Employer–Employee Relations Essay

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Employer–employee relations or employment relations  replaced  industrial  relations  as  the  study  of the relationship  between  employers and employees, a relationship  that  may be affected by government and unions. The employer–employee relations field is comprised of industrial relations and human resource management  (HRM). Recently more  importance  is given to the legal characteristics  of the employment relationship  and to HRM than during the traditional industrial  relations era, which emphasized collective bargaining. This is a consequence  of the weakening influence  of  trade  unions  that  enabled  employers to redefine  employment  contracts  and  job content. Increased  employment  protection legislation, however, provides regulation  and protection to employees, but it does so at the individual rather  than  the collective level. Management  thinking about the relationship also changed with more emphasis on a personal relationship  between  employers  and  employees based on commitment rather  than control  in an increasingly competitive business context.

Despite differences in perspectives, there is agreement  that  the employment  relationship  is changing in most parts of the world. This change is the consequence  of a number  of factors including economic, technological,  and structural  developments; organizational downsizing and restructuring, the composition of the labor force which has changed from male, blue collar, and manufacturing to female, white collar, and  service. Globalization  also affects the  employment  relationship  as it leads to the  deregulation  of labor  markets  to  improve  flexibility and  facilitates convergence of employment relations systems around the world.

In  addition,   the   employment   relationship   has been affected by the rise of nonstandard contracts  of employment  that  became  more  prominent as organizations  sought to improve flexibility and more women entered the labor force, the individualization of the workplace that  led to the reduction  in union membership,  and  the  shift away from  the  unitarist and toward a pluralistic perspective of organizations. Traditionally   the   relationship   was  fundamentally one  of conflict  represented by industrial  relations, but more recently issues of trust, fairness, employee voice, involvement and participation, and dignity and respect are increasingly important in the relationship with more  emphasis  on moral  as well as economic issues and concerns.

The two  main  models  of the  employment  relationship are the unitarist and pluralist. In addition to these, the egoist and the critical models also examine the  employment  relationship.  John  Budd provides an overview of the four models and explains that the unitarist perspective assumes that employers and employees  have  shared  interests  and  any  conflict is a consequence  of inadequate  management practices.  This  perspective  emphasizes  the  individual and views government and trade unions as unnecessary. This is the  model  adopted  by applied human resource management.

The pluralist perspective views employers and employees in a bargaining relationship within imperfect labor markets and with the presence of conflicts of interest  in organizations.  This model accepts that employees and employers may have shared or conflicting interests. A fundamental  principle of this view is that labor is not a mere commodity and therefore it is entitled to voice and equity. Government  and unions are important in this perspective because they assist in leveling the inequalities  that  exist due to market imperfections.

The egoist model subscribes to the view that freedom and individual self-interest result in optimal outcomes  through  the free market transactions.  The employment-at-will doctrine  (the right of employers to hire and fire for any reason or no reason at all and the right of the employee to accept a job and resign at will) is based on the egoist model adopted  in the United States. Finally, the critical perspective sees the employment  relationship  as a struggle for power and control, a struggle that is not confined to this relationship but is found throughout society.

An increasingly important aspect of the employment relationship is the psychological contract, which represents  the relationship between an employer and an employee and the perceptions  of their duties and obligations in that relationship. The psychological contract is based on social exchange theory, and it has been used extensively to research and understand the employment relationship despite the debate about its conceptualization, because it develops the  relationship beyond the employment contract  and highlights the mutual expectations that exist.

Denise Rousseau’s work on psychological contracts, which she defines as an individual’s beliefs about the terms and conditions of a reciprocal exchange agreement, further developed the concept focusing on the individual  rather  than  the  relationship  and  on  the more powerful mutual obligations in the relationship rather than the expectations. The psychological contract between employees and employers has changed from exchange of life-long employment for loyalty and mutual commitment to an exchange of opportunities. This development,  it is argued, led to the extinction of “the organization  man,” the employee who would obediently discount all other interests for the benefit of the organization.  Others,  however, argue that the new employment  relationship  that relies on the base of “no long term,” i.e., on free agents and not life-long employees, is a relationship  that corrodes  trust, loyalty, and commitment, thus having a negative impact on people’s quality of life.

The focus of the employment relationship is now on individual employees rather than on the employees as a collective, a relationship that is focusing on cooperation rather than antagonism. Discussion of the new employment  relationship  in the literature  focuses on the  changes in the  employment  contract  as well as the psychological contract.  It identifies training  and development,  employee involvement  and  participation,  and  two-way communication as the  elements that characterize the new relationship.


  1. Ackers and A. Wilkinson, Understanding Work and Employment: Industrial Relations in Transition (Oxford University Press, 2003);
  2. Tennyson C. Beckles, Human Resource Management: Its Nature and Significance with Practical Techniques for Improving Employer/Employee Relations and Enhancing Productivity (Tennyson Beckles, 2008);
  3. W. Budd, “Values, Ideologies, and Frames of Reference in Employment Relations,” in The SAGE Handbook of Industrial and Employment Relations, N. Bacon, P. Blyton, J. Fiorito, and E. Heery, eds. (Sage, 2008);
  4. Peter Cappelli, Employment Relationships: New Models of White-Collar Work (Cambridge University Press, 2008);
  5. Coyle-Shapiro, L. M. Shore, S. Taylor, and L. E. Tetrick, eds., The Employment Relationship: Examining Psychological and Contextual Perspectives (Oxford University Press, 2004);
  6. Ian Cunningham, Employment  Relations in the Voluntary  Sector (Routledge, 2008);
  7. V. Roehling, M. A. Cavanaugh, L. M. Moynihan, and W. R. Boswell, “The Nature of the New Employment Relationship: A Content Analysis of the Practitioner and Academic Literatures,” Human Resource Management (2000);
  8. M. Rousseau, Psychological Contracts in Organizations (Sage, 1995);
  9. Sennett,  The Corrosion of Character (W. W. Norton, 1998);
  10. Rebecca Tonn, “Maximizing Human Capital,” Colorado Springs Business Journal (April 25, 2008);
  11. Harry J. Van Buren III and Michelle Greenwood, “Enhancing Employee Voice: Are Voluntary Employer–Employee Partnerships  Enough?” Journal of Business Ethics (v.81/1, 2008).

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