What Is a Psychological Contract?


The psychological contract is a usually highly virtual piece of agreement usually between an employer and an employee. You could consider this part of employee relationship management but it is definitely in the space of any HR department and most likely also important to every manager who leads a team. While the formal work engagement contract is there to define standard activities, location and compensation the psychological contract takes care of emotional aspects.

The content of a psychological contract could be something like a promise for promotion or a raise to start simple. It is your future employer forecasting your career if you would join them. From the perspective of the employer this could be something like a candidate agreeing to have no problem working on the weekend sometimes. It is basically the emotional outcome of your work interview and the initial conversations about starting your work engagement – Expectation setting for both parties.

The Purpose of a Psychological Contract

Is there value in having a psychological contract? Wrong question – you have a psychological contract with every relationship there is, including work engagements. The better question is – What is the content of your psychological contract? The corresponding Wikipedia article states the following:

The psychological contract represents the mutual beliefs, perceptions, and informal obligations between an employer and an employee. It sets the dynamics for the relationship and defines the detailed practically of the work to be done. It is distinguishable from the formal written contract of employment which, for the most part, only identifies mutual duties and responsibilities in a generalized form.
– Wikipedia extract

In best case the psychological contracts content is captured and formally signed and reviewed just like the standard working contract. The matters in scope are not very much on the ‘what’ but a lot on the ‘how’ of your working activities, mostly – but not entirely.

Where Does It Come From?

Denise M. Rousseau

The concept of a psychological contract was developed by Denise M. Rousseau, Professor of Organizational Behavior and Public Policy, in 1989. When the imperial workforce culture changed from an industrial environment towards an office environment, later aided heavily by computer technology, it was the case that the employees were increasingly better educated but less deferential to authority and less likely to remain loyal to the employer.

In the evolution of the average working role you could witness an increase in insecurity, based on trends of temporary workers and outsourcing projects and whole services. On the other end people were striving more towards being flexible and trying to achieve a good work-life-balance.

Having this in mind the conception makes great sense and having the psychological contract properly managed and adhered to can avoid a lot of pain in the long run.

Practices Around the Psychological Contract

I was entirely new to the concept and I never knew that this was actually up for consideration along with methodology. I can’t speak for all the many organizations in the world but without data-mining exercises, I would assume that not many organizations consider the management and the adherence to psychological contracts, to say the least.

Even though the matter is very fragile, I don’t think it would be very complex to develop processes within HR to include formal psychological contracts and reviews of same just like with the standard work engagement contracts. If you wanted to keep the effort to a minimum, you could even just write down all the expectations that were talked about during a candidate interview and then have them signed off from both parties.

Possible Results of a Breach

Better don't breach that psychological contractResults of one or more items, that were part of the psychological contract, being breached can be fatal. The outcome of an employee feeling there was a breach to what he or she agreed to with their employers originally can be a decrease in motivation. The degree of such a motivation issue can be anything from being passive, doing mere due diligence, pretending to do due diligence, being disengaged and actively disengaging. The latter could cause the attitude to spread among several employees and result in a working culture problem.

Usually these steps are years apart and can be prevented with an open dialogue and keeping the terms of the psychological contract in mind. If an employer cannot adhere to a term anymore, which was previously agreed on, this requires a dialogue and transparency. If the matter is settled, the psychological contract has also been virtually amended and the employee will not feel this matter being a breach anymore. Of course this is generally to be prevented but if the expectation is not corrected, it will most likely end badly. In best case newly added or removed terms are renegotiated until both parties are satisfied.


All of this is just complex theory for the very simple rules of ‘keeping your word’, which every child learns in a very early age. This is about your integrity as an organization or your integrity as a employee. If you keep your word and talk over issues, there will be a lot less problems than if you try any funny stuff with human emotion.

Thanks to Markus Mattern for pointing me towards this very interesting concept in HR. If you have questions or remarks please drop them in the comments section below.

Further Reading

Photo credit: Denise M. Rousseau / MenomenaLosinpun

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Christopher Isak
Christopher Isakhttps://techacute.com
Hi there and thanks for reading my article! I'm Chris the founder of TechAcute. I write about technology news and share experiences from my life in the enterprise world. Drop by on Twitter and say 'hi' sometime. ;)
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