Effect On The Relationship Status Of Employers Commerce Essay

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From a point view of the people who are currently living in developed societies, the term Employment Relations is all about controlling the relation between employee demands and objectives/goals of an Organisation.

All the features of employment relationship has major or minor effect on the relationship status of employers and employees. The major feature of employment relation, that are most influential are as follows:




Uniqueness of labour




Governance regime of Institution or rules(Sisson2009)

Negotiation of order

In today's world, if someone wants to understand how business works, then it is essential for that person to realize what Employee Relation is all about.(The importance of this subject became evident in 2009 when a French Oil company decided to hire an Italian Firm to do their expansion construction. The Italian Firm hired their own people to do the job, as Italian labour was less costly. This made the local workers angry and they went on a strike, which was supported by many other workers within UK. According to Stephen Briggs, one of the protesting workers, while they have got nothing against the foreign workers, the fact is that there are a lot of people out of work and are looking for jobs.-S. Williams & D. A. Smith,2010).In order to avoid incidents like mentioned above, one must have practical knowledge about the different parties like managers/organisations, workers/employees and trade unions. There is also need to find an explanation behind why these parties behave the way they do. In order to understand the other aspects of Employee Relation, we need to know about it's nature in today's business context.

Nature of Employee Relation:



Employment Relationship


Employee Representatives

Employement Relationship Circle(Source:Industrial Relations-Theory & Practice by Paul Edwards)

Employment Relation depend on many factors like salary, working condition, company policies etc. From the middle of nineteenth century capitalism started to rise and with it contractual relation begin to take place of former work relation, which was based on trust.

The sole purpose of contract is binding the employees and employers with laws, where they both agree to satisfy each other's needs in form of workers providing labour and employers providing money in exchange. That would have been absolutely suitable for both parties if they had same need of each other, but in reality there are major problems if we look at employee relations from the contractual point of view. The main two problems are:

A contract presumes that both parties are agreeing to the contract together without any sort of external pressure and it is a known fact that the employees are in much weaker place compared to the employers. Over 30million people of UK depend on their jobs to run their families, where on the other end, the companies have the whole population as their prospective employees. If an employee doesn't agree with terms of a contract, he has to search for another company where his qualifications and skills will meet the employer's requirements, which is very hard to do in such a competitive job market.

In a recent study by TUC(Trade Union Congress) on Employment Trends, they discovered that in a big city like Glasgow there are 23,758 claimants for 2,836 vacancies, which means that approximately 8.4 people are applying for the same job. So the options for the people looking jobs are very thin.(Source-Guardian.co.uk)

The second and probably the most important point is 'Labour is not a commodity' (Source-Founding conference of the International Labour Organisation).Employers hiring an employee is not the same as an consumer buying a commodity in any way. To understand the nature of Labour, one must understand that labour has a mind of it's own. An employer has to recruit the capacity of employees required to meet his production goal and then he has to convert that labour force into his desired product/service.

So, one can point out that contract has an open ending because during the time of making the contract, it is impossible for the both parties(Capital & Labour) to know whether they will have any kind of obligation in future, as a result they can't mention them during the making of the contractual relation. Now the question is, if employment relation is not an actual contract than how should one look at it? The answer is simple, instead of looking at it as a contract, it should be looked at as series of contacts.

'As Employment Relation is dependent on money aspects, normally it is linked with market relation. Market relation determines wages, product price & economy. On the other hand managerial relation is concerned about how long/how much a worker should work. So in simple words, employment relation is combination of managerial and market relation.(Source-Paul Adam,2003)

Interest of Different Parties:

Before discussing further about the interest of these two parties, let us have a look at the third party's part in this relation, which is the 'The State'.

