A(n) __________ is the set of individual expectations about the employment relationship.

The employment relationship is the legal link between employers and employees. It exists when a person performs work or services under certain conditions in return for remuneration.

It is through the employment relationship, however defined, that reciprocal rights and obligations are created between the employee and the employer. It has been, and continues to be, the main vehicle through which workers gain access to the rights and benefits associated with employment in the areas of labour law and social security. The existence of an employment relationship is the condition that determines the application of the labour and social security law provisions addressed to employees. It is the key point of reference for determining the nature and extent of employers' rights and obligations towards their workers.

The issue has become more and more important because of the increasingly widespread phenomenon of dependent workers who lack protection because of one or a combination of the following factors:

• the scope of the law is too narrow or it is too narrowly interpreted;
• the law is poorly or ambiguously formulated so that its scope is unclear;
• the employment relationship is disguised;
• the relationship is objectively ambiguous, giving rise to doubt as to whether or not an employment relationship really exists;
• the employment relationship clearly exists but it is not clear who the employer is, what rights the worker has and who is responsible for them; and
• lack of compliance and enforcement.

This is why points such as the following need to be addressed:

• When does an employment relationship exist?
• What is an ambiguous employment relationship?
• What is a disguised employment relationship?
• What is a "triangular" employment relationship?
• Who is an employee?
• Who is an employer?

To address these issues, a general discussion took place on the scope of the employment relationship in 2003 and in 2006 the International Labour Conference adopted the Recommendation (No. 198) concerning the Employment Relationship. This Recommendation covers:

• the formulation and application of a national policy for reviewing at appropriate intervals and, if necessary, clarifying and adapting the scope of relevant laws and regulations, in order to guarantee effective protection for workers who perform work in the context of an employment relationship;
• the determination - via a listing of pertinent criteria - of the existence of such a relationship, relying on the facts relating to the performance of work and the remuneration of the worker, notwithstanding how the relationship is characterized in any contrary arrangement that may have been agreed between the parties; and
• the establishment of an appropriate mechanism - or the use of an existing one - for monitoring developments in the labour market and the organization of work so as to be able to formulate advice on the adoption and implementation of measures concerning the employment relationship.

Conference Reports:

Report V - ILC 91st Session, 2003 - The Employment Relationship

Provisional Record No. 21, ILC 91st Session, 2003 - The Employment Relationship

Report V (1) - ILC 95th Session, 2006 - The Employment Relationship

Provisional Record No. 21, ILC 95th Session, 2006 - The Employment Relationship

In preparation for these discussions at the ILC, the Office undertook a number of national studies that demonstrate that many workers suffer from a lack of protection arising from disguised or ambiguous employment relationships, relationships that fall outside the scope of legislation, are under-regulated, or are ignored by enforcement bodies.

Country studies: Argentina (Español); Australia; Brazil (Portugués) ; Bulgaria; Cameroon (Français); Chile (Español); Costa Rica (Español); Czech Republic; El Salvador (Español); Finland; France (Français); Germany; India; Italy; Ireland; Jamaica; Japan; Korea; Morocco (Français); Mexico (Español); Pakistan; Panama (Español); Peru (Español); Philippines; Poland; Russian Federation; South Africa; South Africa (update); Slovenia; Sri Lanka; Thailand; Trinidad and Tobago; United Kingdom; Uruguay (Español); United States; Venezuela (Español).

The ILO, furthermore, assists constituents in developing national policies and setting up monitoring and implementation mechanisms. It also promotes good practices at the national and international levels concerning the determination and use of employment relationships.

What is a psychological contract at work and how does it affect relations between businesses and employees? HR consultant Gemma Dale explains how psychological contracts work and why it's important to maintain a positive psychological contract with all employees.

We have all heard of the employment contract. This describes that collection of terms, written and implied, that sets out the expectations of the parties in the employment relationship. It is regulated by statute, signed, and usually contained within a document to which we can easily refer.

The psychological contract could not be more different. This broad concept first emerged in the 1960s, and there is no common agreed definition of the term. It has been described as ‘a set of unique combination of beliefs held by an individual and his employer’ and ‘and unwritten set of expectations’.

It is not a document of any kind; instead, it is a much more elusive concept describing the many informal elements of the employment relationship. It includes beliefs, perceptions, and expectations. The CIPD refer to this complex contract as ‘how the parties understand their relationship’. Unlike the formal employment contract, it cannot be enforced in law, but it has a huge influence all the same on day-to-day relationships, behaviours, and feelings.

In the employment contract, the primary exchange is the work undertaken for the pay provided. In the psychological contract, that exchange is different: it is the effort and engagement expended by the employee in return for how they are treated or – perhaps more specifically – how they perceive they are treated. The concept of the psychological contract highlights that work is about much more than a monetary exchange; it is something that is imbued with layers of meaning and feelings.

The importance of the psychological contract

A range of different ideas and subjects are linked to the psychological contract, including trust, relationships, fairness, leadership, connection, engagement, and purpose. The strength of this contract can be influenced by a whole range of factors, including manager behaviour, available support, job security, opportunities for learning or career development, and perceptions of fairness of treatment, especially in relation to pay and benefits.

We can use the psychological contract to help us make sense of employee behaviour, especially what we might term as ‘less desirable’ behaviour. When employees leave an organisation, or when there is industrial unrest or a serious lack of employee engagement or co-operation, this may be because of problems with the psychological contract. This alternative contract has been somehow weakened, or perhaps entirely breached. At an emotional level, employees feel that the ‘deal’ or agreement between them has been disregarded. We can see an interesting parallel here with the employment contract, which legally has trust and confidence running through it.

At the end other end of the psychological spectrum, we see a strong positive psychological contract, where commitment is high, and so are employees’ stay intentions. When employees feel that they are treated fairly, this reflects in their day-to-day behaviour at work.

Maintaining the psychological contract

There is no simple formula for developing or maintaining a psychological contract. It is not a static document that can be updated through formal consultation; it only exists emotionally, and it is subject to change over time. It can be influenced by the macro and the micro; from strategic decisions taken at an organisational level, to the way that one manager engages daily with their team. It is a difficult concept to measure, although the traditional employee engagement survey can give some insight as to its overall health.

The organisation that wants to develop a positive psychological contract needs to place trust and fairness at the heart of its people strategy and plans. Most of the positive outcomes from employee relations and engagement result from perceptions of fairness. This can be judged in relation to self (am I being treated fairly?) as well as in relation to others (am I being treated fairly compared to my colleagues?)

When we trust people to do their best work and empower them through autonomy, when we pay a living wage, when decisions about people are consistent, when we support people in their difficult times and in their development, and when we prioritise inclusion and wellbeing, we have some of the fundamental building blocks of a strong psychological contract. In consequence, both the psychological contract, and its more traditional and tangible counterpart (the contract of employment), will endure.

Read more from the myhrtoolkit blog

Psychological safety – what it is and why it matters

Why is it important to have transparency in business?

Written by

Gemma Dale is an experienced senior HR professional, CIPD Chartered Fellow, HEA Fellow, and a regular speaker and writer on a variety of HR topics. Gemma is the co-author of the book 'Flexible Working' published by Kogan Page in 2020. She is also a lecturer in the Business School at Liverpool John Moores University and runs her own business, The Work Consultancy.

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