The Nature and Relationship between Contractual Terms of Employment and Psychological Contract - Literature review Example

The Nature and Relationship between Contractual Terms of Employment and Psychological Contract Name Institution Date Introduction The paper provides a preview of the article by Middlemiss (2011) on the relationship between the psychological and the employment contract. This is attained through a critical analysis of the of the various factors raised in the article. Of particular interest will be why employee relations have been defined and characterized using the psychological contract. The paper will specifically determine why the psychological contact is concerned with the beliefs that are held by the employees on their employers. It will be basically concerned with the set of beliefs on what is expected from the employer and what the employer expects from the employee. This psychological contract was stated in the article by Middlemiss (2011) as being broader than the real employment contract. Even so, the breadth of this contract depends on the type of relationship of the contract; whether part time, fixed or open-ended contract. In addition, this contract is affected by what is agreed by the employer and the employee during hiring or prior to employment. Therefore, there exists a great relationship between the employment contract and the psychological contract. According to Burke and Cooper (2000), the relationship that exists between the psychological and the employment contract, one of the differences that exist between the two has to be considered. This difference is that employment contracts are explicit (whether verbal or written) or they could be implicit just like implied terms. These contracts are legally binding. The psychological contract on the other hand is subjective and lacks any clarity or formality. In addition, these contracts are not legally binding. This does not imply that they do not have any strong influence on the relationship between the employer and the employees. In fact, the contract presents a strong influence on the behavior of the two subjects since their relationship is based on the beliefs that the arties have and the views that they have with respect to the nature of the relationship of employment that they work under (Conway and Briner, 2005). Mohr (2000) argues that the psychological contract makes the employee to behave in ways that attract certain positive remarks from the employee. For instance, the employee may believe that if work is done in overtime and no payment is expected, then the employer may consider promoting the employee. This is an example on how the contract influences the type of relationship between the employer and the employee. In recent times, the psychological contract has been used as an important way of understanding the well being of employees, their performances as well as their attitudes. However, there has been some misunderstanding between the employers and their employees because of what each of them believes. Such misunderstandings can often lead to wrong interpretation and application of the psychological contract. Such misunderstandings lead to poor communication and they could also lead to conflicts if not handled with the required care. It is therefore essential for the two parties to agree or disagree on their psychological contract (Guest, 2000). Questions may be raised on why the psychological contract important if it can lead to conflicts. In addition, it may be questioned on the reason for a psychological contract yet there is the employment contract that can be used to govern the operations of the two parties. Like Middlemiss (2011), this contract can be used by the employers and the employees in reading between the lines and understanding how their counterparts behave or what they are planning. For instance, when an employer wants to fire an employee, the employee could get the signs from the behavior of the employer or from their fellow colleagues. By listening to their colleagues and reading the moods of the employer, the employee can alter the psychological contract so as to try and salvage the relationship. Furthermore, the employers can read the attitude of their employees and make sense out of their behavior. This can alert them of any ill arrangements that the employees have; like an impending demonstration or when their employees are totally unsatisfied. By getting the impression revealed to them. The employers can address the issues on time and save the organization a lot of time and to some extent, resources that they could have wasted in the event that the indicated problems by the employees were not addressed. Of importance, therefore, is for the employers and their employees to understand the effect of their psychological contract and how it can be used to the mutual benefit of the parties. One proper way of understanding this issue is for the two parties to create a culture of communication that will facilitate their interaction. Through communication, they can create a clear understanding of what is expected of them, and what they should do to sustain this relationship (Lindsay, 2001). The importance of psychological contracts can be analyzed to further expand the concept. This analysis would not be well understood if the shortcomings of the employment contract are not mentioned. It is from the shortcomings that the importance of psychological contracts can be seen. One of these shortcomings as stated by Conway and Briner (2005) is that employment contracts are written and therefore, they do not specify a lot of details on the expectation of the employee from the employer and what they expect their employers to do in return. It is at this point that the psychological contract comes in to fill up the void left by the employment contract. This contract presents the employer and the