Psychological contract

Psychological contract
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Psychological contract is an informal, unspoken and unwritten agreement between an employer and employees, including mutual expectations of both entities regarding the performance of assigned roles.

This agreement may concern elements such as[1]:

  • quality of working conditions
  • level of employee involvement
  • job satisfactions

Meaning of psychological contract[edit]

A psychological contract is a source of emotions and opinions that affect the behavior of employees. A balanced psychological contract is very important for building lasting and harmonious relations between employees and the company. Breach of the contract may be a signal to the parties that they no longer have (or have never had) a common set of values or goals.

Expectations of the employer and employee are included in the form of unspoken hypotheses. Hence, both sides can be extremely easily and quickly disappointed. However, the 'situation may be eased if the management realizes that one of its key roles is managing expectations, that is, explaining to employees what they should achieve, what skills to demonstrate and what values to follow. Management should not only formulate these requirements, but also discuss them in detail, explain them and agree with individual persons and teams.

The psychological contract affects employee relations, which are constantly changing. It will not be clear to all involved parties how the contract itself evolves. This is because, in a psychological contract, the rights and obligations of the parties have neither been expressed nor agreed. Those interested can also have a problem with indicating expectations. Employees who do not know what to expect often do not realize the reasons for their disappointment. However, they feel that something is wrong. Consequently, an enterprise with employees who feel "cheated" whose expectations exceed what they receive can quickly have big problems[2].


The psychological contract was identified in the sixties of the twentieth century, but until the 21st century the term 'was not developed or researched. After researching the psychological contract, it was discovered that employees are able to achieve much better results if the working environment favors them. Other studies have shown that the breach of such an agreement by the employer has a very adverse effect on the performance of employees and their retention[3].

The basis of the psychological contract is the mutual trust between the employer and the employee. As mentioned earlier, breach of the contract results in a significant reduction of employees' efficiency and the appearance of reluctance, it occurs by failing to meet the promise made by the company. Violations can occur in the form of outsourcing causing unemployment and aggressive employment reduction.

Whether or not a person exhibits subordination, loyalty and enthusiasm for an organization and its goals depends on[4]:

  • the level to which her own expectations as to what her organization will provide and what she is obliged to do, agree with the organization's expectations regarding what the worker will give and what he will receive from it
  • what is to be exchanged (money for working time, satisfaction and sense of security in exchange for the work done and loyalty, the possibility of self-realization and interesting work in exchange for working in accordance with the organization's goals).


  1. (G. Christeen, (2009), p.3)
  2. (K. Kiazad, (2010), p. 9 - 12)
  3. (M. Welling, (2016), p. 17)
  4. (A. Abdullah, (2017), p. 53 – 55)


Author: Justyna Urbanik