INTRODUCTION

The Psychological Contract is a deep and varied concept and is open to a wide range of
interpretations and theoretical studies. Primarily, the Psychological Contract refers to the
relationship between an employer and its employees, and specifically concerns mutual
expectations of inputs and outcomes.

The psychological contract refers to the unwritten set of expectations of the employment
relationship as distinct from the formal, codified employment contract. Taken together, the
psychological contract and the employment contract define the employer-employee relationship.

Originally developed by organisational scholar Denise Rousseau, the psychological contract

includes informal arrangements, mutual beliefs, common ground and perceptions between the
two parties.

The psychological contract develops and evolves constantly based on communication, or lack
thereof, between the employee and the employer. Promises over promotion or salary increases,
for example, may form part of the psychological contract.

Managing expectations is a key behaviour for employers so that they dont accidentally give
employees the wrong perception of action which then doesnt materialise. Employees should also
manage expectations so that, for example, difficult situations or adverse personal circumstances
that affect productivity arent seen by management as deviant.

Perceived breaches of the psychological contract can severely damage the relationship between
employer and employee, leading to disengagement, reduced productivity and in some
cases workplace deviance. Fairness is a significant part of the psychological contract, bound up
in equity theory employees need to perceive that theyre being treated fairly to sustain a
healthy psychological contract.

Introductions
There are two kinds of contracts which are the formal, written economic contract as well as
the euqally important, informal and unwritten psychological contract. It's all about how
people think they should be treated. Both involve rights, obligations and expectations on the
part of employer and the employee.
The key feature of the word 'contracts' is exchange in term of reward or the effort that
employee puts in etc. For instance, the level of effort which employee puts in or employee's
perception can be affected by how they are being treated by the organization.
A quite large research literature on the psychological contract has been produced in only a
short time with the key players being, in the United States, Denise Rousseau (Rousseau,
1995, 2001), Schein (1980) etc. Although much of the interest in the psychological contract
is recent, its roots go back a long time, it having originally been discussed by Argyris (1960).

History
The concept of a "psychological contract" was first coined by Argyris (1960); it refers to
employer and employee expectations of the employment relationship as well as represents
the mutual beliefs, perceptions and informal obligations between an employer and an
employee. Expanding the concept of the contract was Schein (1980). According to Schien it
may be defined as an"unwritten set of expectations operating at all times between every
member of an organization and the various managers and others in that organization."
More recently Rousseau and her co- workers (Robinson and Rousseau, 1994) have suggested
a more specific definition of the psychological contract. According to them, the
psychological contract is characterised not only by expectations, but by promissory and
reciprocal obligations. When these obligations are broken, they produce more emotional and
extreme reactions than weaker expectations produce feelings of disappointment. Broken
obligations lead to feelings of anger and reassessment of the individual's relationships with
the organization.

Content
The term psychology is derived from the Greek, meaning 'mind, spirit or soul' and contract is
that the expectations concern non- tangible, psychological issues. There are significant
elements of all definitions of the psychological contract include:
1.3.1
integration of beliefs, values, expectations and aspirations of employer and employee, the
beliefs of implicit promises and obligations are included, the level to which these are
perceived to be met or violated and the level of trust within the relationship.
1.3.2
All the expectations must not be made explicit. It could be the implicit deal between
employers and employees. Fairness and good faith are involved.
1.3.3
An significant feacture of the concept is it can be repeatedly re-negotiated, changing with an
individual's, and an organisation's, expectations, and in shifting economic and social
contexts. Yet, a snapshot of one point in time was only provided thus capturing only one
stage in this social process.
1.3.4
Because it is based on individual perceptions individuals in the same organisation or job may
perceive different psychological contracts, which will, in turn, influence the ways in which
they perceive organisational events for instance redundancies or developing or modifying a
flexitime system.

1.4 Advantages
1.4.1 It mitigates uncertainty, forms behaviour, and gives an understanding of situation in the
organisation to employee.
1.4.2 It helps explain the reason why recruits leave during initial training, satisfaction and
commitment levels drop, and turnover rise.
1.4.3 it's useful in evaluating people's responce to the changing context of careers.
1.4.4 it's consistent with times, helps to make sense of current employment relationship, and
helps to highlight who has power.

1.5 Disadvantages
1.5.1 There is no agreement, written of psychological contract; hence it is doubtful whether it
can be considered a contract at all.
1.5.2 Organisations consist of many different individuals and each employee may have
specific expectations about his or her rights and obligations those individuals and groups.
Therefore it's hard to unite the expectations.
1.5.3 Violation of the psychological contract carries a clear view of a broken promise. It is
not yet clear whether the psychological contract explains people's work behaviour any better
than more neutral and simpler concepts.

1.5.4 The psychological contract may be a redundant and complicated concept. It goes
beyond with other psychological constructs such as job satisfaction and organisational
commitment.
 Literature review

1.Violating the psychological contract: Not the exception

but the norm
Authors

Sandra L. Robinson,

Denise M. Rousseau

The occurrence and impact of psychological contract violations were studied among graduate
management alumni (N = 128) who were surveyed twice, once at graduation (immediately following
recruitment) and then two years later. Psychological contracts, reciprocal obligations in employment
developed during and after recruitment, were reported by a majority of respondents (54.8 per cent) as
having been violated by their employers. The impact of violations are examined using both quantitative
and qualitative data. Occurrence of violations correlated positively with turnover and negatively with
trust, satisfaction and intentions to remain.

