The concept of a "psychological contract" was first coined by Argyris (1960); it refers to employer and employee expectations of the employment relationship as well as represents the mutual beliefs, perceptions and informal obligations between an employer and an employee. Expanding the concept of the contract was Schein (1980). According to Schien it may be defined as an"…unwritten set of expectations operating at all times between every member of an organization and the various managers and others in that organization."
More recently Rousseau and her co- workers (Robinson and Rousseau, 1994) have suggested a more specific definition of the psychological contract. According to them, the psychological contract is characterised not only by expectations, but by promissory and reciprocal obligations. When these obligations are broken, they produce more emotional and extreme reactions than weaker expectations produce feelings of disappointment. Broken obligations lead to feelings of anger and reassessment of the individual's relationships with the organization.
Content
The term psychology is derived from the Greek, meaning 'mind, spirit or soul' and contract is that the expectations concern non- tangible, psychological issues. There are significant elements of all definitions of the psychological contract include:
1.3.1
Integration of beliefs, values, expectations and aspirations of employer and employee, the beliefs of implicit promises and obligations are included, the level to which these are perceived to be met or violated and the level of trust within the relationship.
1.3.2
All the expectations must not be made explicit. It could be the implicit deal between employers and employees. Fairness and good faith are involved.
1.3.3
An significant feacture of the concept is it can be repeatedly re-negotiated, changing with an individual's, and an organisation's, expectations, and in shifting economic and social contexts. Yet, a snapshot of one point in time was only provided thus capturing only one stage in this social process.
1.3.4
It is based on individual opinions individuals in the same organisation or job may perceive different psychological contracts, the ways in which they perceive organisational events will be influenced for examples redundancies or developing or modifying a flexitime system.
Advantages
1.4.1 It mitigates uncertainty, forms behaviour, and gives an understanding of situation in the organisation to employee.
1.4.2 It helps explain the reason why recruits leave during initial training, satisfaction and commitment levels drop, and turnover rise.
1.4.3 it's useful in evaluating people's responce to the changing context of careers.
1.4.4 it's consistent with times, helps to make sense of current employment relationship, and helps to highlight who has power.
Disadvantages
1.5.1 There is no agreement, written of psychological contract; hence it is doubtful whether it can be considered a contract at all.
1.5.2 Organisations consist of many different individuals and each employee may have specific expectations about his or her rights and obligations those individuals and groups. Therefore it's hard to unite the expectations.
1.5.3 Violation of the psychological contract carries a clear view of a broken promise. It is not yet clear whether the psychological contract explains people's work behaviour any better than more neutral and simpler concepts.
1.5.4 The psychological contract may be a redundant and complicated concept. It goes beyond with other psychological constructs such as job satisfaction and organisational commitment.
Evaluation
Contemporary employment relationship
The relationship between employers and employees is currentlty shifting in ways that managers need to understand. Nowadays, the employee concerns about security and their need to build up a 'portfolio' of skills and competencies. Employees can be helped to develop occupational and personal skills, become more proactive and take more responsibility for their own careers. Collective agreements often state that compulsory redundancy will be used only as a last resort.
Younger people want excitement and a life outside work. They are not interested in a job for life. They also expect to be treated as human beings such as to be treated respectfully.
Woodruffe (1999) currently sees employee needs focusing on three areas:
2.1.1 Reward package
Employers need to offer pay and conditions that will attract and retain good people for example, the opportunity to trade some pay for more holidays. Employees also need to feel that their pay is 'fair'.
2.1.2 Employability
Woodruffe identifies three elements of the employability. These are career advancement, the opportunity for personal development, and being part of a respect-worthy organisation. CIPD recruitment surveys in recent years have shown that people want to work for an organisation that they feel proud and employers are building this into their recruitment strategies and practices.
2.1.3 Job satisfaction
In particular, there is an important link between employees feeling they have a satisfactory balance between their work and lives, and having a positive psychological contract. Employers need to think through how employees can be helped to achieve such a balance.
Relationship between employment and psychological contract
A number of researchs between the relationship of psychological contract breach and revealed that if the organisation meets the expectations of its employees, the more efficiency and productivity of its employess (Wanous, Poland, Premack and Davis, 1992).
According to Schalk et al. (1995), lower commitment to the job and to the organization, less recognition with the organization and higher turnover intentions as a result of poor psychological contract.
Additionally, the existence of breaches was negatively related to trust, job satisfaction, and intentions to remain and was positively related with turnover are concluded by Robinson, Kraatz and Rousseau (1994).
A research have done by Robinson (1996) revealed a negative relationship between psychological contract breaches and "organizational citizenship behavior", performance, intentions to stay with the employer and a positive relationship with turnover.
A breach of the contract may lead to strong reactions and feelings of betrayal as psychological contracts are created by trust (Robinson and Rousseau, 1994).
Somehow a significant consequences will by brought by a little severe breach; nevertheless, such as higher turnover (Guzzo et al., 1994; Robinson and Rousseau, 1994), lower trust and job satisfaction (Robinson and Rousseau, 1994), lower commitment to the organization (Guzzo et al., 1994), and less Organizational Citizenship Behavior (OCB: Robinson and Morrison, 1995).
HSBC is trying to achieve a strong psychological contract
HSBC bank is the largest bank in the UK and having been founded in 1927, the bank has a long tradition.The HSBC bank serves some 20 million customers across its 2,287 branches in the UK alone. The bank employees some 114,000 people worldwide of which around 60 percent are female.
In order to achieve a better work-life balance, HSBC has adopted strategy to provide more flexible working practice for its employees. What is more, the bank introduced many flexible adjustment or arrangements for instances variable hours, part- time working, home working, term-time working, job share, compressed hours, maternity 'phase back' as well as 'wind down to retirement' and so on. A number of opportunities are provided to employees in order to over- deliver where they are away from work. These include holiday 'banking', buying and selling holidays, short or long-term career breaks, special leave, compassionate leave, study leave as well as the IVF leave. The reason for HSBC bank to provide all of it benefits is that they are trying to achieve a strong psychological contract with its employees. The expected result of the company is to increase employee commitment, motivation, at the same time to reduce absenteeism and improve productivity. (HSBC, 2005) .
As the result of psychological contract, it can be seen that the employees are willing to have a good performance and for the organisation. In addition, they are willing to work longer for the organisation instead of temporary. That is why psychological contract is so significant. It can reduce employees insecure and shapes their behavior. As all possible phases, the relationship between both parties cannot be written in a formal way, therefore psychological contract fills the gaps in the relationship.
It's a useful tool in work-life as it enable employers get know the need of employee then fulfil their need in order to increase the productivity and efficiency.
3.4 Conclusion
In reality, psychological contract is a very arguable and subjective concept and it's all about influencing employees' perceptions and behaviour in the workplace. In the stage of recruitment of an employee's work to retirement or resignation, it has a reflective effect on the behaviour and well-being of an individual. In spite of an unwritten contract, it plays a central role in work behavior by defining the employment relationship. It is undoubtedly a significant element in the business relationship to both employers and employees. It can be a powerful determinant of workplace behavior and attitudes as well.
There is no doubt that the attention to the psychological contract will be continuing to increase in the research or literature. By noting significant views of people's experience of work, it provides great possibilities for understanding work behaviour and attitudes.
