(Solution) 7HR03 Question 4 (AC 4.3) Potential ethical issues associated with the use of contingency forms of reward within the organisation

Solution

7HR03 Strategic reward management

Question 4 (AC 4.3) Examine the potential ethical issues associated with the use of contingency forms of reward within the organisation.

Contingency forms of reward are variable pay structures where financial incentives are linked to certain performance metrics at individuals, teams or the organisation level (Hilton et al., 2021). Examples of such rewards include bonuses, commissions, performance related pay, profit sharing and stock options. Such rewards are meant to motivate employees, boost productivity and ensure workforce support for company objectives.

Potential ethical Issues Associated with the Use of Contingency Forms of Reward

Unfair Reward Distribution

A major ethical issue associated with contingency rewards at Riyadh Air is unfair distribution which would bring about disengagement among employees, resentment and reduces motivation. If performance-related bonuses are primarily for customer facing roles, others in the operational, technical or administrative roles may feel undervalued (Kamran et al., 2024). For example, if sales teams and flight attendants are paid much higher bonuses than maintenance staff or baggage handlers, it can create perceived inequalities and low morale, which in turn decreases productivity. Additionally, performance-based pay is also based on subjective evaluations which can be prone to bias. Ghosh et al. (2023) mention that if the reward decision depends on managerial discretion, some employee may receive preferential treatment, leaving out other employee with the same contribution. This breeds frustration and perceptions of favouritism and erodes trust in leadership (Zhong et al., 2022). In addition, in a diverse, multinational workforce such as Riyadh Air’s, managers’ perceptions may be shaped by variation in cultural backgrounds, which in turn, may unconsciously result in unfair reward allocation. Also, lack of transparency on reward criteria has the potential to amplify dissatisfaction. If no criteria are specified to determine eligibility to bonuses, define performance metrics and assessment processes, employees may feel that reward allocations are done unethically in Riyadh Air (Wang et al., 2021). This might also pressure employees to chase unrealistic targets, which can ultimately elicit burnout or disengagement. Riyadh Air should address these concerns by establishing clear, standardised reward structures that are fair and equitable. Individual, team, and organisational contribution should be rewarded in a way that makes all departments feel recognised (Brissenden et al., 2023). Trust and fairness can be improved through objective performance metrics, frequent reviews, and communication about how rewards are distributed. A hybrid model, that combines fixed bonuses with role-based incentives, can address such disparities and will enhance equity as well as long-term engagement within the organisation.

Short-Term Focus Over Long-Term Development

Another ethical issue is the short-term focus of contingency rewards,