A psychological contract requires contribution on the part of the employee and inducement on the part of the organization, although the terms of this contract are not always explicitly negotiated.
The term "psychological contract" describes how both the employer and the employee interpret an individual's expectations, beliefs, objectives, and obligations. Early 1960s saw the concept's emergence, and it is essential to comprehending the employment relationship since psychological contracts help employees recognize their value and place in the company. Additionally, it assists both parties in avoiding having unjustified expectations of one another. Additionally, it permits "amending" the contract's terms if necessary, which is done through routine communication.
An employee who believes that putting in extra time will inevitably result in compensation is an example of a psychological contract that has failed. This might not, however, be business policy. The additional hours worked may not be compensated for if the employee is salaried.
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