Employment Relations

Introduction to Employment Relations

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What is Employment Relationship?

Employment relationship could be defined as the work relationship between en employer and an employee. Each time an employer and employee wish to enter into a work relationship, an exchange takes place. The term employment relationship refers to the conditions under which the employer decides to hire labour and the employee decides to sell his manpower to the employer.

How is exchange in labour market different from exchange in product or financial market?
The nature of exchange The position of the parties to the exchange The regulation of the exchange

Analysis of the Employment Relationship

Barbashs Analysis of Employment Relationship

The interaction between employer and employee is largely aimed at regulating the employment relationship. There is a degree to which the behavior of management and employees/trade unions is determined by market forces. Management behavior is determined by fluctuations in product market and guided by the social principle cost discipline . Employee behavior is heavily influenced by labor market 5 and guided by the social principle equity.

Cost Discipline & Management Behavior

Constant Pressure on Prices on Product Market

HR Syste ms

Willingness & Effort of Labour

Efficient Use of Labour

Low Labour Cost 6

Equity & Employee / Trade Union Behavior

Labour Market Situation

Price & Effort of Labour

Equity

Efficiency of Labour

Barbashs Analysis of Employment Relationship

The State

Product Market

Management

Collective Bargaining

Employees/ Unions

Labour Market

Cost Discipline

Price

Effort
Equity

Barbashs Analysis of Employment Relationship

In Barbashs view, the employment relationship is given shape
within the limitations imposed by the product and labour markets;

in the exchange between the price of labour (wage) and performance;

in a permanent system of negotiations, since a formal employment contract cannot be expected to define the relationship between price and performance in detail, and because cost control must be repeatedly emphasized and achieved.
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The Nature of the Exchange

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Dimensions of Employment Relationship

The employment relationship covers every aspect of labour either explicitly or implicitly. Time, Qualifications and Wages are three central dimensions to employment relationship. Hence, the employment relationship is based on an exchange between
work and non-work hours, required and available qualifications; and wages and performance
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Time as the Central Dimension of Employment Relationship

Means of Competitive Advantages (traditional) Through
Price (Cost Leadership) Quality (Differentiation) Flexibility & Innovation

And today, Means of Competitive Advantage also includes

Speed. For example;
The shorter product life cycle The rapid commercialization of R&D efforts Shorter delivery times

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Industry Practice Time/Workpace

Lean Production Assumptions of lean production
The emphasis on planned use of labour aimed at reducing unit costs of production. While labour is a valued resource it has to be deployed as efficiently as possible. Production systems which minimise overhead costs by stripping out jobs which dont contribute directly to production. Looking for ways to economise on the use of directly productive labour.
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Time and Workpace

Time influences Performance
The total duration of the task, The amount of time to be worked in a working day, Recuperation time (meaning the time required for recovering from earlier efforts)

Working time as an important bargaining issue

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Technology and Working Time

Just-in-Time Delivery Cutting back on processing times Extending operating hours; and Increasing turnaround times
By means of flexible automation

Higher demands on employees

Not only because of the introduction of new technologies, But also because more intense use of the working time.

Time is increasingly becoming another means of production

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Qualifications as the Central Dimension of Employment Relationship

Employees must have an operational knowledge of not just one, but multiple specialist areas. Cognitive-abstract qualifications are becoming more significant. Socio-normative qualifications are becoming more important.
Shift from classical social norms like accuracy, punctuality and loyalty to modern social norms creativity, customer orientation, responsibility and cooperation.
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Wages and Performance as the Central Dimension of Employment Relationship

Employment relationship provides scope for continuous bargaining over the wages to be exchanged for a certain effort. The relationship between wages and performance is often formalized as a system of appraisal and compensation. Trends in Appraisal and Compensation
Task based appraisal to Skill Based Appraisal Individual Job Descriptions to Group Task Descriptions Individual Job Evaluation Schemes to Pay for Performance Schemes.
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Macro Changes and Support Mechanisms

SUPPORT MECHANISMS Payment systems Training Skills Piece or MTM-based systems to pay for knowledge systems Task based to competence based Craft artisan to multiskilled technician MACRO CHANGES Organizational structure From hierarchical to flatter structures

Divisional structure Organizational functions

Autonomous to blurred responsibility Single to multifunctional managerial responsibility

Production technology

Long single to short multi-functional lines

Production chains

Branch plant of regional to global structure

Source: Terry Wallace. (2000). Work Organization, Competencies and Payment Systems in the Volvo Commercial Vehicle Division, Int. Journal of 18 HRM.

Competence ladder at Volvo Skvde

Wage group Track Operation Instructor K Quality Instructor J Experience can replace the foreman Labour law, co-determination law, Operator and is responsible for company issues, working with assigning work, time reports quality and leave of absence The operator can replace track instructor and is responsible Supervision, work environment for ensuring that the and quality work department works towards product and quality goals Responsible for departments, Instruction methodology, general contacts and incoming business studies, automation, information. Is mobile and calibration systems and leak able to move between testing departments Knows all tasks in the department and has product responsibility Presentation skills, techniques, and for track start. training for co-operation and Responsible for fault problem solving feedback and must have at least 30 months experience Theory and knowledge

Assembly Instructor I

Group Leader H

Source: Terry Wallace. (2000). Work Organization, Competencies and Payment Systems in the Volvo Commercial Vehicle Division, Int. Journal of 19 HRM.

