A FRAMEWORK ON PSYCHOLOGICAL CONTRACT

Volume : VIII, Issue : VI, June - 2018

Ms. T. Subha

Psychological contract is considered a central construct in studying the employee organization relationship. The

management of employees is a key organizational issue as scholars have demonstrated their potential as a source of

sustained competitive advantage in a dynamically changing business environment. When an individual perceives that contribution that he or

she makes obligate the organization to reciprocity (or vice versa), a psychological contract emerges. Under a transactional contract, an

individual‘s identity is said to be derived from their unique skills and competencies, those on which the exchange relationship itself is based.

Relational contracts are oader, more amorphous, and open ended and subjectively understood by the parties to the exchange. Transitional

contract, as the name suggests, is a passing phase of relationship between the two parties reflecting the absence of commitments regarding future

employment. A balanced contract contains both transactional and relational dimensions which are dynamic and open–ended employment

arrangements conditioned on economic success of firm and worker opportunities to develop career advantages. Psychological contract

shapes the behaviour of the parties and also aids the management to effectively manage their employees.