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The Employment Relationship

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The Employment Relationship

Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:

“A person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed.”[1]

At the start of the employment relationship there are several different internal and external factors that impact on the employment relationship. Two internal factors are:

1) Collective agreements between an employer and recognised trade union

Collective agreements can be an important factor in determining and influencing an individual employee’s terms and conditions of employment. An employer who, for example, has agreed to negotiate with a union the terms and conditions of employment for particular grades of staff will apply the relevant provisions of the collective agreement to staff in that grade, irrespective of whether they are union members or not. In law, the terms of the collective agreement that are relevant to an individual employee will then be incorporated into that person’s contract of employment. Consequently, their pay, working time, holidays etc will derive from the collective agreement.[2]

2) Custom and practice

In any organisation there are often ways of working, which are not written down and have evolved over a period of time. For example, it may have become normal to allow staff to go home early on Christmas Eve and a court might decide that this has now been included in your contract of employment by custom and practice. For customary ways to become contractual a court would have to determine whether custom and practice has met the following conditions:

a) It must be widely known and almost universally observed by the relevant employees in the workplace. b) It must be reasonable. c) It must be so certain that the individual employee can know exactly the effect that the custom has on him/her.

Two external factors are:

1) Statutory rights

Statutory rights are an individual’s legal rights, given to him or her by the ruling government based on laws passed by Parliament, which are generally designed to protect workers. Nearly all workers, regardless of the number of hours per week they work, have certain legal rights. However, there are some workers who are not entitled to certain statutory rights such as agency or freelance workers. Sometimes an employee only gains a right once they have been employed by their employer for a certain length of time. Some examples of statutory rights include; the right to a written statement of terms of employment within two months of starting work, the right to an itemised pay slip and the right to be paid at least the national minimum wage.

2) Employment protection rights

There is an enormous amount of legislation giving special rights and protections to employees. These employment rights are designed to ensure that all workers are treated equally, fairly and lawfully. The main employment protection rights for employees are:[3]

• The Sex Discrimination Act 1975 • The Equal Pay Act 1970 • Employment Equality Regulations 2003 • The Race Relations Act 1976 • The Employment Rights Act 1996 • EC Equal Treatment Directive 76/201 • The Protection From Harassment Act 1997

Employment status

In employment law there are three different types of employment status, each with different legal rights. Consequently, an individual’s employment status will determine their rights at work.

1) Employee - All employees are workers, but they have a wider range of employment rights and responsibilities to and from their employer. Employees work under an employment contract and have the same rights as those of workers, but in addition, dependent on there length of continuous service with their employer; they also have the right to:

• a minimum statement of employment terms • Statutory Sick Pay • minimum notice periods if your employment will be ending (e.g. if your employer is dismissing you) • not be unfairly dismissed • maternity, paternity and adoption leave and pay • request flexible working • time off for emergencies • Statutory Redundancy Pay

2) Worker – These are defined more widely than employees and are classed as different from individuals who are self-employed. The status of a worker includes individuals working under a variety of contracts who are entitled to core employment rights, including the right to:

• receive the National Minimum Wage • protection against unlawful deduction from wages • a minimum period of paid holiday (annual leave) • minimum length of rest breaks • not work more than 48 hours on average per week or to opt out of this right if you choose • protection against unlawful discrimination (including less favourable treatment on the grounds of part-time status) • protection for 'whistle blowing' (reporting wrongdoing in the workplace)

Workers may also be entitled to:

• Statutory Maternity, Paternity or Adoption Pay • Statutory Sick Pay

It should be noted however, that entitlement to some of these core employment rights is dependant on several things, including how much a worker earns. To qualify for worker status an individual must:

• perform the work or services personally and cannot send a substitute or sub-contract the work • not be undertaking the work as part of their own business

3) Self-employed – These are defined as people who are in business for themselves and provide a service to multiple clients. Self-employed people are generally more independent than workers, and they have control over how, when and who delivers their service. Generally, employment legislation does not cover people who are self-employed because effectively, they are their own boss. However, they are covered for things like health and safety. Self-employed workers must:

• register with HM Revenue and Customs • submit an annual tax return • account for their own tax and National Insurance payments

Importance of determining an individual’s employment status

As each type of employment status has different legal rights, it is important for individuals to know which category they fall into, because this will determine their rights at work and those of the employer.

