We got an overwhelming response that most people would rather give than receive, considering the economy. It was surprising,” Biwer said.

Carlson collects a different item each day during its twelve-day program, including toys, shoes and coats, and everything is donated to the Arc Twin Cities program, a local charity in St. Paul, Minn. And Carlson employees really get into the holiday spirit: on the first day of the program in early December, bins that were placed on every floor of the company’s headquarters to collect toys were filled to the brim by the early morning.

Some 81% of companies surveyed by executive search firm Battalia Winston Amrop said they would host some kind of holiday event, although 56% said they were planning less extravagant celebrations, such as town hall meetings. These numbers are in line with 2008, suggesting that companies are feeling that economic conditions have at least stabilized.

Companies are also more closely listening to their employees so they know where to spend and where to cut back on their holiday programs—and more than ever employees are taking the lead with holiday celebrations. At Microsoft’s Redmond, Wash., campus, Stacey Key Lemire, an administrative assistant and single mother, put “giving trees” with tags on them –noting the gift wishes of low-income people in the community—in many company buildings. Last year employees donated over 15,000 gifts with Microsoft matching all of the donations. Lemire has grown the program so this year there will be 70 trees across the Microsoft campus.   

Hospital chain Baptist Health South Florida responded to employees who were eager to have holiday parties. The company this year is heavily subsidizing an employee planned evening event at a downtown Miami hotel and an all-day holiday celebration at a Miami zoo where employees are encouraged to bring their families. Baptist Health also gives back to its employees in many ways, such as through its Sunshine Fund, which provides both interest- free loans as well as donations for help with housing payments, gift buying and other expenses. Last year the company gave out some  $2.3 million in loans and gifts to its employees.  

Baptist Health’s Robert Jakoby who runs the program expects that figure to rise this year. “People are really hurting, and we have stepped up our efforts this year,” he says of the program, which kicks into overdrive during the holiday season. The company also gives $2 for every $1 that employees donate to the Sunshine Fund—and encourages these donations.

Sometimes the best gift for employees is extra paid time off. At LEGO, corporate employees who volunteer in a retail LEGO store receive an extra day off between Christmas and New Year’s. In addition, LEGO plans to go ahead with an evening holiday celebration near its Hartford, Conn., campus.  

Discovery Communications is hosting an event with one of its television stations, Planet Green. Employees are being asked to bring in old newspapers, magazines and wrapping paper for a craft event at which experts will help them turn their scraps into unique gift bags. Carlson is hosting an all day scavenger hunt at its main campus in Minneapolis and a choir concert comprised of singers from the company.

There won’t be any celebrating at all, however, at many financial services companies that have received government bailout funds—and whose spending is being closely watched by regulators. Morgan Stanley, Citigroup and Goldman Sachs, for instance, all have publicly announced that they won’t host holiday parties this year.

That may be a smart public relations move but not necessarily a savvy talent retention strategy, says Barry Manus, principal of Bravo HR Services, a Westchester, New York-based human resources consulting firm, “There are a lot of things that companies can do to boost morale and show their appreciation without spending a lot of money and it is more important than ever to be strategic,” says Manus. He believes that companies that show their thanks to employees around the holidays gain employee loyalty and productivity. “Companies are rethinking the way the way that they celebrate the holidays and it isn’t just a recessionary move. Times have simply changed,” he says.