Major risks and dilemma's facing the employer-employee relationship, and effective HRM practices and strategies to manage them.

Erkan Ozsen
February 11, 2021

The critical role of Human Resources professionals in designing and upholding high standards in labour relationships, policies and practices is now more important than ever. As the uncertainty in the labor market has increased, the risk of employee relations practices and the psychological contract becoming more unbalanced is also on the rise. In many cases therefore, achieving a sufficient degree of institutional embeddedness is what is needed within the area of employee-employer relationships.

What are employer-employee relationships?

Employee relations refers to activities between the employer organization and its employees. Specifically, the activities would cover the terms and conditions of employment. Examples of area's are discrimination, harassment, slander, privacy, and increasingly gaining in importance is environment, health and safety (EHS) in the worplace. It is the responsibility of HR professionals to ensure that the appropriate processes, programs, policies, and practices are pursued to create constructive employer-employee relationships. Examples of such HR programs are collective bargaining frameworks, arbitration, mediation, conflict resolution etc. The ensuing outcome of more engaged employees will generally lead to a more productive workforce which leads to greater long-term value for the organization. The opposite situation of poor relationships between the employees and the employers may cause financial costs, damage to the company's public image and often reduce productivity. Hence is it one of the prominent components of corporate social responsibility.

The critical role of regulatory compliance

One of the many important and strategic roles of HR professionals is ensuring regulatory compliance. However, the complexity and diversity of today's labour market poses a number of regulatory compliance risks. An example is the common practice of using independent contractors, which employers may utilize for reasons of workplace flexibility or to cope with uncertainties related to entering a new market. Making sure the individual is truly an independent contractor and not an employee as specified in certain employment and tax laws may lead to the reclamation of salaries, taxes, and benefits, besides potential fines. To mitigate against such risks, HR ought to come up with- and clearly communicate programs and guidelines, including harmonized definitions, for the use of independent contractors. An example of a guideline that ensures the independent relationship, is that the contractor should maintain control over when, where, and how the work is conducted.



What role can HR play in solving the dilemma associated with institutional alignment?

Reconscilling workforce rights and procedures with organizational values and your business strategy is relatively more straightforward when your company is based in one jurisdiction. The other side of the equation is to ensure environmental fitness between on the one hand your company policies and on the other hand the local laws and regulations when you operate in multiple jurisdictions. Common dilemma's facing HR departments in such situations are questions surrounding to what extent to pursue the path of convergence or divergense from headquartes or HR centres of excellence? How does our product strategy impact that trade-off? Do we pay more attention to the relevant society at large and it's stakeholders, or do we emphasize shareholder interested? How well does our approach to controversial societal topics correspond to what they teach students in the host country's educational system? Human Resources Department with the right expertise of relevant multidisciplinary disciplines such as Institutional Economics, Socio-Economics or Business History will be best positioned to most effectively address those kind of dilemma's and general matters of employee-employer relationships.


Although throughout the world there are are common rights and duties covered by statutes and regulations related to equal treatment and opportunity, there can be considerable differences between countries and localities, impacting upon HR's role within the workforce relationship strategy implementation process. Varieties of labour market contingencies requires you to have the right set of competencies to achieve the right amount of embeddedness between your internal HR architecture and external institutions.

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Erkan Ozsen
Erkan Özşen is the founder of Löger Group and Managing Director of it's market research subsidiary EngineerOnomics. With his long track record of developing research, writing, and publishing Erkan is now dedicated to expanding the pool of thought leadership available to Emerging Market Businesses as well as Small- and Medium-Sized Businesses, through this blog and social entrepreneurship.

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