Employer and Employee Relationships (Edexcel A-Level Business): Revision Notes
Employer and Employee Relationships
Understanding the employer-employee relationship
When someone starts a new job, a relationship forms between them and their employer. The strength and quality of this relationship matters significantly because it affects both employee wellbeing and business performance. When the relationship works well, employees feel satisfied, stay motivated, and work productively. This creates benefits for the business including an adaptable workforce, strong cooperation, high skill levels, and excellent output quality.
However, these relationships can become challenging. The main reason is that employers and employees often have different objectives that clash with each other, creating areas of potential conflict.
Key Benefits of Strong Employer-Employee Relationships:
- Increased employee satisfaction and motivation
- Higher productivity and output quality
- Adaptable and skilled workforce
- Strong cooperation across the organization
- Improved business performance overall
Common sources of conflict
Rates of pay
Employers typically try to keep wage costs under control. This helps them manage overall expenses and maintain competitive pricing in their markets. They may resist pay increases or offer minimal rises to protect profit margins.
Employees, on the other hand, want their wages to increase. They need pay rises to keep pace with rising living costs (inflation) and hope to improve their standard of living over time. This fundamental difference creates ongoing tension around pay negotiations.
The Pay Conflict: This represents one of the most persistent sources of tension in employment relationships. Employers aim to control costs while employees seek to maintain or improve their purchasing power – these objectives are inherently in opposition.
The introduction of technology
Businesses often want to introduce new technology because it improves efficiency, reduces errors, and can lower long-term costs. Managers see technological advancement as essential for staying competitive.
Employees may resist these changes for several reasons. Some worry about needing to learn completely new production methods or techniques, which can feel daunting. Others fear that machines will replace their roles entirely, leading to redundancy. This creates anxiety and potential opposition to technological change.
Flexible working
Employers value a flexible workforce – one that can adapt in both size and skills to changing market conditions. This flexibility helps manage production effectively and controls costs. Businesses can scale up or down quickly in response to demand.
However, some flexibility methods create problems for workers. For example, zero-hours contracts (contracts that don't guarantee any minimum hours of work) give employers maximum flexibility but leave employees uncertain about their income and unable to plan their lives properly.
The Flexibility Dilemma: While flexible working arrangements benefit employers by allowing them to respond to market changes, they often transfer risk and uncertainty to employees. Zero-hours contracts exemplify this tension – maximum flexibility for employers but minimal job security for workers.
Work conditions
Employees often request improved working conditions or additional facilities. Examples might include providing a workplace crèche for employees with children, better break facilities, or improved equipment. These improvements would enhance their working experience and work-life balance.
Employers may view such requests as inappropriate for the business or simply too expensive to implement. They need to balance employee satisfaction against cost considerations and operational priorities.
Approaches to managing the relationship
Employers and employees can use two main approaches to shape their relationship and resolve conflicts.
Individual approach
An increasing number of businesses develop relationships with employees on an individual basis. This means each employee negotiates their own terms of employment and resolves disagreements through direct discussion with an employer representative (the owner in small businesses, or a human resources manager in larger organizations).
Under this approach, individuals negotiate their own wages, holiday entitlement, working hours, and other employment conditions directly. If someone has a work-related complaint or need (such as requesting additional training), they must raise it personally with their employer and make their case individually.
Advantages of the individual approach:
- Quick, direct communication between both parties
- Terms can be tailored to individual circumstances
- Less formal bureaucracy involved
Disadvantages of the individual approach:
- Pay and conditions may vary significantly between employees doing similar work
- Employees with stronger negotiation skills get better deals, creating potential unfairness
- Most individual employees lack the bargaining power to match experienced HR professionals
- Many employees feel disadvantaged and would prefer representation by skilled negotiators
Power Imbalance in Individual Negotiations: Many argue this approach favors employers, particularly in large firms. An individual employee typically cannot match the negotiating expertise of trained human resources managers. This power imbalance means employees often prefer collective representation.
Collective bargaining
Collective bargaining is the alternative approach. It involves determining wages, working conditions, and employment terms through negotiations between employers and employee representatives, typically trade unions.
Trade unions are organizations that represent workers' interests. In a large company employing thousands of people, one individual has virtually no influence over pay and conditions. However, a representative body speaking for many workers has significantly more negotiating power and influence.
Without collective bargaining, employers could simply set wages and conditions unilaterally, without considering employee interests or concerns.
