The Psychological Contract refers to the unwritten set of expectations and beliefs between an employer and an employee about the reciprocal obligations of the employment relationship. Unlike formal contracts, which specify pay and job duties, the psychological contract covers intangible expectations such as career growth, job security, fairness, loyalty, and recognition.
When employees perceive that their employer fulfills the psychological contract, they are more likely to show commitment, engagement, and discretionary behaviors like Organizational Citizenship Behavior (OCB). When employees perceive a breach, such as lack of promised opportunities or unfair treatment, it can lead to dissatisfaction, reduced trust, lower performance, and higher turnover.
HR shapes the psychological contract by setting expectations during recruitment, reinforcing them through onboarding, and sustaining them with fair policies and consistent communication. When promises of growth, recognition, or support are met, employees feel trust and loyalty, leading to stronger engagement and retention. When expectations are breached, HR must repair trust through transparency and corrective action. By actively managing the psychological contract, HR ensures employees’ lived experiences align with organizational commitments, reducing turnover and building long-term commitment.
A psychological contract is the unwritten set of expectations between employees and employers. Plum helps fulfill that promise by aligning people’s strengths and motivators with meaningful work and growth opportunities. When expectations and reality match, trust grows and retention improves.
Reinforce the psychological contract with PlumA formal contract covers legal, tangible obligations like pay and job duties, while the psychological contract includes unwritten expectations like growth, fairness, and support.
It begins during recruitment and onboarding, shaped by what candidates are told, organizational culture, and early employee experiences.
Employees may feel betrayed, leading to disengagement, reduced performance, cynicism, or turnover.
Yes, through honest communication, acknowledgment of breaches, and renewed commitments to employee expectations
It influences engagement, trust, performance, and retention, making it a critical but often overlooked factor in employee experience.