Like any other agreement, a psychological contract in organizations is the formalization of a relationship, in this case, the purely human aspects of the employment relationship between a person and the company for which they start working.
This contract, therefore, serves to clarify the terms and conditions under which each member of this relationship will operate and the different transactions that must occur between them. What they will provide each other, what benefits they will obtain from each other (or, at least, what they expect to receive), and in what context.
A psychological contract in organizations is a commitment
By its very nature, a psychological contract implies a commitment on behalf of both parties to the relationship, a commitment to perform based on trust that the other will be loyal to the agreements reached. Normally contracts of another nature can be either verbal or written, although the psychological contract in organizations is usually a purely verbal agreement.
Rather than strictly work-related terms, it refers to how the employee and the company interpret the “journey” they are about to embark on together in terms of a mutually satisfying experience. This means that the psychological aspects of the relationship can contribute to sustainable productivity, i.e., to the company’s success and to providing the employee with a positive experience.
Characteristics of the psychological contract
No psychological contract in organizations can be strictly perfect. However, to be satisfactory and fulfill its function (to regulate some critical aspects of the labor relationship between an employee and their company), it must meet a series of characteristics. Let’s take a look at what they are.
1. Must be open
A psychological contract cannot be all-encompassing. Working life is too complex for a contract to anticipate every single thing that can happen, every nuance of the employee’s experience, and structure it in terms of exchange and engagement.
Provided they are not excessive – in which case the psychological contract is ineffective – these unavoidable gaps bring openness and flexibility to the psychological contract and allow the members of the employment relationship to enrich or complete it as unforeseen situations arise, allowing adaptability.
2. Must be balanced
For relationships to work, they must be balanced and fair, i.e., allow benefits smoothly for both parties instead of being based on abusive conditions that only benefit one of the parties involved.
3. Must be meaningful
The less important aspects of the employment relationship do not need explicit agreements to clarify and structure them. Those that are relevant do need that extra agreement. So, the psychological contract must refer to the essential issues of the employee’s journey within the company.
Why is it important to have a psychological contract in organizations?
1. Formalizes the employment relationship
This does not mean that the psychological contract turns the relationship between the employee and the company into a kind of “hyper-legal agreement” without paperwork. On the contrary, it puts into concrete words some important expectations, needs, and desires of both the employee and the company, rather than leaving them in the ambiguous world of things unsaid or half-said.
2. Provides clarity to the relationship
By making some terms of the relationship between employee and company explicit and concrete, the psychological contract in organizations allows both parties to look at their relationship more easily. Consequently, they can understand more clearly what some of their duties are and what they must abide by concerning each other. It fosters the experience of security within the relationship.
3. Offers guidance for the employee and the company
The psychological contract gives predictability to the relationship. The terms and conditions in the psychological contract provide both members of the employment relationship with guidelines they can follow to ensure a mutually satisfying experience. They know what they should contribute and what they should receive for the duration of the employee’s life cycle within the company.
Emotional well-being for companies
At ifeel, we are committed to improving employee and company well-being. That is why we strive to help them in the challenge of generating stimulating and healthy work environments for their employees.
For this purpose, our psychologists have created an emotional well-being program for companies. Through this collaboration, your company’s HR managers will be able to receive personalized, data-driven advice on how to improve their teams’ psychological well-being. In addition, this program provides employees with a complete mental health care service structured at different levels according to their needs. Try our program now to see how it can help you.
Visit our Resources section, where you will find podcasts, guides for Human Resources, or interviews with leading HR professionals. In addition, you will have access to a Psychosocial Risk Factors Template, which will help you comply with the Labor Inspection requirements.
We hope this post about the psychological contract in organizations has given you some good ideas to make it easier for you to fulfill your tasks. Contact us to learn more about how our emotional well-being program for companies works.
