"On account of the difficult situation of the general economy, it seemed neither possible nor opportune to burden Vatican institutions with a considerable unforeseen extraordinary expense," Vatican spokesman the Rev. Federico Lombardi said in a statement.
Francis instead ordered Vatican officials to donate church funds to "charitable organizations," Lombardi said.
The donations, coming from the pontiff's personal charity budget, will be "a sign of the church's attention for the many people who are suffering" from the global economic slowdown, Lombardi said.
Some 4,000 religious and lay Vatican employees got a $1,300 bonus after Pope John Paul II died in April 2005 and another $650 after Cardinal Joseph Ratzinger was elected as his successor and became Benedict XVI, the Religion News Service reported.
That totaled $7.8 million.
The 76-year-old former Cardinal Jorge Mario Bergoglio of Buenos Aires -- known for his humility and frugality, as well as his concern for the poor -- has dramatically shifted the tone of the papacy since his election March 13.
He has cut back on liturgical pageantry and lives in the Vatican guesthouse rather than the Apostolic Palace's papal apartments used by his predecessors since 1903.
He told international journalists March 16 he chose his papal name because he was inspired by St. Francis of Assisi, who he said was "a man of poverty and a man of peace."
The medieval patron saint of Italy came from a wealthy family and took a vow of poverty.
Pope Francis, the first Latin American pope and the first non-European pontiff in nearly 1,300 years, is also the first pope to come from the Jesuit order, whose members likewise take a vow of poverty and have traditionally focused on service, education and engaging with the world.
"Ah, how I would like a poor church, for the poor," he told the journalists.
Lombardi said the pope's decision to forgo the employees' bonuses had nothing to do with the Vatican's financial difficulties.
The Holy See reported a $19 million deficit in 2011.
The Vatican's cardinal secretary of state said four months ago the Vatican needed to put "effective" cost-cutting measures into practice because of the Vatican's "continuing inability to increase revenues" due to the lingering economic crisis.