Psychological Contract and Employment Relationship

Abstract

Psychological contract refers to mutual unwritten expectations that exist between an employee and his/her employer regarding policies and practices in their organization. Psychological contract influences job attitudes and performances of the employees. This study aims at developing a deeper understanding about psychological contract and employment relationship. Six psychological contract variables—relational contract, transactional contract, employer’s commitment/obligation to employee, employee’s commitment/obligation to employer, employer’s relationship with employee, and employee’s relationship with employer—were measured on 202 employees from 15 IT companies randomly chosen for the study. A 52-item Psychological Contract Questionnaire (PCQ), adapted from the Psychological Contract Scale (Millward and Hopkins, 1998) and the Psychological Contract Inventory (Rousseau, 1995), was used for collecting the data. The study revealed that relational contract was dominant in the IT companies under study. Employees’ commitment/obligation to their employers was higher than employers’ commitment/obligation to their employees. Employees’ relationship with their employers was also stronger than employers’ relationship with their employees. The implications of the study for the IT industry have also been discussed for harnessing the energy, knowledge and creativity of employees for competitive advantage.

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