In the post World War Two there was notable accentuation in the degree of state intervention in employment relations. During the post war period full employment caused upward pressure on wages and caused inflation, which consequently damaged economic competitiveness. Thus from late 1940s onwards, governments sought union agreements, largely through TUC, to restrain worker's wage-bargain behaviour(Source-S.Kessler 1994)

During 1970s The labour Government accepted the need of voluntary wage restraints as strategy to cope with inflation(Davies & Freedland 1993).Here are some major European Legislations since 1993:

Regulation of working time,breaks and holidays(1993)

Establishment of transnational information and agreements on consultation in MNCs operating in Europe(European Works Council directive,1994)

Right to equal pay and condition if some worker is posted abroad to other EU states for limited period of time(1996)

Provision of minimum standard maternity and paternity leave along with a provision of minimum two weeks unpaid paternity leave(1996)

Equal pay and condition for part-time workers, so that employers can't discriminate between full time and part-time workers(1997)

Rule of employers giving workers on fixed-term equal pay and condition as permanent staff(1999)

Europe wide legal protection for individuals on the ground of racial and ethnic origins(2000)

The firms who employed fifty workers more had to agree on information and consultation arrangements among them(2002)

Agency provided short-term workers had to be treated equally ,like permanent employees(First proposed in 2002,eventually agreed on 2008)

(Source-Contemporary Employment Relation by S.Williams & D.A.Smith)

One can easily say that the state plays a vital role in Employment Relation as a body of supervision who sets the ground rules. Without a body like The State, the employment relations would be a field of conflicts, as both employer and employees would want their interests to be met. It is a well known fact that the demands of the two parties are different and it will always stay different in some way or the other because an employee will obviously prefer having higher wage, better working conditions etc, where on the other hand the employee's only target will be well-being of his company/organisation, which means higher control, profit maximization etc. So it is safe to say that 'The State' is an very important artery which decides how the heart of Employment Relation will run.

Moving on to the more relevant parties of this relation, now their interest will be discussed in details. Like any relationship, this relation between the employers and employees has some interests/demands from each other as well.

As an employer, he/she will always want:

Maximize Profits

Market Share

Power & control

On employees end he/she will always want:

Survival & Income

Equity & Voice

Fulfilment & Social Identity

Power & Control


'Now, as mentioned above, there are different interests of capital and labour. The manager/employers have received very little attention from researchers and writers. Although the term Employment Relation consists of both parties, yet in most of the books/articles the employees/workers had the most attention(Clegg 1979').'Since the 1980s there has been changes in economic situation and political climate. Due to these reasons, there was a decline in unions, which prompted more focus on the management activities'(Marchington & Harrison 1991:286).

The managers all over the world have been saying that their employees are the most important resource to them. In reality we can see contradiction when we compare what they claim and what they do in practice. For example: The name McDonalds is a famous name in the world of fast food, but they have a record of very low-wage rates. Although David Fairhurst, a senior Mcdonalds executive claims that since 2005 they are providing their employees with outstanding employment experience, so that the workers get engaged in providing better experience for the customers. Now, what creates doubt about David Fairhust's claim is that the critics of McDonalds are still pointing out many jobs within the company where the pay is very little or just above minimum pay.

Previously management always tried to undermine the unions as they didn't want to recognize their needs and certainly had no desire of spending money for employee's benefits, but as the time progressed, the workers around the world became more united and concentrated on collective bargaining. The employers eventually had to bow down to the mass power of their employees, but some management prerogatives were smart enough to presume this situation and made arrangements thusly. For example, management in a biscuit sector were aware of the workers getting united to have voice of their own, so they chose to recognize union, by centralized negotiation relation with union full-time officers. As a result of this, the management were able to satisfy the demand of workers while maintaining managerial authority.

Percentage of workplace with a recognized union, 1980-1998


All workplaces

Private manufacturing

Private services

Public services





















(Workplaces with 25 or more workers)

(Source- Millward,Bryson and forth, 2000:96)

As we can see from the above table, other that public sector,all the other sector saw a rapid decrease in number of unions recognized. Although one interesting thing can be spotted here that union numbers were pretty much held up in 1980s and really started to fall in 1990s.What that suggests is that the management were tentative and late to recognise economic condition and political situation was in favour of beginning a siege on union power.

