Blue Flower

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How and why one should celebrate depends on the culture of the company and ones standing within the organization. Some organizations have a culture of celebrating everything and some are so sterile and stoic where they don't celebrate anything.

Minimally as a boss you should congratulate the employee on the milestone in person or via email. If you have a good working relationship take the employee out to lunch and if not give him or her a gift card. Regardless of the relationship its a good practice to schedule a 1:1 with the employee and solicit feedback on how the last year has gone and what can be improved.