employee with what the other expects in details. The psychological contract takes into consideration the implicit or unwritten details in the employment relationship. This contract helps in understanding the expectations of both the employer and the employee. In essence, it helps reduce misunderstandings and strengthens the relationship that exists between the employer and the employee (Burke & Cooper, 2000). A report by Isakson et al (2003) suggests that the psychological contract can be used as an intervening factor to the changing patterns of relationships between the employer and their employees. This idea was developed because of the feeling that the psychological contract can be used as the undertaking of reciprocal obligation and expectations that are implied in the relationship of employment. Proof of this concept can be made when considering how the psychological contract can enhance the deteriorating relationship between the employer and their employees. According to Burke and Cooper (2000), within the organization, negative consequences affect the satisfaction of employees with their job. It also affects their psychological well-being as well as their life outside their places of work. This brings job insecurity to the employees. As a result, the organization will be affected by the negative performance of the employees (Sverke, Hellgren & Näswall, 2002). This is because job insecurity has been perceived to be one of the features that are most distressing in the work situation. According to Isakson et al, (2003), the reason as to why the psychological contract has been considered as being an intervening factor in the situations at work is that the contract is perceived to be a mechanism that explains the satisfaction levels, the well-being as well as the health of the workers. In a way, it gives the employee the feeling of trust on their employers since they conclusively understand the expectations of the employers. An employee with a temporary contract that is well defined is better placed to trust and perform when compared to one that has a secure contract yet the employer is not trustworthy. When drafting a contract for an employee, the employment contract will only define the transactional aspect of the contract. However, it is the psychological contract that can be used in understanding the relational aspects of the employment. Such transactional aspects are only based on monetary value and the short-term exchange that will take place between the employer and the employee. Another perspective to the psychological contract was presented by Guest (2004), stating that this contact ensures that the promises made by the two parties of the employer and the employee are kept. It is also the extent to which they trust that what they have agreed upon will be fulfilled. The relational contract on the other hand, presents the expectation of both the employer and the employee. This implies that the two will get an understanding of what they intend to do together, and how far they intend to reach in their relationship. Based on this argument, the psychological contract is appropriate for the employer and the employee and it is the reason as to why it can be used to fill the gap that exists between the employer and the employee. The general feeling that the psychological contract suggests is that employees need to be psychologically at peace for them to perform; while their employers need to be sure that their employees are performing as expected. It is a useful tool in making employees gets an assurance of their well-being while they are at work (Burke and Cooper, 2000). The importance of this psychological contract does not imply that once agreed, all the expectations are met. Despite this, there is an implied agreement that is made between the employer and the employee on what should be fulfilled. After the agreement, there is an assumption from the two parties that the agreed deal is fair for both of hem and has been made in good faith. The important aspect in ensuring the psychological contract is continued is the level to which the beliefs, values, aspirations and expectations are taken to be met or to be violated, together with the extent of the existing trust in the relationship (Lindsay, 2001). It is also vital to analyze the stability of psychological contracts so as to ascertain their effectiveness. These contracts are based on the trust that each party has on the other. They have to believe that what they agree to be done has and will be done. Therefore, the contract’s stability depends on the level of trust that the two parties have on each other. Whenever the trust is breached, or is reduced, then the psychological contract will not be effective. A comparison with the employment contract shows that the employment contract is stable since it is based on written agreements. This agreement cannot be overlooked; otherwise, the matter shall be legally handled. The stability of the psychological contract ends when trust between the parties is missing. For the employment contract, the stability is based on the written terms and conditions. Should these agreed terms and conditions be breached, then the contract will have been breached and as a result, the contract could be ended (Mohr, 2000). Lindsay (2001) argues that the assessment of these contracts’ tangibility presents the importance of the contracts to the employers and their employees. The employment contract binds the two parties to the agreed terms. However, this does not commit the trust and effort that the parties will input in their tasks at work. This brings another important aspect to the psychological contract; the already mentioned aspect of trust. When employees have their trust in the organization, their performance shall be reflected positively. This is because they believe in the mutual nature of their relationship and they