1. Psychological Contract: Definitions, Contents & Importance of Breach.
Psychological Contract Lecture Series
Employee Relations – Michael A. Gyensare UEW

2. Learning Objectives
By the end of this lecture, students should be able to:
Define the concept psychological contract.
Identify and explain the key terms involved in defining the concept psychological contract.
Explain the contents of the psychological contract.
Explain the four types of psychological contracts.
Outline four causes of psychological contract breach.
Identify the outcome of psychological contract breach.
Employee Relations – Michael A. Gyensare UEW

3. Introduction
Like many concepts in HRM and OB, there is no agreed definition of the psychological contract
The psychological contract is not used in everyday language like concepts such as leadership, culture, stress or motivation but rather one constructed by researchers.
Employment relationship can be perceived as a psychological contract.
The psychological contract concept was first introduced by two prominent and renowned psychologists, Argyris and Menninger.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

4. Definition of Psychological Contract
Let us now focus on some relevant definitions of the term psychological contract.
“Is an implicit contractual relationship between an employer and employee which is derived from a series of assumptions about the nature of the relationship.”--- (Schein, 1988).
“An employee’s belief regarding the terms and conditions of a reciprocal exchange agreement between him or herself and the organisation.”-- -(Rousseau, 1989).
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

5. Features of Psychological Contract
It is based on a belief system
Psychological contract consists of a promissory- based obligations. Hence, only obligations arising from implicit promises are considered a part of psychological contract.
It is implicit in nature
Expectations contained in a psychological contract ‘are not written into any formal agreement between the employer and employee, yet they operate powerfully as determinants of behaviour.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

6. Features of Psychological Contract
It is subjective in nature
First, it is inherently subjective in nature in the sense that an employee cannot fully understand the intentions and meanings of the behaviour of the organisation, nor can the organisation fully understand the employee.
Second, even when items that form part of the exchange appear objective, they remain open to subjective interpretation by the two parties.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

7. Features of Psychological Contract
It is based on perceived agreement
Unlike legal contracts, where ‘agreement is an essential ingredient’, agreement or mutuality is not a requisite condition for psychological contract.
That means each party to the relationship may hold different beliefs regarding the existence and terms of a psychological contract because it is subjective in nature.
It considers the parties to the exchange.
The parties include: employee and organisation.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

8. Features of Psychological Contract
It is essentially about an exchange
It refers to perceived exchange agreement between two parties. In other words, things offered by the employee are conditional on what the organisation does in return.
Organisation offers
Pay
Training
Respect
Promotion
Employee offers
Effort
Skills
Flexibility
Creativity and innovation
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

9. Contents of Psychological Contract
The content of the psychological contract refers to;
The promises an employee believes (s)he has made to his/her organisation and what (s)he believes the organisation has promised in return.
The content of the psychological contract is based on the norm of reciprocity.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

10. Contents of Psychological Contract
Employer obligations
Employee obligations
Promotion
Overtime
High pay
Loyalty
Pay based on current level of performance
Volunteering to do non-required tasks on the job
Training
Willingness to accept a transfer
Career development
Refusal to support the employer’s competitors
Long-term job security
Protection of proprietary information
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

11. Types of Psychological Contracts
Types of PC
Transactional
Relational
Balanced
Transitional
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

12. Types of Psychological Contracts
Transactional Psychological Contracts (TPCs)
It refers to employment arrangements with short- term exchanges of specified performance terms.
Employees with TPCs perceive their employment arrangements with their employers as narrow and short-term.
Employees with TPCs focus on the monetary or economic terms and conditions in their reciprocal exchange agreement with the employers.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

13. Types of Psychological Contracts
Relational Psychological Contracts (RPCs)
It refers to employment arrangements with long- term exchanges of non-specified performance terms.
Employees with RPCs perceive their employment arrangements with their employers as stable and long-term.
Employees with RPCs focus on socio-emotional and economic terms and conditions in their exchange agreement with the employer.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

