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." Black's Law Dictionary page 471 (5th ed. 1979).

In a commercial setting, the employer conceives of a productive activity, generally with the intention of generating a profit, and the employee contributes labour to the enterprise, usually in return for payment of wages. Employment also exists in the public, non-profit and household sectors. To the extent that employment or the economic equivalent is not universal, unemployment exists.

Employer

An employer is a person or institution that hires employees or workers. Employers offer hourly wages or a salary in exchange for the worker's labor power, depending upon whether the employee is paid by the hour or a set rate per pay period. A salaried employee is typically not paid more for more hours worked than the minimum, whereas wages are paid for all hours worked, including overtime.

Employers include everything from individuals hiring a babysitter to governments and businesses which may hire many thousands of employees. In most western societies, governments are the largest single employers but most of the work force is employed in small and medium businesses in the private sector.

Although employees may contribute to an enterprise, the employer maintains control over the productive base of land and capital, and is the entity named in contracts. The employer typically maintains ownership of intellectual property created by an employee within the scope of employment and as a function thereof. These inventions or creations become the property of the employer based on a concept known as "works for hire".

An employers' relative level of power over employees is dependent upon numerous factors; the most influential being the nature of the employment relationship. The relationship employers share with employees is affected by three significant factors – interests, control and motivation. It is up to employers to effectively manage and balance these factors to ensure a harmonious and productive working relationship.

Interests can be best described as monetary constraints and economic pressures placed on organizations in their pursuit of profits. It covers facets such as labour productivity, wages and the effect of financial markets on businesses.

Wood et al (2004, p 355) describe control as being either output focused, focusing on desired targets with managers defining, and using, their own methods for reaching targets, or process controls, which specify the manner in which tasks will be achieved (Ibid, p. 357). Employer and managerial control within an organization rests at many levels and has important implications for staff and productivity alike, with control forming the fundamental link between desired outcomes and actual processes. Employers must balance interests such as decreasing wage constraints with a maximization of labour productivity in order to achieve a profitable and productive employment relationship.