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Thursday, January 26, 2012


The employment relationship describes the relationships that exist between employers and employees in the workplace. These may be formal e.g contracts of employment or procedural agreements.

They may also be informal , in the shape of psychological contracts that expresses certain assumptions and expectations about what managers and employees have to offer and are willing to deliver.
The starting point of the employment relationship is an undertaking by an employee to provide skill and effort to the employer in return for which the employer provides the employee with a salary or a wage. Initially the relationship is founded on a legal contract.

The employers obligations include :
• the duty to pay salary or wages
• Provide a safe working place
• To act in good faith towards the employee and not undermine the trust and confidence of the employee.

The employee also has obligations which include:
• Obedience
• Competence
• Honesty
• Loyalty
Employment terms are fixed by the employer who has the power to dictate and control the contractual terms.

There are two types of contracts defining the employment relationship:
1. Transactional Contracts-
• Usually described financially
• Limited in duration
• Have Specified Performance Requirements

2. Relational Contracts
• Less Well defined
• Refer to an open ended membership to the organization
Employment relationships can also be expressed in terms of a psychological contract which has both transactional and relational qualities.

The psychological contract expresses the combination of beliefs held by an individual and his or her employer about what they expect of one another.
A psychological contract is implied. There is the notion of an unwritten set of expectations operating at all times between every member of the organization and the various managers and others in that organization.
Aspects of the employment relationship covered by the psychological contract include from an employees point of view:
• Trust in the management of the organization to keep their promises (Guest et al, 1996)
• How they are treated in terms of fairness , equity and consistency
• Security of employment
• Scope to demonstrate competence
• Career expectations and the opportunity to develop skills
• Involvement and influence
From the employers point of view , the psychological contract covers such aspects of the employment relationship as:
• Commitment
• Competence
• Effort
• Compliance
• Loyalty

Significance of the Psychological Contract
A balanced psychological contract is necessary for a continuing, harmonious relationship between the employee and the organization
Violation of the psychological contract can signal to participants that the parties no longer shared (or never shared ) a common set of values.
The psychological contract governs the continual development of the employment relationship which is continuously evolving over time.

Employment Relationship Strategies:
These include :
• Developing a Positive Psychological Contract
• Increase Commitment
• Create a Climate of Trust
Strategies for Developing a Positive Psychological Contract
• Creating a High Involvement Climate . Ensuring that managers and team members have maximum amount of contact and achieve a mutual understanding of expectations
• Adopting a Policy of Transparency –ensuring that all matters which affect employees are known to them. Employees need to know what is happeneing and how it will affect them
• Developing HR procedures covering grievance handling, discipline, equal opportunities, promotion and redundancy and ensuring that they are all implemented fairly and consistently.
• Developing and Communicating HR policies covering the major areas of employment, development, reward and employee relations.
• Ensuring a reward system is developed and managed to achieve consistency, equity and fairness in all aspects of pay and benefits.
• Advising on employee relations procedures , processes and issues that further collective relationships.
• Providing Opportunities for Learning
• Training and Development Programmes that Underpin core values and define performance expectations. Manager and Team Leader Training should ensure that leaders understand their role in managing the employment relationship through such processes as performance management and team leadership.
• Encouraging use of personal development plans that spell out how continuous improvement of performance can be achieved mainly by self managed learning
• Focus on Job Security
• Promotion and Career Management
• Minimizing Status Differentials
• Fair Reward Systems
• Comprehensive Communication and Involvement Processes

Commitment Strategy
Commitment refers to feelings of attachment and loyalty .
Commitment is the relative strength of the individual’s identification with, and involvement in a particular organization. Consists of three factors:
• A strong desire to retain a member of the Organization
• A strong belief in, and acceptance of , the values and goals of the organization
• A readiness to exert effort on behalf of the organization

Creating a Commitment Strategy
It should be noted that when creating a commitment strategy :
1. It is a fact that the interests of the organization and its members do not necessarily coincide. Management usually asserts that everyone will benefit from organizational success in terms of security, pay, opportunities for advancement etc. However it is difficult to convince employees that the success of the organization can only be achieved through divestments, downsizing, cost reductions affecting pay and employment, tougher performance standards or tighter management controls. When defining values it is important that they are not imposed on employees. They should be involved in their formulation.

2. Management must not communicate values in such a way as to inhibit flexibility, creativity and the ability to adapt to change. Strategies have to be defined in broad terms and amended when circumstances change.

3. A commitment strategy will be concerned with the development of communication, education and training programmes , initiatives to increase involvement and ownership and the introduction of performance and reward management processes.

Components of a Commitment Strategy
1. Communication Programmes
Commitment will be gained if people understand what they are to commit to. Most time management communicates not realizing that employees have a different frame of reference from their own.

2. Education – The aim of educating is to influence behavior and thereby positively change attitudes.

3. Training-Training is designed to develop specific competencies. For example if one of the values to be supported is flexibility , it will be necessary to extend the range of skills possessed by members of work teams through multiskilling programmes.

4. Developing Ownership- A sense of belonging is enhanced if there is a feeling of ownership among employees . Ownership is not just in shares but it extends to participating in decision making on new developments and changes in working practices that affect the individuals concerned

5. Developing a sense of Excitement in the job.- Can be done by increasing responsibility, achievement and recognition and using these principles to govern the way jobs are designed.

6. Performance Management

7. PM strategies help cascade the organizations objectives so that consistency is achieved at all levels

8. Reward Management- Reward management channels make it clear that individuals will be rewarded in accordance with the extent to which they achieve objectives and uphold corporate values.

Strategies for Developing a Climate of Trust

In many organizations inconsistency between what is said and what is done undermines trust, generates employee cynicism and provides contradictions in management thinking.

Trust can be seen as a unique human resource capability that helps the organization fulfill its competitive advantage and leads to high business performance.
Trust is the ability to be relied on.

A high trust organization is one where organizational participants share certain ends or values; bear towards each other; offer each other spontaneous support; communicate honestly and freely.

Employees trust management when:
• They believe that management means what it says
• Observe that management does what it says it is going to do.
• Know from experience that management is going to deliver the deal
• Feel that they are treated fairly , equitably and consistently
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