Psychological contract

Psychological contract refers to the unwritten, implicit expectations and obligations that exist between employees and employers, encompassing mutual beliefs about what each party owes the other beyond the formal employment contract (Rousseau D.M. 1989, p.123)^[1]. The written contract says nothing about career development. But the employee understood when joining that the company invests in people—that hard work leads to promotions and learning opportunities. When that investment never materializes, the employee feels betrayed. Not the formal contract—the psychological contract was broken.

Denise Rousseau developed the contemporary concept in her 1989 research, defining psychological contracts as "an individual's beliefs regarding the terms and conditions of a reciprocal exchange agreement between that focal person and another party." Unlike legal contracts, psychological contracts exist in the mind of the employee—subjective, unspoken, yet powerfully influential. When employees perceive that the organization has failed to fulfill its obligations, the resulting breach damages trust, commitment, and performance.

Types of psychological contracts

Rousseau identified four categories:

Relational contracts

Long-term focus. Built on loyalty, mutual commitment, and relationship quality^[2].

Characteristics. Open-ended; emotional investment; career development expectations.

Example. Traditional employment relationships with implicit job security and mutual loyalty.

Transactional contracts

Short-term focus. Primarily economic exchange—work for pay^[3].

Characteristics. Specific, limited duration; narrow scope; clearly defined deliverables.

Example. Contract workers, gig economy participants.

Balanced contracts

Hybrid. Combines elements of relational and transactional—long-term opportunities tied to performance^[4].

Characteristics. Growth opportunities contingent on contribution; dynamic, evolving expectations.

Example. Performance-based careers in competitive firms.

Transitional contracts

Instability. Exist during organizational disruption—layoffs, restructuring, acquisitions.

Characteristics. Uncertainty about future; erosion of previous understandings; anxiety.

Contract breach

When perceived obligations aren't met:

Causes of breach

Unmet promises. Explicit or implied commitments not fulfilled—promised promotions, training, or support that never materialized^[5].

Changed circumstances. Organizational changes that alter previously understood arrangements.

Miscommunication. Different understandings of what was promised.

Consequences of breach

Reduced trust. Fundamental damage to the employment relationship.

Lower commitment. Decreased organizational commitment and engagement^[6].

Withdrawal behaviors. Reduced effort, increased absenteeism, higher turnover intentions.

Retaliation. Some employees respond to perceived breach with counterproductive behaviors.

Managing psychological contracts

Organizations can address:

Explicit communication. Clearly articulating what employees can expect—avoiding ambiguity that creates unrealistic expectations^[7].

Consistency. Aligning actions with stated values and commitments.

Renegotiation. When circumstances change, actively renegotiating expectations rather than silently violating old ones.

Recovery. When breaches occur, acknowledging them and taking steps to rebuild trust.

Contemporary relevance

The concept remains vital:

Changing employment. Traditional relational contracts eroding; more transactional relationships emerging.

New work arrangements. Remote work, gig economy, and portfolio careers create new contract dynamics^[8].

Research continues. 2024 scholarship examines how to align psychological contract research with modern work realities.

Psychological contract — recommended articles

Organizational commitment — Employee engagement — Employment relationship — Organizational behavior

References

• Rousseau D.M. (1989), Psychological and Implied Contracts in Organizations, Employee Responsibilities and Rights Journal, 2(2), pp.121-139.
• Rousseau D.M. (1995), Psychological Contracts in Organizations, Sage.
• Conway N., Briner R.B. (2005), Understanding Psychological Contracts at Work, Oxford University Press.
• Rousseau D.M. et al. (2024), In Pursuit of Impact: Psychological Contract Research, Group & Organization Management.

Footnotes

1. ↑ Rousseau D.M. (1989), Psychological and Implied Contracts, p.123
2. ↑ Rousseau D.M. (1995), Psychological Contracts in Organizations, pp.45-62
3. ↑ Conway N., Briner R.B. (2005), Understanding Psychological Contracts, pp.67-82
4. ↑ Rousseau D.M. et al. (2024), In Pursuit of Impact
5. ↑ Rousseau D.M. (1989), Psychological and Implied Contracts, pp.128-134
6. ↑ Rousseau D.M. (1995), Psychological Contracts in Organizations, pp.134-148
7. ↑ Conway N., Briner R.B. (2005), Understanding Psychological Contracts, pp.178-192
8. ↑ Rousseau D.M. et al. (2024), In Pursuit of Impact

Author: Sławomir Wawak