Requirements for Effective Collective Bargaining:
For collective bargaining to function properly, several conditions must exist:
- Employees must have freedom to join representative bodies like trade unions
- Employers must recognize these bodies as legitimate worker representatives and agree to negotiate with them
- Representative bodies must remain independent from both employers and government
- Representatives should negotiate honestly and in their members' best interests
- Both sides should accept negotiated agreements without needing legal enforcement
Advantages and disadvantages of collective bargaining:
| Advantages | Disadvantages |
|---|---|
| Agreements are transparent and legally binding on both parties | Negotiations can create bureaucracy and take considerable time |
| More cost-effective to conduct one set of negotiations for many employees | Individual workers' specific views may not be fully reflected by union positions |
| Rules and terms are more likely to be respected by both sides | Negotiation costs are usually high and typically paid by businesses |
| More equitable because it equalizes bargaining power between parties | Failure to reach agreement can have serious consequences like strike action |
| Reduces favoritism and victimization in the workplace | Owners may feel their freedom to manage is compromised or restricted |
| Employee representatives are democratically elected by members |
Trade unions: role and benefits
Trade unions are worker organizations designed to further members' interests in the workplace. Over 150 trade unions operate across the UK, each typically representing workers with particular skills, industries, or needs. Individual workers find it difficult to assert their rights, especially against large organizations or multinationals. Trade unions provide the collective authority and expertise that individual workers lack.
Workers who join trade unions pay annual membership fees. In return, they receive several valuable benefits:
Key Benefits of Trade Union Membership:
Representation in negotiations: Unions employ skilled negotiators who bargain with employers on behalf of members. They pursue higher pay, better working conditions, improved health and safety standards, and fight against redundancies.
Legal support: Trade unions maintain legal networks that represent individual members in cases involving discrimination, unfair dismissal, and other employment disputes. The cost of legal representation would be prohibitive for most workers without union support.
Pressure group influence: Unions act as pressure groups, influencing business decision-making more broadly and shaping employment policy.
Additional member benefits: Unions often provide access to discounted insurance, reduced-cost mortgages, travel discounts, social facilities, and financial support during difficult times.
Industrial relations role: Unions play a crucial part in workplace industrial relations. They communicate workers' views when significant changes occur, such as technology introduction, restructuring, or policy changes.
Industrial action
Bargaining between employers and employee representatives has sometimes led to conflict. When negotiations fail and parties cannot reach agreement, industrial action may result – disruptive measures that workers take to pressure employers.
The most severe form of industrial action is a strike, where workers withdraw their labor completely.
Real-World Example: London Underground Strike (April 2014)
In April 2014, strikes disrupted London Underground services. The RMT union (Britain's largest transport union) was in dispute with Transport for London over job losses resulting from ticket office closures in tube stations.
Impact on both parties:
- Transport for London lost revenue because train services were cancelled
- Striking employees lost wages because employers don't pay workers who withdraw their labor
Outcome: These mutual costs create strong incentives for both sides to reach agreements and avoid strikes whenever possible.
Key terms
Collective bargaining – a method of determining working conditions and employment terms through negotiations between employers and employee representatives.
Trade unions – organizations of workers that exist to promote and protect members' interests.
Industrial action – disruptive measures taken by workers to apply pressure on employers when disagreements cannot be resolved through negotiation.
Flexible workforce – a workforce that can respond, in both quantity and type, to changes in market demand.
Zero-hours contract – a contract that does not guarantee any particular number of hours' work.
Multi-skilling – the process of increasing the range of skills that employees possess.
Outsourcing – arranging for external people or businesses to undertake work that was originally done in-house.
Home workers – people who undertake their regular work from home.
Key Points to Remember:
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Strong employer-employee relationships lead to motivated, productive workers and business success. Poor relationships create conflict and reduce performance.
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Main sources of conflict include pay disputes, technology introduction, flexible working arrangements, and working conditions. These reflect different objectives between employers and employees.
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Individual approach allows direct negotiation but may disadvantage employees who lack bargaining skills and power, particularly in large organizations.
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Collective bargaining through trade unions equalizes power between parties, provides professional representation, and creates transparent agreements. However, it can be time-consuming and costly.
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Industrial action (especially strikes) is the last resort when negotiations fail. It damages both employers (lost revenue) and employees (lost wages), creating pressure to reach agreements.