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Psychological contract in today's business

Psychological contract (level of individual and organization):

  • It is a form of social contract.
  • It goes beyond work and salaries.
  • It is implicit i.e. it is not a written contract.
  • The working relationship is rooted in expectations, values, perceptions.
  • It is based on social exchange theory. It means every relationship in society is based on expectations i.e. give and take. It is a Hypothetical contract.
  • The psychological contract in an organization is social exchange interaction between employees.

The psychological contract is complex. It’s mainly on building relationships. It’s about how we are treated and what we put into the job. It has to do with rewards and rights.

The trade that can be seen in this case are Respect, trust, compassion, empathy.

A psychological contract has the dynamic quality and it has an emotional and social impact.

Types of psychological contract:

  • Transactional: economic exchange. There is no expectation the employer will invest in your career.
  • Relational contract: Based on mutual loyalty and trust and abilities. The employer helps to develop your career.

    Questions that can be comprehended:

  • What happens if the contract doesn’t work?
  • How can we say there is a breach of contract that we cannot write down?

-          Follow the iceberg model in the psychological contract. Read More

Iceberg Model
Iceberg Model


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