The employment status is also important in relation to the payment of government tax and National Insurance contributions. For employees, the onus is on the employer to deduct these at source from the employee. Whereas for those who are self-employed, they are paid by invoice for services rendered and the responsibility to pay tax and National Insurance contributions is on the individual.

An individual’s employment status is also important for determining the nature of contractual arrangements under which a person works.

Employee rights during the employee relationship

According to the Cambridge dictionary the definition of work-life balance is the amount of time a person spends doing their job compared with the amount of time they spend with their family doing the things they enjoy. In 1998 the European Working Time Directive (WTD) was introduced into the United Kingdom to regulate the amount of time spent at work in order to protect the health and safety of the workforce, thus supporting the work-life balance of the work force. The WTD states that:

• A person's average working week must exceed 48 hours averaged over a 17 week period • Workers are entitled to a minimum rest period of 11 consecutive hours in every 24, as well as a rest break during working time if they are on duty for longer than six hours. They are also entitled to a minimum uninterrupted rest period of 24 hours in every seven days • Night workers are entitled to extra protection. Average working hours must not exceed 8 hours per 24-hour period and employees are entitled to free health assessments and, in some cases, a transfer to day work. • All employees must be given paid annual leave of at least four weeks per year.

In addition to the WTD acts like the Work and Families Act 2006 have been introduced to create a flexible labour market that serves employers and employees alike. The idea behind the legislation is to ensure every child gets the best start in life and to give parents more choice enabling them to balance their work and family responsibilities.[4] Things covered under the act are maternity leave/pay and paternity leave. Other rights for families and carers such as adoption leave and dependant leave are also covered under the Employment Rights Act 1996, the Employment Relations Act 1999 and the Employment Act 2002.

Maternity Leave

Under the Maternity and Parental Leave Regulations 1999 (as amended in 2002 and 2006) pregnant employees have the right to 26 weeks of Ordinary Maternity Leave and 26 weeks of Additional Maternity Leave making one year in total, this combines both paid and unpaid leave and is called Statutory Maternity Leave. All female employees have a right to take maternity leave regardless of the number of hours they work, how much they are paid and how long they have worked for the employer. During maternity leave an employees employment terms are protected i.e. pension contributions, holiday entitlement etc.

Paternity Leave

Under the Paternity and Adoption Leave Regulations 2002 employees who are fathers to be or have a responsibility, along with the mother, to bring up a child, have the right to take 2 weeks ordinary paternity leave. For an employee to qualify for Ordinary Paternity Leave they must taking the time off to support the mother or carer for the baby and intend to be fully involved in their upbringing. Rights to Ordinary Paternity Leave are in addition to the normal holiday entitlement.

To qualify for Ordinary Paternity Leave, employees must have been with their employer for at least 26 weeks by either:

• the end of the 15th week before the start of the week when the baby is due • the end of the week you are notified you are matched with your child

They must also be either the:

• biological father of the child • mother's husband or partner (including same-sex relationships) • child's adopter • husband or partner (including same-sex relationships) of the child's adopter

Adoption Leave

Employees who adopt a child and have worked continuously for a period of at least 26 weeks before the beginning of the week when they are matched with the child, have the right to 52 weeks of Statutory Adoption Leave, under the Paternity and Adoption Leave Regulations 2002. The 52 weeks is made up of 26 weeks of Ordinary Adoption Leave, followed by 26 weeks of Additional Adoption Leave. As long as an employee meets the criteria and gives the employer the correct amount of notice, they can take adoption leave regardless of the number of hours worked and how much they are paid.

Dependants Leave

Under the Employment Rights Act 1996 employees have the right to take unpaid time off work to deal with emergencies involving a dependant, regardless of their length of service. The term dependant covers, husband, wife, partner, child, parent, or anyone living in the household who is classed as a member of the family. It could also mean anyone who relies on the employee for help in an emergency e.g. an elderly neighbour. An employee is allowed to take ‘reasonable’ time off to deal with the emergency and make the necessary arrangements required.