therefore expect to receive the same proper treatment from their employers (Lindsay, 2001). This shows that the psychological contract is tangible for both the employers and their employees. However, it does not imply that the employment contract is not tangible; it essentially implies that the employment contract is based on the transaction that the two parties have. However, the extent of achievement of better performance from either party will depend on the willingness of the party to fulfill their expectations. This relates back to the importance of fulfilled expectations. This fulfillment is no doubt achieved when a psychological contract is made by the parties and they both fulfill their part. This indicates the relationship that exists between the employment contract and the psychological contract (Rousseau & Schalk, 2000). Going by the study conducted by Guest et al (2003), the psychological contract is best performed by workers who are on fixed term and those who are on agency contracts. For workers on temporary contracts, their state of psychological contract is poor. This is attributed to the level of job security that they feel and the extent to which they feel their expectations can be met. This could be due to the fact that the psychological contract of workers on temporary contracts is transactional and restricted when compared to that of employees on permanent employment. It is also worth noting that the behavior of employees on temporary contracts is more sensitive to any variations in content of psychological contract when compared to that of the permanent employees (Guest et al., 2003). According to Middlemiss (2011), the idea of psychological contract seems to suggest equality of work and relationships at work. However, Rousseau and Schalk noted that equality could have some counter-productive effects. This is because equality is suggested to bring about uniform general rules and as a result, create bureaucratic rules that will enforce equal treatment. However, it is also suggested that this bureaucracy creates authority and the created authority will in turn undermine the equality that bred it. This therefore suggests some careful approach when creating psychological contracts (Sverke, Hellgren, & Näswall, 2002). Conway and Briner (2005), note that it would be detrimental for an idea that seemed great to turn out to be harmful to the creators. In addition, the idea of psychological contract could be used by some organizations to oppress their employees. This can be done by the employers expecting their employees to fulfill their ends of the deal while they willingly abandon their responsibility of fulfilling the agreement since their have not been bound by any law to fulfill this psychological contract. The employees will therefore have no other protection once the trust has been breached. The repercussions will be felt by the organization through negative performance. However, the employers have the right to sermon the employees when they are not performing to the expected levels. On the other hand, employees cannot directly confront their employers for failing their trust. Therefore, this contract is risky because it is strongly inclined on trust (Guest, 2000). Conclusion and Recommendation Psychological contracts have been used to curb the changing issues that have cropped in employment. It has been seen as a great way of enhancing the relationship between the employer and the employee. Analysis of the various types of contracts indicates the best type of employment contracts when the psychological contract is to be successfully deployed. However, this contract poses a risk to the employee, in the event that the employer does not honor their end of the trust. This requires that employers uphold dignity and therefore be trustworthy. In addition, employers should use the psychological contract in deciding the best type of employment contract to be used. Consideration should be made on the flexible contract since it provides key benefits to either party regardless of the work and duties. It is also important to note the rising importance of the psychological contract in providing satisfaction and security among employees. Through this, employers can understand how to get the best out of their employees. References Middlemiss, S., 2011,"The psychological contract and implied contractual terms: Synchronous or asynchronous models?", International Journal of Law and Management, Vol. 53 Iss: 1 pp. 32 - 50 Conway, N. & Briner, R., 2005, Understanding Psychological Contracts at Work: A Critical Evaluation of Theory and Research, Oxford: Oxford University Press. Isakson et al, 2003, “Employment contracts and psychological contracts in Europe,” Results from a pilot study, SALTSA Report 1, Stockholm. Sverke, M., Hellgren, J., & Näswall, K., 2002, “No security: A meta-analysis and review of job insecurity and its consequences,” Journal of Occupational Health Psychology, 7(3), 242-264. Rousseau, D. & Schalk, R., 2000, Psychological Contracts in Employment: Cross-National Perspectives, UK, Sage Publications. Lindsay, J., 2001, “The implied term of trust and confidence”, Industrial Law Journal, Vol. 30 No. 1, pp. 1-16. Burke, R. & Cooper, C., 2000, The Organization in Crisis, Oxford: Blackwell Publishers. Guest, D., 2000, Management and the insecure workforce: The search for a new psychological contract, In E. Heery & J. Salmon (Eds.), The Insecure Workforce. (pp.140-154). London: Routledge. Mohr, G., 2000, “The changing significance of different stressors after the announcement of bankruptcy: a longitudinal investigation with special emphasis on job insecurity,” Journal of Organizational Behavior, 21, 337-359. Guest et al, 2003, “The psychological contracts, attitudes and behavior of workers on temporary and permanent contracts” Management Centre Working Paper, London, King’s College. Read More