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15. THE EMPLOYMENT RELATIONSHIP

Teaching notes
Learning outcomes of session
The session will cover:
 Basis of the employment relationship
 Employment relationship contracts
 What is happening to the employment relationship
 Managing the employment relationship
 Developing a high-trust organization
 Theories explaining the employment relationship
In addition, definitions will be provided of the following concepts and terms:
 Agency theory  Employment
relationship
 Exchange theory  High-trust
organization
 Labour process theory  Mutuality
 Pay–work bargain  Pluralist
framework of reference
 Procedural justice  Psychological
contract
 Relationship contract 
Transactional contract
 Trust  Unitary framework of
reference
Key concepts and terms
Contents
These notes contain:
 An outline of the session
 Definitions of key concepts and terms
 Questions and discussion points
 A bibliography

Session outline
Basis of the employment relationship
● 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.
● The employer's obligations also include the duty to provide a safe workplace, to
act in good faith towards the employee and not to act in such a way as to
undermine the trust and confidence of the employment relationship.
● The employee has corresponding obligations, including obedience, competence,
honesty and loyalty.
Employment relationship contracts
The three types are:
1. Relational contract: A contract expressing the relationships between employers
and employees in abstract terms that refer to open-ended membership of the
organization. Performance requirements attached to this continuing membership
are incomplete or ambiguous. It is less well-defined than a transactional contract
( qv).
2. Transactional contract: A contract that has well-described terms of exchange
between employer and employee, which are usually expressed financially.
3. Psychological contract: The combination of beliefs held by an individual and his or
her employer about what they expect of one another. It can be described as the
set of reciprocal but unwritten expectations that exist between individual
employees and their employers.
What is happening to the employment relationship
Three of the more important developments in the employment relationship (Gallie et al,
1998) are:
1. New forms of management, often based explicitly or implicitly on HRM principles
and emphasizing individual contracts rather than collective bargaining.

2. There was some increase in task discretion but there was no evidence of a