Examples of things that are classed as emergencies are:

• The death of a dependant • Unexpected breakdown in childcare arrangements • Sick child • If a dependant has been injured

Employees can take a reasonable amount of time off to allow sufficient time to deal with the emergency and make whatever arrangements are required.

Equal Pay

The purpose of the Equal Pay Act 1970 is to bring about a level of equality on pay across the employment environment. A commensurate job deserves a commensurate pay scale. Under the Act an individual has the right to the same contractual pay and benefits as a person of the opposite sex in the same employment, where the individuals being compared are doing:

• The same, or broadly the same job as the other employee • The work being done is proved to be of equal value • The work being done is rated by a job evaluation study as the same as that of the other employee

The employer will not be required to provide the same pay and benefits if it can prove that the difference in pay or benefits is genuinely due to a reason other than one related to sex.

Equality Act 2010

The Equality Act 2010 consolidates nine main pieces of discrimination and equality legislation, which are as follows:

• Equal Pay Act (1970) • Sex Discrimination Act (1975) • Race Relations Act (1976) • Disability Discrimination Act (1995) • Employment Equality (Religion or Belief) Regulations (2003) • Employment Equality (Sexual Orientation) Regulations (2003) • Employment Equality (Age) Regulations (2006) • Equality Act (2006) • Equality Act (Sexual Orientation) Regulations (2007)

Under the Act an employee has the right to things like equal treatment in access to employment, regardless of the protected characteristics of age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity leave, race, colour, religion or belief, ethnic background, nationality and sexual orientation.

According to the Oxford dictionary discrimination is defined as:

‘The unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age or sex’.

In the employment relationship there are two different types of discrimination, direct and indirect. Direct discrimination is where an employer treats an employee less favourably than someone else because of one of a protected characteristic. For example, if a cleaning job was only open to female applicants. Indirect discrimination is where the effect of certain requirements, conditions or practices imposed by an employer has an adverse impact disproportionately on one group or other. Indirect discrimination generally occurs when a rule or condition, which is applied equally to everyone, can be met by a considerably smaller proportion of people from a particular group, the rule is to their disadvantage, and it cannot be justified on other grounds. For example, if minimum height requirements were imposed for no apparent reason, people from an Asian background, or women, may not be able to meet the requirement.

Workplace harassment is any behaviour that is hurtful or shows aggression toward an employee and based on race, sex, colour, national origin, religion, sexual orientation, age, political affiliation, disability or veteran status. Harassment creates an intimidating, uncomfortable, or abusive environment and can interfere with an employee's performance.

Victimisation is when somebody is treated differently in retaliation for involvement in bringing, or supporting, a complaint of discrimination. Examples include refusal to promote an employee because he or she had invoked a grievance procedure, or for giving evidence against the employer at a tribunal. Victimisation can also take place after employment has finished. For example, where an employer refuses to follow its normal post-employment procedure and fails to give a reference to a former employee because he or she had begun a tribunal claim for discrimination against it.

Psychological Contract

The psychological contract represents the mutual beliefs, perceptions, and informal obligations between an employer and an employee. It sets the dynamics for the relationship and defines the detailed practicality of the work to be done. It is distinguishable from the formal written contract of employment, which, for the most part, only identifies mutual duties and responsibilities in a generalised form. In the employment context, the psychological contract is the fairness or balance (typically as perceived by the employee) between:

• How the employee is treated by the employer, and • What the employee puts into the job

Examples of policies and procedures that help to underpin the psychological contract are:

• Managing expectations, for example through regular employee appraisals • Two-way communication, either formal or informal, is essential and can be used as a basis for building mutual trust and understanding between the employer and employee • Staff surveys are a useful means for determining how employees think and feel on a range of issues affecting the organisation

Terminating the Employment Relationship

Broadly speaking, the employment relationship can end (terminate) in one of the following ways:

• Resignation of the employee • At the conclusion of a fixed term contract • Retirement of the employee • Redundancy • Dismissal • Compromise agreement

Dismissal of an employee occurs when:

• The employer terminates the contract, either with or without giving notice • A fixed term contract ends and is not renewed • The employee leaves, with or without giving notice, in circumstances in which they are entitled to do so because of the employer’s conduct

It can be broken down into 2 categories, fair and unfair.

