Psychological Contracts

People and Organisations: Principles and Practice in Global Contexts

Psychological Contracts

Introduction

A psychological contract is a set of unrevealed expectations which are in the existence between the employees and the employers which underpins the employment relationship. It is a system of beliefs that encompasses the actions employees believe are expected of them and what response they expect in return from their employer, and, reciprocally, the actions employers believe are expected of them and what response they expect in return from their employees (Armstrong, 2009)

How Psychological Contracts develop

Psychological contracts are not developed by means of a single transaction; they evolve over and can be multi-faceted. There are many contract makers who exert influence over the whole duration of an employee’s involvement with an organization. (Spindler, 1994 cited by (Armstrong, 2009))

Types of Psychological Contracts

There are two kinds of contract to define the kind of employee-employer relationship. Relational type contracts concern a relationship built on the utmost trust, implicit emotional attachment, and embrace long-term employment. Relational contracts were prominent prior to recent market changes and instability in the business world. As a result of these changes there has been a dramatic increase in transactional type contracts. This type of contract concerns a more direct exchange of commitments and is more concerned with a tit for tat economical transaction. (Curwen, n.d.)

Figure 1: Figure summarizing the differences between transactional and relational (picture credit - (Curwen, n.d.))

Thing to remember if the Psychological Contract breaks:

Employment relationship between the employee and the employer may damage despite manager’s best offer: nevertheless it is managers job to take responsibility for maintaining them.

Taking precautions prior to breaking the contract is always the better than repair the damage afterwards.

When breach cannot be avoided it may be better to spent time on negotiating or negotiating the deal, rather than focusing too much on delivery (CIPD, 2019)

Conclusion

All employment and other relationships involve Psychological Contracts in different forms. Employment relationships may deteriorate even though they seem fair and to have high rewards. Breaching of contracts has a significant effect on attitude and behavior of both the employee and employer. Therefore, preventing the breach I the first place is better than trying to cure or repair breach. The Psychological contract is one of the most useful ways to understand the employment relationship. (Conway, n.d.)

Reference:

Armstrong, M., 2009. Armstrong's Handbook of Fuman Resource Management Practice. Philadelphia, USA: Typeset by Saxon Graphics Ltd. pp.277-82.

CIPD.[Online]Available at: https://www.cipd.co.uk/knowledge/fundamentals/relations/employees/psychological-factsheet [Accessed 10 June 2019].

Conway, N., n.d. What is the psychological contract and does it matter? p.15.

Curwen, R., n.d. The Psychological Contract : Are unmet expectations harming your employee relationship. pp.1-3.