Hrm: Psychological Contract

The characteristics of a psychological contract are the mutual beliefs, informal obligations, perceptions of the employee and employer towards each other; the expectations an employee has of the organisation and the expectations the organisation has of the employee and the reciprocal promises in that relationship. This helps to set out the aims and objectives in the company for the work to be done professionally. The employee has different contents and outputs for the business as to the employer.

The employee seeks for fairness followed by an output of behaviour, whilst the employer seeks for trust and performance _(Annette Sharpe, 2004). _ There can be informal and imprecise obligations regarding the psychological contract, these obligations can be referred from current events or actions from the past, as well as from employee statements. An example of where these obligations may occur is during the recruitment process or in performance appraisals (CIPD, 2008). The important aspect about the psychological contract is that the employee understands and believes the relationship between the employers and the employees.

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An example of a successful company using the psychological contract in the right meaning is ‘Pret a Manager’ which is a sandwich company that opened in the London in 1986, by two college friends, Sinclair and Julian (Pret a Manager, 2008). The expectations that the employees can expect from Pret a Manager are getting paid as much as they can afford, invest in people training and development, and most managers are promoted from within. The expectations that Pret a Manager has from the employees are hard working, good sense of humour, enjoy delicious food, and start early to leave early (Michael Wellin, 2008).

Pret a Manager has successfully managed to build a great relationship with their employees using an effective psychological contract, which is one of the reasons why for the success of the company. Employing individuals from different backgrounds has made it possible for the business to make their shops feel more interesting for the customers and the employees (Michael Wellin, 2008) David Guest (2006) says that the state of the psychological contract is concerned with whether the promises and obligations have been met, whether they are fair and their implications for trust. The expectation rom both the employer and employee has to be met for work to be done efficient and for the future and success of the company. Guest, D shows a result of temporary workers regarding the psychological contract and states that there is a lower expectation of temporary workers, but better psychological contracts of temporary workers. The psychological contract is changing in ways of different expectations from the employees or the organisation. If the business identifies some negative effect with their aims and objectives or with the employees, there might be a change within the organisation.

The employers might have a negative effect or a bad relationship with the employees, therefore can change the contents and the output criteria from the employers. The employees can believe or feel that the employers have not met their expectations and can effect on a negative job satisfaction. When the employers do not supply the employees as promised, there are negative effects within the organisation, and the ones to be held responsible are the managers, but not in all cases where the organisation might merge with another and staff has to be cut down.

The changes over the years concerning the psychological contract are done to find the best possible way and suitable to manage any organisation and every individual company have its own way. In the 1970’s, the employee offers were loyalty, good citizenship and compliance, and after 20 years in 1990’s it had changed to flexibility, accountability, and long hours. Today, the offers are learning and clear added value, which means that the psychological contract has changed in different ways of what the employee, can offer and contribute to the organisation.

The employers have understood the different offers and changed their way of satisfying the employee and offering them different aspects for the work to be done and the business to be successful. In the 1970’s, the offers were security, promotion and care. In the 1990’s it had changed to a job and a salary, and current offers are employability, flexible contract and individualised rewards _(blackboard slides, 2008)_. Changes are done to match the needs and wants of the employee to work hard for the business because the employees are the main key for the business to stay alive.

Why the psychological contract is changing A reason why the psychological contract is changing is because organisations realize that the previous method has had a negative effect within the company. Reasons can also be such as the relationship has not worked as planned between the employers and employees or the promises are not fulfilled by the employers or the dedication from the employees are not met to the expectations of the employers. When expectations are not met, the organisation can face negative effect such as decreased employee commitment, poor performance and high labour revenue.

The psychological contract in organisations has undergone a paradigm shift (Stone J, R, 2005). According to Stone, expectations and assumptions about employment relationships have been swept away. Meaning that loyalty, qualifications, superior performance does not guarantee job security, good job or job continuity. Conclusion In conclusion the psychological contract is one of the main reasons why Pret a Manger, John Lewis and Ernst and Young are successful companies. The psychological contract provides the business with the relationship between the employees and employers, the clarity of the job, the job security and the employability.

The challenge for every organisation is to find the way to cope with the psychological contract and find the best suitable way for the business to be successful. The goals for any employer is to be social responsible and meet the demands of the employees, and the effect in return from the employees will be at the highest level of working, being efficient, increase commitment and an aim to stay within the organisation.


  1. Blackboard (2008) the employment relationship: lecture 2 ER’ship and PC. CIPD (2008) The Psychological Contract [online].
  2. Available at: http://www. cipd. co. uk/subjects/empreltns/psycntrct/psycontr. tm accessed on 3 January 2009. Guest, D (2006) King’s College London; Employment Flexibility and Worker Well-Being: The Role of the Psychological Contract [online].
  3. Available at: http://www. iva. se/upload/Verksamhet/Projekt/3F/Stockholm%20December%202006. pdf accessed on 4 January 2009. Pret a Manager (2008) About our company [online].
  4. Available at: http://www. pret. com/about/ accessed on 3 January 2009. Sharpe, A (2004) The psychological contract in a changing working environment [online].
  5. Available at: http://www. ukwon. net/files/Psychological%20Contract%20Theme%20Paper%20_TWI_. p

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Hrm: Psychological Contract. (2018, Jan 25). Retrieved from