PEOPLE MANAGEMENT CHALLENGES

People Management Challenges

The Changing World of Work and the Psychological Contract

Introduction

What follows is an overview of the psychological contract, its impact and how it operates in the workplace. This will be followed by looking at the impact of the most important implied terms in employment contracts that provide rights to employees and consideration and comparison of the corresponding rights under the psychological contract.

It is somewhat problematic to define this concept because it has been derived from ideas put forward by researchers which are not easily encapsulated in a definition (Lindsay 2001, pp. 1).

The consensus appears to be that it represents the full set of beliefs that employees have concerning the continuing exchange relationship with their employer. In other words, everything he or she can expect from the employer and everything that the employer can expect of him or her (Homans 2008, pp.597). Of course, this will be difficult to define and with vary between individuals depending on the job itself, the type of contractual relationship that exists between them (e.g. part time, fixed term and open-ended contracts) and the nature of the industry or profession the employee is employed in. What is put in writing by the employer about the rights and obligations of the job or said or given in writing or orally expressed to the employee either prior to his being employed (e.g. at interview) or on his starting employment and during his employment will also be important. Of course, employees may have a vast number of these beliefs and it may be impossible to identify them all:

The psychological contract is much broader than a legal or employment contract: it may have literally thousands of items […] although the employee may consciously think of only a few (Kotter, 2003, p. 91).

Discussion

Psychological contracts

The terms in an employment contract are often explicit (verbally or even written down) or implicit (like implied terms) and are usually legally binding. On the other hand, psychological contracts are highly subjective and often lack any formality or clarity and are not legally binding on the parties. Despite this, they will often exert a strong influence on behavior precisely because they are based on the beliefs of the parties and in particular the views of employees concerning the nature of the employment relationship they are working under (Barmes 2007, pp.35).

Under the psychological contract, employees may believe justifiably or unjustifiably that if they behave in a particular way at work (e.g. work unpaid overtime, volunteer to carry out a difficult task) then certain outcomes will be forthcoming from the employer (e.g. promotion or recognition in some other way). From the earliest stages of the recruitment and selection process through appointment and then continued employment and then finally termination of the contract, employees receive signals from their employer or manager about what they can expect and often they will “read between the lines” to make sense of what they are told. They will also listen to their colleagues and observe workplace behavior ...