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Employer and employee relations

In this section, we move on to look at the nature of the relationship between employer and employee and the methods used by each group to promote their interests. Employers and employees have the same long-term interest; the success of the business, but each groups has short-term interests that may lead to conflict and jeopardise that success.

Managers need to balance the interests of all the firm's stakeholders, of which employees are only one. In topic one, we discussed the possible conflict situations that may arise between each stakeholder group. The largest cost in any business is usually its labour, so controlling pay levels is necessary for firms wanting to earn high profits to reward their shareholders through higher dividends. However, conflict between employees and management risks these profits, so business success usually comes down to how skilfully employers and employees can negotiate the terms and conditions of employment.