Definition of Psychological Contract

A contract is important tool which allows an organization to hire employees to work in the organization and protect the rights of both parties. So What is Psychological Contract???

Psychological contract is established base on the level of agreement of both parties about the terms which can be done by each other (Ho, 2005; Rousseau, 2004).

Arnold et al., (2010) argues the psychological contract is shown the promises, expectations of employee and employer, and relationship of the parties in the contract which can be changed and developed over time. Psychological contract is also a basically belief about what the deal is between the parties, what they own and can expect in return over time from each other (Rousseau, 2004). It is also two-way undertanding of employees and employers.

Psychological contract is defined as the perception of both parties involves in a contract about what their mutual obligations toward to each other (CIPD, 2015). These obligations are informal and imprecise which can be seen as mutual trust (promises) and expectations. The important of this contract is to build a good relationship of both parties through the mutual trust and expectations and what they have done for each other. In some case, the obligations are created base on actions which have happened in the past as well as present in order to add more terms to make the psychological contract more perfection and completion (CIPD, 2015).

Psychological contract is implied and unwritten which is not written like a legal contract, it is the deals which are made by the parties in order to fill the expectations and promises of them (Michael, 2012).

Psychological contract can arise by overt promises, past exchanges and observations which are made by employees and employers (Rousseau, 1989).

Psychological contracts are inherently subjective, incorporating the individual’s perceptions of the obligations of the other party, rather than representing a common understanding of the obligations between two parties” (Morrison & Robinson, 1997).

References

1. Arnold John et al. (2010). Work Psychology: Understanding Human behavior in the workshop. 5th Edition. Financial Time Prentice Hall. Page: 282.

2. Ho VT. Social influence on evaluations of psychological contract fulfillment. Acad Manag Rev 2005;30(1):113–28.

3. CIPD. The psychological contract. Available at: http://www.cipd.co.uk/hr-resources/factsheets/psychological-contract.aspx. Accessed on 28 August 2015

4. Morrison, E. W., & Robinson, S. L. (1997). When employees feel betrayed: A model of how psychological contract violation develops. Academy of Management Review, 22, 226–256

5. Rousseau DM. Psychological contracts in the workplace: understanding the ties that motivate. Acad Manage Exec 2004;18 (1):120–7.

6. Micheal Wellin (2012). Managing the Psychological Contract: Using the Personal Deal to Increase Business Performance. Gower Publishing, Ltd.

7. Rousseau, D. M. (1989). Psychological and implied contracts in organizations. Employee Responsibilities and Rights Journal, 2, 121–139.