Individual employability (i.e., the ability to be employed) has gained resonance against the background of increasing job insecurity. Being employable helps to acquire employment for those unemployed and helps to stay employed for those employed, and to realize career goals (i.e., making job-to-job transitions). A plausible assumption then is that individual employability fosters psychological functioning (i.e., the presence of well-being and the absence of ill-being). Though employability research is progressing quickly, we see a number of shortcomings in existing studies. First, there is confusion about the very notion of individual employability. Second, relationships with psychological functioning have not yet been probed in much detail. In response, we aim to clarify individual employability at the conceptual level and its relation with psychological functioning among employed workers and unemployed job seekers at the empirical level with a collection of five papers. The first paper clarifies and defines individual employability within the psychological literature through the notion of “perceived employability” (PE). PE concerns the individual’s perception of his or her possibilities of obtaining and maintaining employment, be it with the current employer (i.e., internal PE) and/or with other employers (i.e., external PE). The second paper provides an overview of research, theoretically and empirically, on the causal relationship between PE and psychological functioning. From this overview we choose to use the Conservation of Resources (COR) Theory as it provides an integrative framework for this relationship accounting for all possible causal pathways (i.e., normal, reversed, and reciprocal) and potential mediating processes. The third paper probes the causal relationship between PE and psychological functioning among the employed workers and among the unemployed job seekers. Results indicate that external PE positively impacts well-being among the employed workers in line with the COR gain cycle idea while ill-being negatively affects external PE among the unemployed job seekers in line with the COR loss cycle idea. The fourth paper establishes that the job resource of skill utilisation explains the positive effect of external PE on well-being among the employed workers and the fifth paper establishes that the resource of networks explains the negative effect of ill-being on external PE among the unemployed job seekers. In all, this dissertation shows that individuals with a strong resource pool are prone to develop a stronger resource pool and that those with a weak or weakened resource pool, for example due to involuntary dismissal, tend to experience their resource pool to become weaker. Especially for those who are at risk for developing a resource loss cycle it is important to install processes, such as outplacement, that replenish the resources that have been lost and build a more resilient resource pool that enables to cope better with future (career related) challenges.