14. Types of Psychological Contracts
Balanced Psychological Contracts (BPCs)
It refers to employment arrangements with long- term exchanges of specified performance terms.
Employees with balanced PC perceive internal advancements and dynamic performance in their employment arrangements with their employer.
Employees with balanced PC believe that they have both economic and social exchange relationships with the employer.
BPC also focuses on socio-emotional and economic terms and conditions between the two parties to the exchange.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

15. Types of Psychological Contracts
Transitional Psychological Contracts (TPCs)
It refers to employment arrangements with short- term exchanges without specified performance terms.
Employees will have transitional PCs when their employer withholds important information from them or reduces their wages and benefits.
Employees with transitional psychological contracts perceive a breakdown/absence in the employment arrangements and mistrust the employer.
Since transitional arrangements represents no commitment from either party, they do not constitute true PC.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

16. Types of Psychological Contracts
Performance terms
Duration
Specified
Non-specified
Short-term
Transactional
Transitional
Long-term
Balance
Relational
Figure 1. Types of Psychological Contract. Source: Rousseau (1995)
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

17. Comparing Transactional and Relational Psychological Contracts
Criteria
Transactional psychological contracts
Relational
psychological contracts
Time frame
Short-term, time-bounded promises
Long-term, open-ended promises
Degree of specificity
Highly specified
Loosely specified
Resources exchanged
Tangible, having a monetary value
Intangible, likely to be socio-emotional
Explicitness of promise
Explicit
Implicit
Negotiation
Likely to be explicit and require formal agreement by both parties
Implicit and unlikely to involve actual agreement by both parties
Examples
Pay in exchange for number of hours worked
Job security in exchange for employee loyalty
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

18. Psychological Contract Breach
Breach is the main way of understanding how the psychological contract affects the feelings, attitudes and behaviours of employees.
Breach of the psychological contract occurs “when one party in a relationship perceives another to have failed to fulfil promised obligation(s)”
Robinson and Rousseau (1994)
In other words, breach is the perceived discrepancy between what has been promised by and what is actually delivered.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

19. Antecedents of Psychological Contract Breach
Inadequate provision of HRM practices.
Employees perceive psychological contract breach when there is a mismatch between management communications about HRM practices and what employees actually experience .
Lack of organizational and supervisor support.
A second cause of breach is when employees feel unsupported by either the organisation or their immediate supervisors.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

20. Antecedents of Psychological Contract Breach
Events happening outside the organisation.
Employees are more likely to perceive psychological contract breach by their current employer where;
they have experienced breach by former employers.
they perceive themselves to have many employment alternatives.
When employees compare their deal, unfavorably, with other employees and perceive inequity.
For instance, if an employee compares his/her PC to that of another employee and concludes that he/she is getting a worse deal, then he/she is more likely to perceive a breach of his/her own psychological contract.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

21. Consequence of Psychological Contract Breach
In general, psychological contract breach has serious consequences for both parties to the contract.
When employees perceive the organisation to have breached the psychological contract they view their relationship with the organisation more negatively and are less likely to do things for the organisation.
Breach decreases trust between the two parties.
Because promises imply expectations, breach will imply unmet or unfilled expectations and these are know to affect job satisfaction and performance.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

22. Consequence of Psychological Contract Breach
Feel
Think Do
Anger
‘How can I trust this organisation anymore?’
Put in less effort
Upset
‘I’m not going to put myself out again for this company.’
Not prepared to go the extra mile for the organisation
Dissatisfied
What’s the point in being loyal to this company when they behave in this way?
Refuse to work beyond their contract
Betrayal
How dare they treat me like that?
Retaliate – through turning up late, leaving early, taking days off, using company equipment for non-work activities.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

23. Consequence of Psychological Contract Breach
Reactions of employees to psychological contract breach include the following;
Decreased levels of trust in the organisation.
Cynical attitudes towards the organisation.
Thinking about, and in some cases actually leaving, the organisation.
Specific moods and emotions such as feeling anxious, violated, depressed and hurt.
Reduced psychological well-being.
Job dissatisfaction.
Reduced organizational commitment
Decreased levels of performance.
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

24. END OF LECTURE 5: Any Question(s)?
Employee Relations – Michael A. Gyensare UEW
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.