Introduction
The psychological contract refers to the unwritten set of expectations between an employee and the employer. Unlike formal employment contracts, this contract is based on beliefs, perceptions, and mutual understandings about responsibilities and obligations in the workplace.
Definition
A psychological contract includes things like job security, career development opportunities, respect, and fairness from the employer, while the employee is expected to show loyalty, commitment, and high performance. It is not legally binding but plays a critical role in shaping employee attitudes and behavior.
Types of Psychological Contracts
- Transactional Contract: Focuses on short-term, specific job-related expectations like pay and working hours.
- Relational Contract: Involves long-term emotional and social aspects, like trust, loyalty, and mutual support.
Importance in Organizations
- Employee Engagement: When expectations are met, employees feel valued and committed.
- Job Satisfaction: A positive psychological contract increases morale and satisfaction.
- Trust Building: It strengthens trust between employers and employees.
- Performance: Employees are more motivated to perform when the contract is upheld.
Breach of Psychological Contract
When the psychological contract is broken—such as unfulfilled promises or unfair treatment—employees may feel betrayed. This can lead to:
- Lower morale and motivation
- Increased absenteeism
- Higher turnover rates
- Decreased productivity
Conclusion
The psychological contract is an essential part of employer-employee relationships. Organizations should actively manage expectations through clear communication and fairness. When maintained properly, it contributes to a healthy, motivated, and productive workforce.