4 Types of Psychological Contract

As a business owner or an HR manager, you must have heard of the term ‘psychological contract’ in the workplace. It refers to an unwritten agreement between the employer and the employee that outlines the expectations, obligations, and responsibilities of both parties. In essence, the psychological contract is an understanding of what employees expect from their employer, including working conditions, compensation, recognition, and job security. Understanding the different types of psychological contracts can help you build a better relationship with your employees and create a more productive work environment.

Here are the four types of psychological contracts you should know about:

1. Transactional Contracts

The transactional contract is the most traditional and straightforward type of psychological contract. It is based on the idea of exchanging something for something else. Employees agree to work for an employer in exchange for specific benefits, such as salary, benefits, and job security. The employer, in turn, expects the employee to perform their duties to the best of their ability. This type of contract is typically formal and written, and both parties have a clear understanding of what is expected of them.

2. Relational Contracts

In contrast to transactional contracts, relational contracts focus on building a long-term relationship between the employer and the employee. It emphasizes trust, mutual respect, and loyalty. Relational contracts involve a more informal and personal relationship between the parties, where promises are made based on what the employee perceives the employer values. In this type of contract, employees are often willing to go above and beyond their job requirements because they believe that their employer will reciprocate their loyalty.

3. Balanced Contracts

Balanced contracts are a mixture of both transactional and relational contracts. They involve a balance of duties and obligations, where employees receive fair compensation, but also a sense of loyalty. Balanced contracts are based on the idea that both the employer and the employee need to benefit from the contract. They prioritize building relationships while maintaining a fair exchange of value.

4. Ideal Contracts

Ideal contracts refer to employees’ expectations of what a perfect workplace would be like, including enjoyable work, fulfilling career development, and a supportive work environment. This contract is often an unwritten agreement and represents an employee’s subjective appraisal of the workplace. The ideal contract is an essential component of employee motivation and job satisfaction, and it is essential for employers to understand and try to meet these expectations.

Understanding the different types of psychological contracts can help you build and maintain a strong relationship with your employees. Employers need to recognize the expectations and obligations of their employees to maintain a productive and motivated workforce. Creating and maintaining a favorable psychological contract will ultimately lead to a positive and productive working environment.

By | 2022-06-01T17:42:35+00:00 June 1st, 2022|Uncategorized|0 Comments

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