A psychological contract could be defined as a set of promises and beliefs held by an individual employee about the terms of the exchange between the employee and his or her organization, or the agent of the organization (Wellin, 28). The psychological contract can be a complex concept since it is an unwritten rule that cannot be directly expressed in a tangible way. . Nevertheless, there have been arguments to the effect that a breakdown of the psychological contract can result in poor performance of individual workers or of the organization as a whole (Anderson, 102).
This can be caused by a reduction in levels of organizational commitment, lack of motivation, absence and attendance problems and high levels of staff turnover, some of which the financial company is already experiencing. Being a psychological rather than a legal contract, a psychological contract refers to beliefs about the deal as opposed to what is contained in writing within the formal employment contract about the deal (Conway & Briner, 23). Breach is probably the most important idea in psychological contract theory since it is the main way of understanding how psychological contact affects the feelings, attitudes, and behaviors of employees. . A breach of the psychological contract occurs when one party perceives that the other has failed to fulfill promised obligations.
In this case, the financial organization’s freeze on pay-rises and overtime payments combined with the freeze in almost all training could have been perceived by the employees as being a breach in psychological contract. From the contractual perspective, employees and employers enter into an employment relationship with sets of expectations of reciprocal obligations that go beyond the formal, explicit agreements made during the hiring process.
The core of the typical psychological contract of the industrial age organization member was the belief that the organization will provide job security and promotional opportunities in return for hard work and loyalty (Armstrong, 149).