Are surfing lessons and perfume-making classes replacing year-end bonuses? According to a recent study from Mercer HR Consulting, 72% of respondents now employ "nonmonetary recognition awards" at some point during the year, compared with just 55% using spot cash bonuses.

Mary Naylor, whose company, VIPdesk, designs "experience-driven" rewards for corporate clients, has seen demand for them grow by 700% this holiday season. Her staff has arranged for clients to treat their workers to personal chef services, makeovers, and even circus lessons.

One explanation for the shift: Many HR experts have come to believe that cash bonuses are expensive and breed a sense of entitlement. "Part of the rationale is that nobody wants to raise fixed costs," says Steven E. Gross, a compensation practice leader in Mercer's Philadelphia office. Regularly doling out free car washes and gift cards from Starbucks enables employers to do more with less, at a time when salaries remain flat. (The whipped cream on the latte: If the benefit is worth less than $25, it's not subject to tax.)

Naylor, whose company is based in a suburb of Washington, D.C., has developed a "layered" bonus system for her own staff, using different rewards in different circumstances. From office massages to regular visits from "Mr. Omelet," Naylor has found the programs to be more effective. She now avoids traditional holiday bonuses altogether.