Psychological contract theory

The Psychological Contract Theory entry includes sections that define the theory, explore developments in the theory, demonstrate specific application of the theory to HRM, and provide suggested topic areas for future research. The psychological contract (PC) is concerned with the employment exchange between an employee and their employing organisation. Employees usually have a legal contract specifying the terms and conditions of their employment. The PC assumes there are additional elements to the exchange relationship, perceived by both parties to the relationship, that often contain implicit, unwritten promises. For example, there might be a promise of a progressive career in the organisation in return for loyalty and strong performance; or the opportunity to leave work early if the schedule for the day is completed. The PC is, therefore, a form of social exchange. It addresses the content of this exchange— what is promised— the extent to which promises are kept, and the consequences when promises are fulfilled or broken. It can therefore influence employees’ attitudes and behaviour.