A psychological contract is an implicit and non-legally binding contract based on the perceptions of the employee and employer of what their mutual understandings are in relation to needs and wants. A psychological contract can be distinguished from a legal contract in the regard that a legally binding contract is a concise summary of everything expected from the employee in relation to pay, duties and working hours. In essence, a psychological contract reflects anything an employee feels they should get from an employer and anything they feel they should give back in return and ultimately, the employees main source for motivation.
Employees that experience a positive psychological contract are often loyal to the employer and organisation, they exert high levels of productivity and are prepared to go the extra mile to take on extra work and are accepting of transitions in day-to-day duties in the workplace.
In return, employers are expected to reward their employees with even or increased pay, allow the employee an opportunity for promotion and help with the training and development of new skills.
Progressive employers and HR practitioners recognise the value of finding innovative ways to increase employee engagement. They also know that engaged employees are more productive and go that extra mile.
As important, especially with the Millennial's, genuine CSR programmes are becoming increasingly important as a means to motivate, recruit and retain top talent. Building strong community links fosters innovation and up-skills employees and has a very positive impact on a company's corporate reputation.
Smart, conscientious and mobile, the Millennial's will repay the company many times over if you get your psychological contract right with them. This is borne out with extensive research, one such piece being Employee Engagement and CSR - The Connection.
In simple terms, your psychological contract with your employees is based on three key pillars: how employees feel about the company, what they think about the company and what they do in relation to their actions (their emotional connection to the company).
If you're interested in a little further reading, check out Sarah Cook's Essential Guide to Employee Engagement
Breaches in a psychological contract
This occurs when an employee feels that the employer did not fulfil their promises fairly or equally. This results in the employee withdrawing their efforts to accomplish a duty to the best of their ability. Employees are less likely to cooperate with their employer. For Example, if an employer gives an employee a short deadline, the employee is less likely to over exert themselves to complete the job efficiently. Bad mouthing the company occurs to the employees friends, family and potentially other employees creating a negative environment which is likely to lead to employee(s) looking for opportunities elsewhere.
Research has shown that most employees in fact leave a company due to a violation in their psychological contract rather than their legally binding contract of employment.
Benefits to the company
Happy, motivated employees that appear to have a positive psychological contract utilise their skills and knowledge to benefit the company to the best of their ability resulting in increased productivity and lower levels of employee retention. Which overall, meets the companies requirements to minimise costs on recruiting and training new employees and increases profits by increased productivity.
So, the question isn't do you have a psychological contract? but rather, what kind of psychological contract have you?
If you would like to know more about increasing Employee Engagement through CSR and getting that psychological contact with staff, contact Yellow Harbour for more information on 021 - 492 8940 or email us at email@example.com