Competency Based Pay in an Indian Manufacturing Company

CADRE X
Performance level Point range Competency reward Performance level

CADRE Y
Point range Competency Reward

9 8 7

35 37 33 34 31 32

7000 6600 6000

9 8 7

25 28 22 24 19 21

5000 4560 3150

6
5 4 3

29 30
27 28 25 26 23 24

5400
4800 3360 2880

6
5 4 3

16 18
13 15 10 12 79

2880
2610 1560 1380

2
1

21 22
1 20

2400
1200

2
1

46
13

1200
600
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The Position of the Parties in the Employment Relationship

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The Position of the Parties in the Employment Relationship

The behaviour of the parties in the employment relationship is affected by developments in the market (Barbash, 1984). The behaviour of employers by their position in the labour, product and financial market and the behaviour of employees by their position in the labour market. More than market, the behaviour of the parties to the employment relationship is also affected by the division of labour within the company and to the control system of which governs behaviour of employees.
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Williamsons Analysis of Employment Relationship

Loose Relationship
Market-like aspects of employment relationship dominate.
Temporary employment to perform a specific job; or Contracting out the jobs to small independent businesses or subcontractors outside the company when
Qualifications required are not firm-specific; and Performance can measured easily and regulated by coercive power of contract

Permanent Organizational Relationship

Organization-like aspects of employment relationship dominate
Permanent full-time job when
Qualifications required are firm-specific; and Performance is difficult to measure and regulated by intricate control structure having control systems like promotion ladders, compensation systems etc.
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Watsons Analysis of Employment Relationship

Restrictive Employment Relationship
More specification of implicit employment contract by giving detailed instructions to employee Employment relationship is based on mistrust Cooperation achieved by direct control

Diffuse Employment Relationship

General specification of implicit employment contract by giving employee more discretion and autonomy Employment relationship based on mutual trust. Cooperation achieved by responsible autonomy
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Watsons Analysis & Organizations Choice

An organization can, incidentally, have both types of employment relationship as well as control systems for different types of work:
Restrictive employment relationships for simple, manual tasks in parts of the organization with a strict division of labour and an extensive hierarchy of managers supporting a regime of direct control. Diffuse employment relationship for more complex work in parts of the organization with a modest division of labour and a regime of responsible autonomy.

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Transition from Restrictive to Diffuse Employment Relationship

Implications for Employment Relationship Dimensions
Time
More autonomy in determining the relationship between working time and recovery time or to a more intense level of work?

Qualifications
More responsibility and pressure on individuals in developing new skills and competencies required for continuous development?

Wages and Performance

Will the employee take charge of his own performance or will new control systems evolve to replace supervisory hierarchy like career planning and group compensation?
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Employment Relationship as a Power Relationship

Employment relationship is a power relationship and it can lead to conflict since
Employers desire to control employee behavior. Employees desire to control conditions of employment.

Employees dependency on wages will always be more disadvantage to him / her than to employers dependency on employees performance.
Therefore, the relationship between employer and employee in the labour market is uneven, asymmetrical. Asymmetry in relationships between parties is a preconditions for the exercise of power. 27

Power in Sociological Exchange Theories

The basis for power (Pfeffer and Salancik) in terms of dependence. A has power over B in so far as:
The resources in question are more important to B than A B will have more trouble than A obtaining the same resources elsewhere B is unlikely to find a substitute for the resource in question to satisfy its need.
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Ownership Vs. Market Capacity - Decoding the Power Relationship

The basis for power relationship
Marx
Ownership i.e., employer owning the means of production and employee owning the manpower.

Giddens
Market Capacity i.e., employers ability to replace an employee than employers ability to secure a new job and a new employer at the same or higher wage level. The conditions of labour market will restrict or extend the behavior alternatives available to both parties.
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Regulating the Exchange

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Internal and External Regulation

Employment relationship is a regulated relationship through rules and regulations governing the exchange which takes place on a continuous basis. Internal regulation takes place within the company and with a specific employer. External regulation takes place at levels above the company.
The region; The industry; or Central level

The employment exchange dimensions (Time, Qualifications, Wages and Performance) can be regulated at one of these levels or multiple levels.
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Employment Exchange Regulation Models

Internal Regulation Only
The conditions of employment determined unilaterally by the employer

Predominant External Regulation

The conditions of employment determined by collective agreements and in legislation with little or no scope for regulating the exchange internally.

Mixed Regulation
The conditions of employment determined by both external and internal regulation with the employer having the power to make supplementary with his employees while complying with collective bargaining agreements. The supplementary agreements can be established either unilaterally or in consultation with the employee(s).
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The Strategic Choice Approach to Regulating Employment Relationship

Employers Strategic Choice
Primary
Decisions concerning markets, product types and technology. Economic and technical considerations are given much importance

Secondary
Social aspects of management like personnel policy and labour relations Derived from primary strategic choices Play a role in policy making at a later date only when it becomes clear that the primary strategy cannot be pursued without adopting a well-considered social policy. Market conditions force an employer to reconsider the traditional institutions like collective bargaining as a regulatory framework for regulating employment relationship

Employees / Trade Unions Strategic Choice

Not victims of employers strategic choices Taking action by developing strategies which will put limits on employers in taking strategic decisions.

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Intra and Inter-organizational Relations

Intra-organizational relations
The relationship between members and interest organizations.
Why do people join interest organizations and under what conditions people participate in collective action?

Inter-organizational relations
The existence of mutual and partial dependent relationship between interest organizations.
The leadership of trade unions and employer associations need each other to gain recognition by relevant third parties (like govt.) and to continue attract members by recognizing each other as legitimate representatives. 34