At its core, the psychological contract is built on the everyday actions and statements made by one party — and how they are perceived and interpreted by the other. This factsheet explores the psychological contract within the context of the modern employment relationship. It identifies ways that managers can bolster the psychological contract and its impact on broader organisation strategy. The factsheet also considers the role of HR in managing the psychological contract.
The psychological contract emphasises that the relationship between employers and workers is more than just a transaction regulated by a legal contract.
Working with perceptions
As in any relationship, both parties have informal expectations of each other that — although unwritten — can significantly affect the length and quality of their relationship. The nature of the psychological contract varies across time and individuals. For instance, job security is rarely the main offer of the modern employment relationship, and not all employees desire it.
Other opportunities, such as availability of training and development, might be more attractive. To manage the psychological contract effectively, regardless of the expectations of an individual worker, employers should be transparent about what they offer, and consult with the current and future workforce on the employee value proposition.
They should also strengthen capability of line managers to understand and adjust the perceived balance of what employees contribute and what they get back. Log in to view more of this content. If you don't have a web account why not register to gain access to more of the CIPD's resources. Please note that some of our resources are for members only. The term 'psychological contract' refers to subjective expectations, beliefs and obligations, as perceived by the employer and the worker.
The concept emerged in the early s and is core to understanding the employment relationship. Although the notion of psychological contract describes the expectations of both employers and individual workers, the concept has been mainly studied from the perspective of the employee. The psychological contract is different from a legal contract of employment which will, in many cases, offer only a limited and uncertain representation of the reality of the employment relationship.
The legal contract refers to a written agreement about the mutual obligations of the employer and the worker. The psychological contract, on the other hand, describes how the parties themselves understand their relationship, their own perceptions of what they commit to the relationship and what they can expect to receive in return. They may be inferred from actions even towards other employees , or from what has happened in the past. For example, an employee observing a manager in a different department granting a flexible working request may expect similar treatment from their own manager.
Broadly, the psychological contract may cover the following aspects of the employment relationship:. Employees in large organisations do not identify any single person as the 'employer'.
Line managers are important in making day-to-day decisions but employees are also affected by decisions taken by senior management and HR. Employees may have little idea who, if anyone, is personally responsible for decisions affecting their welfare or the future of the business. It is fair to say that for many employees the psychological contract is largely the deal they have with their direct line manager. The quality of the psychological contract heavily influences how employees behave from day to day. Workers who perceive it as balanced in terms of the contributions they make to the organisation, and what they receive back from the employer, perform better, demonstrate more extra-role behaviours, and indicate a higher level of commitment to the organisation.
See more of our resources on managing the employment relationship. This is why violation or breach of psychological contract by the employer can have sudden and powerful consequences for people and organisations, negatively affecting job satisfaction, commitment, performance, and increasing turnover intentions.
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Psychological Contracts: Effectiveness, implementation and consequences of breach
You previously purchased this article through ReadCube. Institutional Login. Log in to Wiley Online Library. Purchase Instant Access. Log In Sign Up. The psychological contract is a powerful determiner of behaviour in organizations. Beritan tak. Since the remarkable changing point of the industrial revolution, the ongoing impact of technical forces and the development of automation has led to continuous organisational changes.
In terms of a shift from manual workforce into occupations that requires professional and technical skills, this has led to rapid organizational and global shifts, including economic growth, major shifts in employment relationships, enhanced productivity and increased global competition Adler, ; Akhtar and Long, In line with the industrial era, the scientific management approach proposed by Frederick Taylor had marked an essential impact on the workplace.
Employees were merely perceived as part of a mechanical process with no emotions involved Adler, Recent organizational changes has significantly emphasized on features such as loyalty, motivation and job satisfaction Akhtar et al. This aspect emerged from the human relations theory of management during early s. The sense of uncertainty and lack of control over important work-related aspects such as job security, status and training needs commonly result in feelings of overwhelming.
Thus, the stress caused by the changes within the organisation may result in decreased job satisfaction and increased intention to leave the organization Bordia et al.
