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Introducing the employment relationship

Another factor that has a strong impact on employee engagement and motivation is their relationship with their employer (Latorre et al. 2016).

This is manifested in the formal and psychological contracts.

The formal contract

The employment relationship is

… a relationship between an employee and an employer (Edwards 2003: 11).

This is more formally known as the contract of employment (Employment Rights Act 1996). However, the employment relationship can be seen as an informal continuous process that takes place whenever an employee has any dealings with their employer and vice versa.

The psychological contract

The psychological contract expresses certain assumptions and expectations of both employees and employer on what is expected and what can be offered. It is the base for the employment relationship.

According to Kessler and Undy (1996), there are four dimensions of the employment relationship: parties, substance, structure and operation. These can be seen in the diagram below.

Dimensions of the employment relationship. At the centre is a box saying 'The employer relationship'. Pointing to the box is an arrow from a box reading, 'Operation: - level - process -style'. Pointing to the box is another arrow from another box reading 'Parties: -managers - employees - employee - employee representatives'. Pointing to the box is another arrow from another box reading 'Substance: Individual: - job- reward - career -communications Collective: - trade unions - consultative committees'. Pointing to the box is another arrow from another box reading 'Structure: - formal rules - informal - understandings and expectations Adapted from Kessler and Undy (1996)

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Your task

Reflect on your experience of being in work, education or volunteering:

  • What was ‘the relationship’?
  • What characterised it?
  • How did you feel about it?

Share your thoughts and experiences with your peers.


Edwards, P. (2003) ‘The Employment Relationship and the Field of Industrial Relations’. In Industrial Relations: Theory and Practice in Britain. ed. by Edwards, P. Hoboken, NJ: Wiley-Blackwell

Employment Rights Act (1996) [online] London: Legislation.gov.uk. available from https://www.legislation.gov.uk/ukpga/1996/18/contents [8th March 2019]

Kessler, I., and Undy, R. (1996) The New Employment Relationship: Examining the Psychological Contract. London: Institute of Personnel and Development

Latorre, F., Guest, D., Ramos, J., and Gracia, F.J. (2016) ‘High Commitment HR Practices, the Employment Relationship and Job Performance: A Test of a Mediation Model’. European Management Journal [online] 34 (4). available from https://locate.coventry.ac.uk/primo-explore/fulldisplay?docid=TN_sciversesciencedirect_elsevierS0263-2373(16)30057-3&context=PC&vid=COV_VU1&search_scope=Primo_Central&tab=remote&lang=en_US [10th May 2019]

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This article is from the free online course:

Employee Engagement and Motivation: An Introduction

Coventry University