Psychological Contracts and Their Impact on Employees: An Essay

This essay delves into the concept of psychological contracts, which represent the unwritten expectations and mutual obligations between employers and employees. It explores the different types of psychological contracts, including transactional, relational, transitional, and balanced contracts, and examines the implications of contract breaches. The essay highlights how breaches can lead to decreased job satisfaction, reduced organizational commitment, and negative behavioral outcomes such as cynicism and intention to quit. It also discusses the impact of psychological contract breaches on employee motivation, organizational citizenship behavior, and overall job performance. The essay draws on academic literature to provide a comprehensive analysis of the psychological contract's role in shaping employment relationships and its significance for organizational success, emphasizing the need for managers to address and manage these contracts effectively.

Student ameN
nstitutional Affiliation SI ( )
bachelor of business
Document subtitle[ ]

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ntroductionI
he psychological contract is a significant aspect of employment relationship as itT
imperceptibly binds employee and the employer through set of e pectationsx aill et al( P é, .,
2016) or an individual of an organisation th. F , e psychological contract refers to those
elements that affects the level of commitment morale and motivation in them urthermore, . F ,
positive psychological contract aids in boosting organisational productivity and employee
performance also evertheless e pectations cannot be identified easily on both employers as. N , x
well as employee perspective that often arises breaches from any one or both the parties
allou(B , 2013) t can be noted. I here that psychological contracts possess unwritten and
unspoken elements and thus it can be recommended that employees e pectation in any’ x ,
foreign conte t which they plan to engage shall be documented to avoid furtherx ,
discrepancy he implication of psychological contract breach will be further discussed in this. T
paper along with psychological contracts e amples and different types of breaches with thex
help of academic literature found in journal articles and books.
According to Antonaki rivellas sychological contract has been regarded& T (2014), “P
as an important framework for shedding light on the employment relationship p“ ” ” ( . 355).
herefore to gain loyalty and commitment of individual employees putting them atT , ,
appropriate places becomes significant for organisations to foster identification of individual
e pectations and methods to fulfil them he literature related to psychological contract havex . T
e panded remarkably in past few years under the influence of researchers and authorsx .
owever Cullinane Dundon argues that the concept of psychological contract hasH , & (2006)
much deeper and longer pedigree with its background events as mentioned in previous works
on social e change theory According to the authors previous works and literaturex . ,
illustrates significant points that demonstrates employment relationship shaped by social and
economic e change sychological contract concept was developed later after envisagingx . P
series of mutual demands and e pectations in which the parties related to employmentx
relationship may not be aware of there presence but nonetheless governs interrelationships
with each other s’ Rousseau et al( , ., 2013) herefore a more pr cised definition of. T , é
psychological contract was developed in contemporary organisations where it is defined as the
perceptions of employees and employers imprecise and informal mutual obligations towards
each other.

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ransactional relational transitional and balanced are four distinct types of psychologicalT , ,
contracts Savarimuthu Rachael( & , 2017) ransactional contracts specify mainly monetary. T
terms e change with specific performance rapports Relational on the other hand refers tox . ,
imprecise and long term contracts that not only involves fi nancial rewards but also social and- ,
emotional e changes that are based on loyalty trust and respect ransitional contracts as thex , . T ,
name states is passing phase between two parties relationships where they reflect the absence, ’
of commitments nder such contracts although psychological contract may not be formed. U , ,
but a cognitive statement is developed that reflects consequences of organisational transitions
and change that brings odds with previously formed employment arrangements allou(B ,
2013) alanced contract is also mentioned in literature where transactional and relational. B
dynamic dimensions along with open ended employment arrangements- are managed n. I
such contracts worker opportunities economic success to develop organisations as well as, ,
career advantages are envisaged Rousseau et al( , ., 2013).
sychological contract reflects employees e pectations and that there is mutualP ’ x
obligation between organisations and employees hat happens when any of these contracts. W
e pectations does not get fulfilled ased on contemporary workplace environment andx ? B
several studies psychological contract breach implications show that when workplace do not,
meet employees e pectations employees remain less gratified with their work hus it can be’ x , . T ,
said that psychological contract breach puts negative impact on employee s performance’
which makes necessary to understand how breach in psychological contracts can affect
employees under different situations According to akovic etrick psychological. G & T (2003),
contract breach can be defined as employee s perception that organisation has failed to fulfil’ .
here may be one or more commitments associated with professed mutual promises thatT
has not been fulfilled which creates perception of breach in contract in the judgements of
employees or e ample if an employee worked hard for years along with staying loyal to. F x ,
the company he would receive Christmas bonus or cash that allows him her to fulfil, /
e ceptional needs owever if the bonus which is highly anticipated is not received by thex . H , ,
employee he she may become highly upset and even lose composure that further, /
manifests into anti social behaviours due to breach of psychological contract- .
he above e ample shows that psychological contract violation can result in series ofT x
attitudinal responses Sutton riffin states fi ve stages of employee response towards. & G (2004)

