The significance of psychological contract in an employment relationship: Review of critical factors

psychological contract

Abstract

Psychological contract is an unwritten mutual understanding among employee and employers, several factors influence this unwritten agreement. The purpose of this study is to highlight the key factors which influences this informal un written relationship. As this contract is between two parties, it is important to explore both parties’ perspectives. The aim of this review paper is to understand both employers’ and employees’ perspectives on the antecedents of the psychological contract violation. Existing literature is reviewed on psychological contract and related dimensions to understand the concepts. The findings reveal that employees tend to be more vulnerable to contract violation due to their weak position. Management can focus more on organizational justice, better communication, and organizational culture to avoid psychological contract breach. Both employees and employer can hold back their negativity through good communication to create a positive organizational culture. Psychological contract is reciprocal in nature, the factors discussed in this review provide a base for reciprocity The implications of the research findings would suggest that explicitly communicating the employee obligations are essential in preventing employee contract violations in future, which helps in reducing costs of grievance procedures and prevents lowering employees’ morale on job. This research will contribute to the study of employers’ perceptions regarding their psychological unwritten contract’s breach that has been comparatively neglected, and the backgrounds of psychological contract violation has received little attention in the literature.