The Psychological Contract

Apr 27, 2020 | Blog | 0 comments

An insight into the unwritten rules about your job…

The Psychological Contract is the unwritten contract between employers and employees. It is the mutual expectation that both parties have of what they expect from the other. Simply put, it’s the stuff that’s not in your paper contract, but that plays part in your everyday working life.

The employee inputs things such as effort, ideas, and commitment, and may make sacrifices for the company. In return, they receive rewards from the employer, such as job security, recognition, personal development, and status. As the employee inputs more, so the company rewards with more. Or that’s the expectation anyway. Employees might call this going above and beyond.

Conversely, employers may view what the employee is putting in, as inherent expectations from simply having a job. They may expect a certain amount of commitment or dedication in return for the recognition and responsibility that they give.

When the psychological contact is breached

The employment relationship can be adversely affected if it is perceived that there has been a breach in the psychological contract. When the employee believes that the employer has failed to fulfil its obligations, (i.e. suitably rewarding them or even recognising their efforts), then they can feel that the psychological contract is broken.

For example, perhaps it’s always been the unwritten rule that staff can come in a bit later the day after the annual Christmas do. If one time an employee is suddenly reprimanded for this, then this can cause a resentment on the part of the employee as they will feel the psychological contract has been dishonoured.

Breaches of the psychological contract can lead to an employee becoming disengaged with their job and, if not resolved, can continue to cause disaffection and demotivation that further results in a decline in performance. In more serious cases, the entire relationship can break down and cause the employee to exhibit negative and sometimes deliberately malicious or deviant behaviour.

The impact of Covid-19 measures on the psychological contract

If they haven’t already done so, employers should be looking at some of the areas their psychological contracts with their employees might break down. We are in unprecedented times, all of us having to adapt and work in ways we are not used to.

Employers and employees are all now having to manage issues caused by:
• Isolation
• Worries about job security
• Personal and career development – is it on hold?
• Managing working from home with family or friends locked down with you
• Additional stress for parents or carers
• Providing equipment so employees can work safely, and comfortably, from home

Any one of these issues, handled badly, can leave either side feeling that the psychological contract has been broken.

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What should businesses be doing?

A lot of businesses will have already put things in place to ensure the psychological contract is strong, but here are some ideas that might help with the areas we have already discussed.


• Line managers should arrange more one-to-ones
• Schedule in team coffee mornings or evening online chats, not to talk about work but just so people feel connected
• Maybe think about running online competitions or social events


• Keep employees up to date with the current situation and what the business is doing
• If you are thinking about changing team structures or roles to accommodate the new business landscape, make sure they are kept in the conversation
• Good or bad news, share it with the employees; they need to feel that you are being honest with them


• Find a way to acknowledge achievements either by a thank you email or an online post, perhaps across the company Yammer stream
• You could invite the business to nominate their colleagues for any reason
• Encourage employees, team heads and more to share the good news – even if it seems insignificant – as often as possible


• Look at ways you can still help employees develop
o Provide, or point them in the direction of, online training courses
o Set up channels whereby other employees can share their professional skills or knowledge.


• Recognise that with things like home schooling some flexibility is needed – don’t be asking your teams to clock in and out every day – give a little trust and the psychological contract will remain strong
• Don’t focus on what employees can’t do at this time – instead look at opportunities to do things a little differently

Work Environment

• Make sure that your employees are able to work safely and comfortably from home.
• Understand that not everyone will have a spare room or a home office they can use so making allowances and providing the right equipment will put you in good standing
• Sending out a survey to understand what your employees really need will help identify those in most need

As mentioned above, once broken or even damaged, it is very hard for an employer to retrieve the situation, once the employee has become disenfranchised.

It may well have been easy for employers in the past to assume that going above and beyond is just part of the job. In the current climate, when employers need the support of the people, the reverse is now true and employers are the ones being expected to go above and beyond.


If you’re interested in learning more about ways in which you can prevent the psychological contract being broken, check out this on-demand webinar! Chief People Officer, Thea Fineren, shares success stories on physical and mental health initiatives and developing an employee engagement ecosystem.

On-Demand Webinar – Engaging Your Workforce in the New Virtual World


Suzanne O'Neill

Business Change & Adoption Consultant

A Prosci Change Management Practitioner and trainer who designs and delivers Change Management interventions including cross-organisation workshops, toolkits, guidance, process design and advice to Leaders and Managers across organisations going through transformational change.

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