Psychological contract theory is a concept that is widely used in the field of human resource management. It refers to the mutual expectations and obligations that exist between an employer and an employee. The psychological contract theory holds that both employers and employees have expectations that they expect the other to fulfill, and these expectations form the basis of the psychological contract.
The psychological contract theory is based on the premise that there are two types of contracts that exist in the workplace. The first is the formal contract, which is the written agreement that outlines the terms and conditions of employment between the employer and the employee. The second is the psychological contract, which is the unwritten, implicit expectations and obligations that exist between the two parties.
The psychological contract is based on the belief that employees have certain expectations that are not necessarily spelled out in the formal employment agreement. These expectations might include things like job security, opportunities for career advancement, fair treatment, and a supportive work environment. Employers, on the other hand, have certain expectations of their employees, such as honesty, loyalty, and a commitment to achieving company goals.
The psychological contract theory is important because it helps employers understand the expectations and needs of their employees. By fulfilling their obligations under the psychological contract, employers can create a positive work environment and improve employee satisfaction and engagement. This can lead to improved productivity, higher job satisfaction, and lower turnover rates.
When the psychological contract is breached by either the employer or the employee, it can lead to negative consequences. For example, if an employer fails to provide job security or opportunities for advancement, employees may become disengaged and unmotivated. This can lead to decreased productivity and increased turnover. Similarly, if an employee fails to meet their obligations, such as being dishonest or disloyal, they may be subject to disciplinary action or termination.
In conclusion, psychological contract theory is a valuable concept that can help employers create a positive work environment and improve employee satisfaction and engagement. By understanding the implicit expectations and obligations that exist between employers and employees, employers can create a workplace culture that fosters trust, loyalty, and commitment. This can lead to improved productivity, higher job satisfaction, and lower turnover rates, ultimately benefiting both the employer and the employee.