Psychological Contract

SN:11005400

HRM assignment

Outline and critically evaluate the concept of the ‘psychological contract’. Why is an understanding of the psychological contract considered to be important to the management of the contemporary employment relationship?

The psychological contract is one of the basic elements of the employment relationship (Schein 1978) described it as ‘A set of unwritten reciprocal expectations between an individual employee and the organisation’ where employees are willing to accept organizational values that are intangible and commit themselves fully to their job without having to sign a physical contract. There are a variety of forms it can come in; the main ones being transactional VS relational. (Parks & Schmedemann, 1994) says, Transactional contracts are characterized by limited involvement of the parties, and emphasize short-term, monetary obligations. But relational contracts highlight broad, long term, socio-emotional obligations.

The contract originates from the need for businesses to have more innovative HR practices (CIPD, 2012). As traditionally job security was exchanged for loyalty but due to recession/ globalization the PC allows for a more individualised experience of employment (good or bad).Career development is what is now being offered in return for employee’s service. Potential workers may have already assumed what the firm may be like and what they expect from the job which is called a contract schema , it’s based on perceived promises that are conveyed to employees through mechanisms such as documents, discussions, organisational practices or even job adverts (Shore & Tetrick, 1994). Hence the psychological contract is being formed before they have even signed a physical one.

The components of the psychological contract consists of; back ground factors (individual and organizational), organizational influences (e.g. HR policy/ practices, support) which determine the ‘state’ on how fairly the employee feels...