2. Trust and Breach of the Psychological Contract

Sandra L. Robinson

Administrative Science Quarterly

Vol. 41, No. 4 (Dec., 1996), pp. 574-599

This paper examines the theoretical and empirical relationships between employees' trust in their
employers and their experiences of psychological contract breach by their employers, using data
from a longitudinal field of 125 newly hired managers. Data were collected at three points in
time over a two-and-a-half-year period: after the new hires negotiated and accepted an offer of
employment; after 18 months on the job; and after 30 months on the job. Results show that the
relationship between trust and psychological contract breach is strong and multifaceted. Initial
trust in one's employer at time of hire was negatively related to psychological contract breach
 after 18 months on the job. Further, trust (along with unmet expectations) mediated the
relationship between psychological contract breach and employees' subsequent contributions to
the firm. Finally, initial trust in one's employer at the time of hire moderated the relationship
between psychological contract breach and subsequent trust such that those with high initial trust
experienced less decline in trust after a breach than did those with low initial trust.

3.WHEN EMPLOYEES FEEL BETRAYED: A MODEL OF HOW

PSYCHOLOGICAL CONTRACT VIOLATION DEVELOPS
1. Elizabeth Wolfe Morrison1 and
2. Sandra L. Robinson1

The psychological contract held by an employee consists of beliefs about the reciprocal obligations between that employee
and his or her organization. Violation refers to the feelings of anger and betrayal that are often experienced when an
employee believes that the organization has failed to fulfill one or more of those obligations. This article provides a model
outlining the psychological sensemaking processes preceding an employee's experience of psychological contract
violation. It also identifies factors that affect those processes with the aim of encouraging future empirical research.

4. Changing Obligations and the Psychological Contract: A Longitudinal

Study
1. Sandra L. Robinson1,
2. Matthew S. Kraatz2 and
3. Denise M. Rousseau2

In an exploratory longitudinal study of business school alumni, we investigated changes in employment obligations as
perceived by employees. During the first two years of employment, employees came to perceive that they owed less to
their employers while seeing their employers as owing them more. An employer's failure to fulfill its commitments was
found to be significantly associated with decline in some types of employee obligations. We discuss implications for
managing employees' beliefs regarding obligations and for future research on psychological contracts.

5. The Impact of Psychological Contract Violations on Exit, Voice, Loyalty,

and Neglect
1. William H. Turnley
1. Daniel C. Feldman

Abstract

This study examines the relationships between violations of employees' psychological contracts and their exit, voice,
loyalty, and neglect behaviors. Using a sample of over 800 managers, this research found that psychological contract
violations result in increased levels of exit, voice, and neglect behaviors and decreased levels of loyalty to the
organization. In addition, this research examines the moderating effects that situational factors (such as the availability of
attractive employment alternatives) have on the relationships between psychological contract violations and managers'
behaviors. The results suggest that these situational factors moderate the relationship between psychological contract
violations and exit, but not the relationships between psychological contract violations and voice, loyalty, or neglect.
Finally, this research also examines differences in the nature of psychological contract violations experienced across three
categories of workers: new managers entering the workforce, expatriates and managers in international business, and
managers working in downsizing or restructuring firms. The results suggest that psychological contract violations are both
more frequent and more intense among managers working in downsizing or restructuring firms, particularly in terms of
job security, compensation, and opportunities for advancement.

6.The Development of Psychological Contract Breach and Violation: A

Longitudinal Study
Sandra L. Robinson and Elizabeth Wolfe Morrison

Journal of Organizational Behavior

Vol. 21, No. 5 (Aug., 2000), pp. 525-546

Abstract
This study examines factors affecting employees' perceptions that their psychological contract has been breached by
their organization, and factors affecting whether this perception will cause employees to experience feelings of
contract violation. Data were obtained from 147 managers just prior to their beginning of new job (time 1) and 18
months later (time 2). It was found that perceived contract breach at time 2 was more likely when organizational
performance and self-reported employee performance were low, the employee had not experienced a formal
socialization process, the employee had little interaction with organizational agents prior to hire, the employee had a
history of psychological contract breach with former employers, and the employee had many employment
alternatives at the time of hire. Furthermore, perceived breach was associated with more intense feelings of violation
when employees both attributed the breach to purposeful reneging by the employer and felt unfairly treated in the
process. Theoretical and practical implications of these results are discussed.
 LINKS

http://onlinelibrary.wiley.com/doi/10.1002/job.4030150306/full

http://www.jstor.org/stable/2393868?seq=1#page_scan_tab_contents

http://amr.aom.org/content/22/1/226.short

http://amj.aom.org/content/37/1/137.short

http://hum.sagepub.com/content/52/7/895.short

http://www.jstor.org/stable/pdf/3100447.pdf?seq=1#page_scan_tab_contents