During the mid 1990s, a trend among the new workplaces were derecognizing the unions and this trend was spotted more in the new workplaces(under 10years) than in the established workplaces(25years or more).In fact, in 1998 32% of the established companies recognized unions, where 18% of the new companies did the same(Source-Cully et al. 1999). In some cases the management wouldn't derecognize an union just because of the massive size of it and this strategy was the right option, as unions which are massive in size and have unity will cause a lot of problem for the company if they were derecognized. So, the more feasible options were taking up different strategies, like team meetings, which were designed to motivate the workers and to make them committed towards their workplace, but still somehow it did contribute to the declining form of unionism.


Now the situation for the workers is different in many ways. In the above discussions it was pointed out that an employee doesn't have as many options as an employer does, due to the high numbers claimants for each job vacancies. So, naturally once a worker gets a job and faces some problems or has some demands that he wants the employer to fulfil, he needs some kind of body to take that demand to the management. Its not physically possible for management to talk to all the employees(Specially in the big companies with large number of workers),so the only way workers can deliver their voice to the employer is through some kind of medium and since nineteenth-century the employees have been using Unions as that medium. From the the year 1892,the number of unions started to vary, with the highest increase of unions during the period of 1917-1920(15% increase in union density, UK) and most fall in numbers during 1920-1926(16.9% decrease in union density, UK).By the year 1979 Union membership had risen to 13,447,000 from 1,576,000 in 1892.(Source-Bain & Price, 1983)

In total the workers have four main ways to represent themselves. The four ways are:

Provision of friendly Benefits

Collective bargaining

Approaching union representative or steward with their demands/problems

Asking for support from political unions

(Source-Contemporary employment Relations by S.William & D.A.Smith)

Decline in union forms of representation:

Strike Frequency Showind Decline in Union activity(Source:Industrial Relations-Theory & Practice by Paul Edwards)

During the period of 1980s and 1990s trade union members percentage came down to 30% only. Even of percentage of unions in workplace fell down to 38% in 2004 from 53% in 1980(Source- Kersley et al. 2006).In terms of number of union members in UK, the figure dropped to 7million in year 2000 from 12.5million.

Like any incident, this one also had some possible reason behind it. The seven possible factors/reasons causing this decline are as follows:

It is suggested that rise of belief in individualism gradually pushed away collectivism, which used to contribute to the unity of workers in an union.(Basset and Cave 1993)

According to Fernie,2005-The reason is more likely to be the that there weren't any advantages of joining the union.

The growth of employment kept contracting in places where union was strong, but employment growth was good at weak union territories, which might have influenced workers not to join unions.

High rate of unemployment during 1980s made the workers worry about their job. So naturally they decided not to join union, so that they can avoid the chances of employer firing them.(Fernie 2005)

Employers hostility towards unions and constant effort of derecognizing them contributed to the decline.

Hostility of the Conservative governments towards the unions was definitely a possible reason for the contacting numbers of unions.(Waddington,2003b)

The last possible point is about the incompetency of the unions. They might have suffered decrease in numbers due to meet their goals.(Machin 2000)

Replacement of Unions With HRM:

With the continuous diminution in the numbers of unions, what would be a suitable replacement of it? That was the question that the business world had to face. The workers obviously wanted some voice in the organisation and managers were also looking for a way to control the workers. Since the 1980s the term 'Personnel Management' or 'Personnel Manager' has been increasingly replaced with the term 'Human Resource Management'.

Now there two ways to interpret HRM, on one hand HRM is used for managing people in organisation and try to bring them under one umbrella where they are together. On the other hand ,another way to interpret HRM is managing labour by engaging employees and by winning their commitment to the organisation, thus improving the performance of the company as a singular business body.

'So generally speaking the focus is no longer on trade unions, it is more about communication, managing changes, motivating the staff and increasing their involvement'(Emmot 2005: 3).

'As we saw in the case study of McDonalds, even they are concerned about involving the staff more for improved customer service'(Fairhurst 2008).

The five main features of HRM approach to managing employees are as follows:

Emphasis that is places on aligning people management practices with the overall business practices of the organisation.

Linked to this there is a concern with managing people in a way that helps to enhance business performance.

There is a recognition that improvements in business performance can be secured by interventions designed to involve employees and to increase their organisational commitment.

