The Effect of Psychological Contract on Employee Engagement

 

(Dale, 2022)

 

Employees are bounded by numerous contracts upon employment. This includes the employment contract and non-disclosure agreements. Nevertheless, there is an informal agreement that is often overlooked, and this is known as the psychological contract (Ngobeni et al., 2022).

The psychological contract concept was first introduced by Argyris (1960) after analyzing interviews conducted between employees and supervisors in two factories. He found out that a psychological contract is an implicit understanding between employees and their foreman. He further argued that the relationship could be developed to allow higher employee productivity and fewer grievances in exchange for satisfactory wages and job security. Thus, the defining characteristic of the first conceptualization of psychological contract was an exchange of tangible, specific, and economic resources agreed upon by both parties that allowed for the fulfillment of the needs (Argyris, 1960).

However, Tomprou et al. (2015) note that a psychological contract describes the intangible mutual benefits and informal obligations between an employer and employee. Swanepoel & Saurombe (2022) further state that psychological contracts are informally established as an implicit agreement between an employer and employee on the roles and activities that each party will be performing. Psychological contracts are highly subjective and are dependent on what the employer and employee believe is acceptable (Rousseau et al., 2018).

 

(Pangrikar, 2021)

 

The concept of psychological contract has garnered considerable attention over the past years due to two main reasons. One, it helps us understand and manage employee behaviors and attitudes within an organization, and two, it helps us understand how employer-employee relationships evolve. A breach of a psychological contract occurs when either the employer or the employee feels as though the other party has not fulfilled a perceived obligation or expectation. This breach in the contract can lead to either party feeling emotionally and psychologically aggrieved, leading to a loss of loyalty, motivation, and, ultimately, overall productivity (Ngobeni et al., 2022).  

 

Psychological Contract and Employee Engagement

 

(Bonilla, 2018)

 

Naidoo et al. (2019) say that employee engagement is the extent to which an employee’s mind and heart are captured by an organization. Effort, involvement, and positive interaction are considered characteristics of employee engagement. High employee engagement has the power to increase organizational performance, thus, generating business results. According to Agarwal & Sajid (2017), engaged employees also better understand their position and purpose in the organization, which allows them to be motivated and driven enough to do the tasks assigned to them enthusiastically.

According to Rousseau & McLean Parks (1993), relational psychological contracts are positively associated with organizational commitment, intention to remain with the organization in the long run, performance, and job satisfaction. Zhao et al. (2007) further state that a breach or violation of the psychological contract is associated with decreased engagement, reduced organizational trust, lower satisfaction and performance, reduced organizational citizenship behavior, and high turnover intentions. This implies that if employees experience a psychological contract breach, it may lead to reduced work engagement and high turnover rates (Malik & Khalid, 2015).

 

Conclusion

Psychological contracts are based on employees’ sense of fairness and trust, and a violation of them can have sudden and powerful consequences for the employees and organizations, including a reduction in employee engagement. Thus, organizations should take every measure to honor the psychological contract and work according to it.

 

References

Agarwal, P. & Sajid, S. M., 2017. A study of job satisfaction, organizational commitment, and turnover intention among public and private sector employees. Journal of management research.

Argyris, C., 1960. Understanding organizational behavior. London: Tavistock Publications.

Bonilla, J. C., 2018. Fulfillment of the employee psychological contract in a healthcare system: does it drive employee engagement and reduce turnover intention?.

Dale, G., 2022. What is the psychological contract at work?. [Online]
Available at: https://www.myhrtoolkit.com/blog/psychological-contract-at-work
[Accessed 20 April 2023].

Malik, S. & Khalid, N., 2015. Psychological contract breach, work engagement, and turnover rate: evidence from the banking industry in Pakistan.

Naidoo, V., Abarantyne, I. & Rugimbana, R., 2019. The impact of psychological contracts on employee engagement at a university of technology. SA Journal of Human Resource Management, Volume 17.

Ngobeni, D. A., Saurombe, M. D. & Joseph, R. M., 2022. The influence of the psychological contract on employee engagement in a South African bank. Front Psychol.

Pangrikar, A., 2021. The psychological contract. [Online]
Available at: https://www.linkedin.com/pulse/psychological-contract-ashwini-pangrikar-ph-d
[Accessed 20 April 2023].

Rousseau, D. M., Hansen, S. D. & Tomprou, M., 2018. A dynamic phase model of psychological contract processes. Journal of organizational behavior, pp. 1-18. 

Rousseau, D. M. & McLean Parks, J., 1993. The contracts of individuals and organizations. Research in organizational behavior, Volume 15, pp. 1-43.

Swanepoel, K. & Saurombe, M. D., 2022. The significance of an employee value proposition in the retention of teachers at selected South African private schools. South African Journal of Economic and Management Sciences, 25(1).

Tomprou, M., Rousseau, D. M. & Hansen, S. D., 2015. The psychological contracts of violation victims: a post-violation model. Journal of organizational behavior.

Zhao, H., Wayne, S. J., Glibkowski, B. C. & Bravo, J., 2007. The impact of psychological contract breach on work-related outcomes: a meta-analysis. Personnel Psychology, Volume 60, pp. 647-680.