The Importance of the Psychological Contract
Moreover, the anxiety caused by the lack of information of job-related aspects may also affect the employees, resulting in reduced sense of job security, new roles, changing relationships and new required skills Terry et al. The psychological contract in relation to the changes became a very significant feature for examining attitudes, relationships and behaviours in the workplace. However, one may argue that although existing literature has established further understanding of the concept by highlighting the implications and the significance of unmet expectations Cullinane and Dundon, ; the concept is not fully understood in terms of methodological concerns and limitations within the construct of the framework Guest, Thus, the following essay will critically evaluate and investigate the existing literature of the psychological contract, with the aim of understanding whether the psychological contract is a powerful determiner of behaviour in organisations.
The essay will start by examining the definitions of the framework followed by a critical literature re-view and analysis of the content. The essay will then follow on by critically evaluate the existing conceptual issues of the breach and violation processes of the psychological contract.
A re-view of the existing literature has demonstrated that there seems to be a common disagreement within the established definitions of the psychological contract. More specifically, scholars and academics seem to have a different perspectives regarding what the psychological contract actually is Guest, ; Cullinane et al.
Since there is lack of clarity among the relationship between the provided definitions, Roehling argued that this inconsistency makes it difficult and complex to understand what the contract actually is and what it is assessing. Nonetheless, some scholars suggest that the contract is based on an implicit understanding in terms of mutual obligations, values and expectations between employees and the organisation Argyris, Others views it as beliefs and obligations based on implicit or explicit promises Rousseau, ; ; , or as a series of mutual expectations including tangible and intangible resources Levinson et al.
In line with this, Guest emphasized on the comparison between expectations, perceptions, beliefs, promises and obligations. According to him, these operates differently in relation to levels of psychological engagement within the employment relationship. Guest therefore stressed the importance of the need to establish a clear understanding of what the psychological contract actually contains.
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This therefore suggests that there are both conceptual and operational concerns, where the differences of the definitions might cause conceptual limitations such as operational obstacles of how to differentiate implied promises from implied psychological contracts Guest, ; Conway and Briner, Furthermore, one response to the unclear concept of reciprocal exchange, i.
Therefore, this suggest that reciprocal exchange is based on organizations offering inducements, such as promotion, in exchange for employee contributions and performance Coyle-Shapiro et al. Furthermore, critics have emphasized on the ambiguity in terms of who the contract maker is Guest, ; Cullinane et al. This is associated with the fact that viewing the psychological contract only from an employee perspective is a limited perspective. It has been found that there are multiple agents within organizations resulting in a lack of clarity in terms of who the contract maker is Guest, ; Shore, Porter and Zahra, ; Petersitzke, Some research suggests that the main contract makers are immediate managers as they represent the organization in relation to observation of perceived obligations and their reactions towards it Rousseau, ; Tekleab and Taylor, However, Guest and Conway claims that employment relationships are based on the high positioned managers within the organizational hierarchy and that the mangers need to perceive themselves as representatives of the organization in order to be a contract maker Coyle-Shapiro, et al.
Moreover, in relation to the idea of whether all employees have a contract, one aspect of the conceptual problem within the psychological contract relates to the awareness of the start point of the contract. Criticisms argue whether a formal employment relationship is required or whether individuals require to emotionally bond to an organization, regardless of the existence of any formal inducements Guest, Moreover, it is argued that employees may develop an emotional bond towards an organization as long as they have acquired a certain status or reputation Guest, The formation of the contract develops already during the: pre- employment, the recruitment process, early socialization and later levels of experiences.
In line with tis, there are two basic psychological contracts — relational and transactional contracts. Relational contracts implicitly depends on trust, loyalty and job security, and includes long-term relation and emotionally association with the organisation.
Supervisor Psychological Contract Management : Maida Petersitzke :
In contrast, the employment is a transaction where long working hours is provided in exchange for high performance-related salary and training Jafri, As such, it is important to accurately judge the type of relationship that should be formed in order to process obligations and expectations accurately. Furthermore, research has aimed to identify and operationalize the key dimensions of the psychological contract, where five dimensions has been identified: stability, scope, tangibility, focus and time-frame Guest, ; Rousseau and Parks, The relational dimension refers to a contract emphasizing on social exchange and interdependence, whilst transactional dimension emphasizes on the concrete content of the contract, i.
However, Guest points out that the list of dimensions seems to be intuitive rather than theoretically driven, which raises the question of whether or not the list is fully established.