Outline and Critically Evaluate the Concept of the ‘Psychological Contract’. Why Is an Understanding of the Psychological Contract Considered to Be Important to the Management of the Contemporary Employment Relationship?

Outline and critically evaluate the concept of the ‘psychological contract’. Why is an understanding of the psychological contract considered to be important to the management of the contemporary employment relationship?

This essay will outline and critically evaluate the theory of the “psychological contract” and its role between the employee and employer. Through looking at the positive and negative aspects of this contract by using relevant information, figures and evaluating case studies, it shall explain why the understanding of this “psychological contract” is considered to be so vital to the management the contemporary employment relationship.
The “psychological contract” of employment can briefly be defined as ‘a set of unwritten reciprocal expectations between an individual employee and the organisation’ (Schein, 1976). Such as the employee being promised certain policies or benefits and the employer expecting the employee to perform at a certain level or be of a specific age etc. Guest and Conway (2002) defined it as “the perceptions of the two parties, employee and employer, of what their mutual obligations are towards each other”. Therefore, an agreement that is beyond what is written or implied in the contract or other explicit manifestations of the employment relationship.
The concept of the psychological contract is commonly traced back to the early work of Argyris (1960) and to social exchange theory (Blau, 1964). However, the crucial developments leading to its current use as an analytic framework were provided mainly by Rousseau (1995). The psychological contract therefore provides an opportunity to explore the processes and content of the employment relationship through a focus on more or less explicit deals. These deals are likely to be re-negotiated or modified over time, to be influenced by a range of contextual factors, and to have a variety of consequences. Thus the primary focus of the psychological contract is the employment

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