In contrast to the traditional personnel management approach, which tends to rely upon bureaucratic methods, such as the provision for regular pay increments for example, to enforce control in the workplace, under a HRM regime the emphasis is more placed on the techniques of managing organisational culture(Legge 2005; Storey 1992).

This last approach is managing employment relation is a preference for weak or non-existent trade unions by seeking to bind individual employees to the organization and reduce the potential conflict of interest(Guest 1987).

(Source:Contemporary employment relations by S.Williams & D.A.Smith)

HRM is not about anti-union approach. It is more about managing employees and their interests in a way that there is no need for unions. 'Organisations appear to have adopted particular elements of the HRM approach. Rather than adopting all the approaches, they tend to adopt the specific approaches that are appropriate for their needs, specially direct methods of communication like team briefing ,in ad ad hoc and opportunistic way(Legge 2005).So HRM in a way is about commitment model, as high commitment from employees towards the organisation is equal to the improved organisational performance.


Functional Flexibility

Improving Discretionary work effort and Organisational Commitment

Improving Organisational Performance

Employee Involvement

Reward Practices

The High Commitment Model(Source:S.Williams & D.A.Smith 2010)

Downside of HRM(Source:Human Resource Management Journal-Vol 21 No 4 2011-Article of P.Thompson on 'The trouble with HRM')

Now like everything else, even HRM has some problems. There are many researchers around the world who believe that HRM is not the answer for the conflict of interests. It is said that HRM has major flaws practically and theoretically.

'The human resource management profession faces a crisis of trust and a loss of legitimacy in the eyes of its major stakeholders. The two-decade effort to develop a new 'strategic human resource management' (HR) role in organizations has failed to realize its promised potential of greater status, influence, and achievement'(Kochan, 2007: 599).

In a case study, Karreman and Alvesson(2004) argue that HRM works in firm not because it is an efficient way of managing people.but because of the functions which promote identity construction, which creates a feeling of competition, belonging etc.

'From the mid-1980s 1980onwards, the increasing emphasis on culturally-based forms or organizational control - in which symbolically-mediated bodies of regulation, monitoring and disciplining at work became the major concern . . .'(Reed, 2010: 46).

'Management of the employment relationship is structured around the promotion of 'brand essence' in which the powerful HR department is tasked with the implementation of the appropriate practices to achieve this, focused on an 'employment deal', with accompanying communication narrative and intensive socialisation processes. It did not work. Employees not only did not live the brand, they were sceptical and often downright

contemptuous of it. They were quick to spot the discrepancy between the brand narrative and their experience of reward constraint and work insecurity. Moreover, they blamed HR for operating as a cheerleader for the board and brand, rather than an honest and fair regulator of the employment relationship.'(Source:P.Thompson,Human Resource Management Journal,2011)

So it can be stated that HRM can be more of tool for management, rather than a voice of employees. Now, the question that remains is, 'What should be the solution for the declining form of union representation, if HRM is in sufficient?'


It all comes down to 'Efficacy' of Unions and HRM.Is the declining number of unions going to be a problem? If it is thought from a rational point of view, then the contracting union numbers is definitely a problem, because a HR manager can not understand the problems and demands of employees as well as another employee would. So the part/role of the employee representative/steward is crucial for the sake of employee's interests. A HR manager may be considerate about the workers of his organisation, but as a human being he will always have his own needs and can't possibly always think or work like a worker representative. For example, if the workers of a company have two demands, like better wage rate and improvement in the quality of meal the canteen provides then the manager might just mention the problem with the meal, as most of the company owners are rigid about increasing wage rates. For this reason, existence of a representative who is a worker himself is very important for the well-being of the workers. That way, the representative can understand which topic is more important for the workforce to put forward to the higher authority.

To sum up, it is clear that the declining union form of representation is essential for effective employee representation, but the management has interests as well and after all they are running a business to make profits. So, the only possible solution which may meet the interest of both sides with less conflicts is, combining union form with HR department. That way both parties can mention their point which may make it easier for the organisation to be encompassed as one team with better performance.