A dismissal is classed as fair provided the employer has a valid reason for the dismissal and they can demonstrate they have acted reasonably in carrying out the dismissal.

Examples of fair dismissal are:

• capability or qualifications • conduct • illegality or contravention of a statutory duty • some other substantial reason • redundancy

Unfair dismissal is where an employee is sacked (or forced to leave) without good reason or, when the employer fails to follow fair dismissal procedures. In most cases before a claim for unfair dismissal can be made, there needs to be a qualifying period of 12 months service, apart from for example, cases of dismissal for pregnancy, adoption, parental leave etc.

The law on unfair dismissal is covered under The Employment Rights Act 1996. The basis of unfair dismissal law is that employees have the right to be treated fairly. In making a claim of unfair dismissal the employee needs to be able to demonstrate that they were dismissed, and that this dismissal was not fair for a specific reason.

Exit Interviews

The exit interview with a terminating employee is important for both parties. It is an opportunity for the employer to obtain information about what the organisation is doing well and, what areas need to be improved and for the employee, it provides an opportunity for them to part company with the employer on good terms. If used in conjunction with staff surveys, exit interviews are a rich source of information for organisational improvement.


Redundancy is a form of dismissal from employment, which normally comes about as a result of the employer needing to reduce the workforce for reasons such as; the job you were hired for no longer exists, the business is closing down or moving, cost cutting for reasons of sustainability.

As the threat of redundancy is considered to be a very stressful time for the employee, its announcement will inevitably lead to disruption and an unsettled workforce. Consequently, it is very important for the organisation to establish and implement the formal redundancy procedures. The key stages in managing the process are as follows:

• planning • identifying the pool for selection • seeking volunteers • consulting employees • selection • appeals and dismissals • suitable alternative employment • redundancy payment • Counselling and support.
[1] Black's Law Dictionary
[2] Employment Law in Context – Brian Willey

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...The Psychological Contract' is an increasingly relevant aspect of workplace relationships and wider human behaviour. Descriptions and definitions of the Psychological Contract first emerged in the 1960s, notably in the work of organizational and behavioural theorists Chris Argyris and Edgar Schein. Many other experts have contributed ideas to the subject since then, and continue to do so, either specifically focusing on the the Psychological Contract, or approaching it from a particular perspective, of which there are many. The Psychological Contract is a deep and varied concept and is open to a wide range of interpretations and theoretical studies. Primarily, the Psychological Contract refers to the relationship between an employer and its employees, and specifically concerns mutual expectations of inputs and outcomes. The Psychological Contract is usually seen from the standpoint or feelings of employees, although a full appreciation requires it to be understood from both sides. Simply, in an employment context, the Psychological Contract is the fairness or balance (typically as perceived by the employee) between: how the employee is treated by the employer, and what the employee puts into the job. The words 'employees' or 'staff' or 'workforce' are equally appropriate in the above description. At a deeper level the concept becomes increasingly complex and significant in work and management - especially in change management and in large......

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Outline and Critically Evaluate the Concept of the ‘Psychological Contract’. Why Is an Understanding of the Psychological Contract Considered to Be Important to the Management of the Contemporary Employment Relationship?

...contract by using relevant information, figures and evaluating case studies, it shall explain why the understanding of this “psychological contract” is considered to be so vital to the management the contemporary employment relationship. The “psychological contract” of employment can briefly be defined as ‘a set of unwritten reciprocal expectations between an individual employee and the organisation’ (Schein, 1976). Such as the employee being promised certain policies or benefits and the employer expecting the employee to perform at a certain level or be of a specific age etc. Guest and Conway (2002) defined it as “the perceptions of the two parties, employee and employer, of what their mutual obligations are towards each other”. Therefore, an agreement that is beyond what is written or implied in the contract or other explicit manifestations of the employment relationship. The concept of the psychological contract is commonly traced back to the early work of Argyris (1960) and to social exchange theory (Blau, 1964). However, the crucial developments leading to its current use as an analytic framework were provided mainly by Rousseau (1995). The psychological contract therefore provides an opportunity to explore the processes and content of the employment relationship through a focus on more or less explicit deals. These deals are likely to be re-negotiated or modified over time, to be influenced by a range of contextual factors, and to have a variety of consequences. Thus......

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