6. The psychological contract and HR

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What is the psychological contract?

source: (Youtube:GreggU,2022)


The unwritten, informal agreement that characterizes the understandings, expectations, and informal commitments between an employer and employee is known as the psychological contract. It is important to know the difference between a written employment contract and a psychological contract because they are two entirely different things. The legally-binding agreement between the two parties is outlined in an employment contract; however, the contract alone offers a relatively limited and simplified perspective of the employee-employer relationship overall (Enright, 2018).

Numerous other expectations that are equally significant but not fully codified make up that relationship. The psychological contract is based on the regular acts, declarations, and promises made by one party to the relationship and how those actions are interpreted by the other, whereas an employment contract is a formal agreement that is written down.

An employment contract addresses the transactional labor-for-reward exchange. The more colloquial understanding of what each party gives up in a relationship and what they might gain in return is called the psychological contract. A psychological contract may cover things like job security, advancement opportunities, and learning and development opportunities. The standing of the employer in the community and It is possible to identify the employee's perception that their work positively impacts society.  

Why is the psychological contract important?


source: (hrexchangenetwork,2018)

In the end, a team member's day-to-day work experience is not significantly impacted by the formal employment contract they have with their employer. In actuality, it sign that contract on the first day of work and most likely won't see it again for the remainder of your tenure there. That contract may very well remain in a filing cabinet at the back of the office unless the employer and employee get into a legal battle (CIPD, 2023).

The perceived fairness of the psychological contract an employee has with their employer is far more influential than other factors when it comes to how the employee acts, works, and behaves. Consider the psychological contract as a relationship in the same way that you would any personal relationship in your life. It's very simple for a friendship to go sour if your friend constantly disappoints you, asks for more from you than they ever give, or frequently makes you feel taken advantage of. One person may find it suitable, but the other feels unfairly treated, and with good reason.

However, a friendship in which mutual support is provided makes both parties feel important and worthwhile. The same is true of the psychological contract that exists between an employer and employee: for the relationship to last over time, both parties must believe that their contributions are equitable and well-balanced.

A balanced psychological contract

Team members who believe they have a fair psychological contract—one in which their contributions correlate with their output—perform better at work, are more dedicated to the organization's goals, and are much more inclined to "go the extra mile." Employers should be aware that the definition of a balanced psychological contract will differ for each employee and, more importantly, that it will evolve over time.

Over the course of a person's career, what initially appears to be a "fair" relationship will change. Their needs from their employer will also change as their life does. For instance, chances for advancement are frequently more important to young workers than job security. That may very well be where their priorities are at that point in their lives. That won't remain the same, though, as their priorities may change and job security may become more important to them.

list of references 

Enright, J. (2018). What is the psychological contract? [online] CharlieHR Blog | The Workspace. Available at: https://www.charliehr.com/blog/what-is-the-psychological-contract/. [Accessed 12 Nov. 2023].

CIPD. (2023). CIPD | Psychological Contract. [online] Available at: https://www.cipd.org/en/knowledge/factsheets/psychological-factsheet/ [Accessed 12 Nov. 2023].

www.youtube.com. (n.d.). The Psychological Contract. [online] Available at: https://www.youtube.com/watch?v=p3RJ439rj1M&t=3s [Accessed 12 Nov. 2023].


Comments

  1. AnonymousNovember 18, 2023 at 8:32 PM

    Great. Thank You

    ReplyDelete
  2. Hashanka Gunasekara - HR360November 19, 2023 at 10:52 AM

    Good explanation provided. Could you please share, will the positive psychological contract result in building loyal employees?

    ReplyDelete
    Replies
    1. Chanika Janani FernandoNovember 20, 2023 at 8:25 PM

      Thanks for the comment, Creating a positive psychological contract requires a number of elements, including equitable treatment, open communication, growth opportunities, acknowledgment of contributions, and a positive work environment. Employee commitment and trust are increased when they believe the company is meeting or surpassing their expectations.

      Long-term retention is a benefit that can benefit both the employer and the employee when it comes to loyal workers. Employees that are loyal to the company are typically more engaged, productive, and eager to go above and beyond to make a positive impact on the organization. Additionally, they are more likely to talk favorably about the business, which can improve its standing and draw in new hires.

      Delete
    2. Hashanka Gunasekara - HR360December 20, 2023 at 9:25 AM

      Thank you, Chanika! for your valuable insights.

      Delete
  3. Lakma Lochana SudusingheDecember 5, 2023 at 7:45 AM

    Well I think, when the psychological contract is breached, it can lead to a number of negative consequences, such as decreased employee morale, productivity, and retention (Zhao et al., 2008). Therefore, it is important for HR professionals to take steps to prevent breaches from occurring. Therefore HR professionals can play a key role in managing the psychological contract by:

    Communicating clearly with employees about the organization's expectations and values (Aryee, 1993).
    Providing employees with the resources and support they need to be successful (Eisenberger et al., 2000).
    Fostering a culture of trust and respect (Eisenberger et al., 1997).
    Addressing employee concerns in a timely and fair manner (Gouldner, 1956).

    ReplyDelete
    Replies
    1. Chanika Janani FernandoDecember 10, 2023 at 5:55 AM

      Absolutely, I agree with your perspective. Maintaining a positive psychological contract is crucial for fostering a healthy work environment. Clear communication, adequate support, a culture of trust, and prompt issue resolution, as suggested by HR strategies, are essential for ensuring employee morale, productivity, and retention. HR professionals indeed play a pivotal role in managing and reinforcing these aspects to prevent breaches and uphold a positive and mutually beneficial relationship between employees and the organization.

      Delete

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