According to Watson Wyatt Worldwide’s 2003/2004 Survey of Strategic Rewards and Pay Practices, executives at only 18 percent of corporations plan to pass larger shares of benefit costs on to their employees, an enormous drop from last year’s 56 percent.

Meanwhile, 12 percent plan to cut their budgets for salary increases, compared to 45 percent last year. While six percent expect to reduce benefits, five percent intend to eliminate or severely cut bonuses, and five percent want to divest unprofitable units.

Of course, that does not mean that cost cutting has disappeared entirely. Watson Wyatt researchers also found that almost 40 percent of companies are making changes to their short-term and annual incentives, and 41 percent have decreased eligibility for long-term incentive participation. In part, that is because low-performing companies simply cannot fund those programs as well as high performing companies can.

“The difficult business environment and cost cutting of the past several years have caused many companies to change their reward practices, especially the mix of rewards,” says Laura Sejen, Watson Wyatt’s national practice director for strategic rewards. “While fewer companies see the need for additional cost cutting in the coming year, clearly the nature of the employer-employee deal has shifted.”.