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employer breach of contract that includes complaining reduced involvement in job, ,
retaliation legal and union assistance and fi nally resignations mployee cynicism can further, , . E
be described as negative behaviour that involves belief that their fi rm lacks integrity and
negative emotions towards employees his tendency among employees further develops. T
critical behaviour within workplace and create behavioural changes like reduced
commitments and efforts that leads to significant implications in organisational and employee
performance or e ample during recruitment and selection process if selection is based on. F x , ,
priority or under bias ways employees may feel demotivated and outraged f the employer, . I
employees psychological contract is breached during job promotions it will reduce motivation’ ,
and job satisfaction among other employees also Robinson Morrison( & , 2000).
ff
ects of psychological contract breach on employees have been well documented inE
literature that shows that it leads to critical disengagement and decline in productivity ther. O
implications on employee attitudes and behavioural job outcomes is also seen like job
dissatisfaction intention to quit organisational citizenship behaviour motivation and job, , ,
performances Some researches have even found that contractual breaches may affect.
different age groups in a different way or e ample younger employees may lose sense of. F x ,
commitment and trust whereas older ones lose sense of job satisfaction when a breach of
contract is made Regardless of what impacts psychological contracts breach has research. ,
shows that whenever employees get disengaged their disengagement impacts organisational,
teams and job retention among them akovic etrick(G & T , 2003).
sychological contract breach has great influence on job satisfaction where presentP
literature states that if a promise is not fulfilled then the intensity of reaction can prove severe,
for the fi rms owever Sutton riffin further argues that no matter how much managed. H , & G (2004)
psychological contract is the working conditions e perience also continues to influence overall, x
job satisfaction among employees rganisational citizenship behaviour is another most. O
researched topics whenever job outcomes during psychological contract breach is
discussed rganisational citizenship behaviour refers to those behavioural patterns that are. O
beneficial to fi rms are optional and not included in formal job descriptions of employees t, , . I
becomes significant to evaluate the effects of psychological contract breach in organisational
citizenship behaviours as these behaviours impacts organisations both negatively as well as
positively nder breach of contract employees may get less engaged with the fi rm and since. U ,

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organisational citizenship behaviour remains unnecessary for the employee s job descriptions’ ,
failure to perform such can affect negatively on their performance allou(B , 2013).
reach of psychological contract is also related to employee s intention in quitting theB ’
job that is also another widely discussed attitudinal job outcome Due to breach in contract, . ,
employees may show less willingness to e ert e tra efforts for their organisation and thusx x
results in less employee turnover u(Y , 2016) According to. Man employee reported(2013),
with transactional psychological contract breach were more likely to resign from their posts
than those who observed relational psychological contract n summary the type of. I ,
psychological contract breach further determines whether the employee quits the job due
to psychological contract or due to some other reason n literature it is also identified that. I ,
number of socio cognitive dimensions may vary people beliefs and influence employees attitude- ’
to proceed and perform the work in effective manner ut of all other dimensions motivation. O ,
has been assessed by many researchers and when a psychological contract breach takes
place it lowers job retention, Robinson Morrison( & , 2000) Moreover different people react in. ,
different ways at the ti me of breach of contract where high percentage of people behaves in
opposite manner of their behavioural attitude ersonality traits where personality of. P
individuals is affected through psychological contract breach also predicts low performance in
work u(Y , 2016) his study is further supported by. T Man hari where the author statesx (2015)
that psychological contracts serve motivation in employees that make them meet promises
with employer and when employees are confident that their employer will fulfil their
requirements owever if such promises are not met it demotivates employees negatively. H , ,
thereby reducing employees job performance.
Conclusion
he above essay e plored research literature on psychological contract and howT x
does it help organisations gain trust and loyalty from their employees he above paper also. T
evaluated breach of psychological contract and its implication on employees attitude and’
behavioural job outcomes sychological contract can be termed as a set of e pectations. P x ,
other than formal job descriptions that are presented in unwritten format i e based on, . .
employer and employee mutual understanding within a workplace hese promises can. T

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meet either transactional relational balanced or transitional level All the e pectations emerge, , . x
from series of interactions or can be signalled during employment relationship beginnings .
Since industry practices needs to adapt to changing industrial environment psychological,
contract breaches are probable in any workplace hese breaches effects employee reactions. T
and other behavioural attitude among them that also affects employment relation rganisations. O
can manage these psychological contracts during selection and recruitment process through
ensuring job fi t between applicants and organisation s value evertheless contemporary’ . N ,
mangers must be able to offer justification whenever any breach takes place if they seek to avoid
breaches to be apparent.
eferencesR

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