Stephen and Timothy (2002) explain the psychological contract as an unwritten agreement that exists between employees and employers. This agreement
will define the mutual expectations, what management expects from workers and
what workers will expect from the management. Also, management is usually expected to
treat employees justly, provide acceptable working conditions, clearly
communicate what is a fair day’s work, and finally give feedback on how well an
employee is doing. Whereas employees are expected to respond by demonstrating a
good attitude, following directions and showing loyalty to the organization
(Stephen and Timothy, 2002).
The
current 'psychological contract' concept attempts to capture the idea of
employees' explicit and implicit expectations about what their work will
deliver (Edwards, 2003).The analysis of this definition of a psychological
contract often emphasizes the importance of principles in and in the
relationship of employment Equity, justice, dignity, and confidence are among
the values that are often argued to be fundamental to the effectiveness of the
employment relationship and the accomplishment of the goals of the
organizations (Leat, 2007).
According to Rousseau (1989), the psychological contract can be defined as
relations between organizations and their members that derive from two forms
of unwritten contracts. Further, these are individual beliefs in a reciprocal
obligation between the individual and the organization. The definition
'psychological contract' discusses many areas such as subjective expectations,
beliefs and obligations and finally as perceived by the employer and the
worker. This is the core to understanding employment relationship and this
concept first emerged in the early 1960s. The concept of psychological contract has
been primarily studied from the viewpoint of the employee through the notion
describes the expectations of both employers and individual workers (CIPD,
2019).
CIPD (2019) further explains the legal contract of employment offers only
a limited representation of the employment relationship on its own, mainly because
workers contributing little to its terms beyond accepting them. In this logic,
the psychological contract may be more influential as it explains the insights
of the relationship between employers and workers and it influences how people
behave from day to day. Everyday actions and statements made by one party – and
how they are perceived and interpreted by the other is the core of how
psychological contract is built on. Unlike the legal contract of employment
signed by employers and workers, the psychological contract is intangible by nature
(CIPD, 2019).
Armstrong (2014) defines the psychological contract as the expectations that
exist between individual employees and their employers which is a set of reciprocals
but unwritten.
The psychological contract is more than just a transaction regulated
by a legal contract, it emphasizes that the relationship between employers and
workers are much more. Like in any relationship, the length, and quality of their
relationship can be significantly affected since both parties have informal
expectations of each other that are even unwritten (CIPD, 2019). From my
experience working for many local and multinational companies, most of these
unwritten promises were fulfilled unless there is an organizational change
that’s limiting the ability to do so.
Irrespective 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 in order to manage the
psychological contract effectively. Also, in order to understand and adjust the
perceived balance of what employees contribute and what they get back, they
should also strengthen the capability of line managers (CIPD, 2019).
Below are some general aspects that psychological contract may cover the employment relationship:
Below are some general aspects that psychological contract may cover the employment relationship:
- Job security
- Career prospects
- Training and development
- Perceived fairness of pay and benefits
- Manager support
- Employer’s reputation and the impact on society
(CIPD, 2019)
Psychological contract provides a powerful foundation for the employers to pay attention to the ’human’ side of the employment relationship, such as individuals’ values, motivations, and ambitions. However, this varies across time and individuals. For example, job security is not something everyone desires these days and it is rarely the main offer of the modern employment relationship. But the availability of training and development like opportunities might be more attractive (CIPD, 2019). This is proven to be a fact-based on our company data gathered during initial job interviews because people these days are more keen to know about their career progression opportunities available and other training provided rather than asking about job security related questions.
Psychological contract provides a powerful foundation for the employers to pay attention to the ’human’ side of the employment relationship, such as individuals’ values, motivations, and ambitions. However, this varies across time and individuals. For example, job security is not something everyone desires these days and it is rarely the main offer of the modern employment relationship. But the availability of training and development like opportunities might be more attractive (CIPD, 2019). This is proven to be a fact-based on our company data gathered during initial job interviews because people these days are more keen to know about their career progression opportunities available and other training provided rather than asking about job security related questions.
As per Rousseau (1989), typically the development, maintenance, and
violation of psychological and implied contracts are described along with their
organizational implications. So, what would happen if management is derelict in
keeping its part of the bargain is that it will then have negative effects on
employee performance and satisfaction. According to a study done on restaurant
managers, they have found that psychological contract violations were related to
greater intentions to quit the job, another study conducted on a variety of
different industries found they were associated with lower levels of
productivity, higher levels of theft, and greater work withdrawal (Stephen and Timothy,
2002). One good example I can bring in from the organization I work for is that people who
initially joined the company when its first launched in Sri Lanka, expected promotions
or growth within a shorter time period and employers initially acknowledged but
couldn’t cope up with that later mainly due to lack of results and growth of
the company. Eventually, these employees left the company mainly due to this
reason of the violation of the psychological contract.
References
Armstrong, M. (2014). Armstrong's handbook of human resource management practice. 13th
ed. London: Kogan Page, p.210.
Chartered Institute of Personnel and Development
2019, 12th February 2019, London: The Psychological Contract [Online],
Available https://www.cipd.co.uk/knowledge/fundamentals/relations/employees/psychological-factsheet#6110 [Accessed 13 September 2019].
Edwards, P. (2003). Industrial relations. 2nd ed. Oxford: Blackwell Publishing Ltd, p.15.
Edwards, P. (2003). Industrial relations. 2nd ed. Oxford: Blackwell Publishing Ltd, p.15.
Leat, M. (2007). Exploring
employee relations. 2nd ed. London: Routledge, p.9.
Rousseau, D. (1989). Psychological and implied contracts in organizations. Employee Responsibilities and Rights Journal, [online] 2(2), pp.121-139. Available at: https://www.researchgate.net/publication/226857215_Psychological_and_Implied_Contracts_in_Organisations [Accessed 12 September 2019].
Stephen, P. and Timothy, A. (2013). Organizational Behavior. 15th ed.
Boston: Pearson, p.278.
