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Psychological Contract Worksheet

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CIPD Factsheet
The psychological contract
Revised July 2011

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What is the psychological contract?
The term 'psychological contract ' was first used in the early 1960s but became more popular following the economic downturn in the early 1990s. It has been defined as '…the perceptions of the two parties, employee and employer, of what their mutual obligations are towards each other '1. These obligations will often be informal and imprecise: they may be inferred from actions or from what has happened in the past, as well as from statements made by the employer, for example during the recruitment process or in performance appraisals. Some obligations may be seen as 'promises ' and …show more content…

Employer brand
Employees in large organisations do not identify any single person as the 'employer '. The line manager is important in making day-to-day decisions but employees are also affected by decisions taken by senior management and HR. Employees may have little idea who, if anyone, is personally responsible for decisions affecting their welfare or the future of the business. Unsurprisingly surveys confirm that employees tend to feel more confidence in their line manager, whom they see on a regular basis, than in members of senior management.

In order to display commitment employees have to feel that they are being treated with fairness and respect. Many organisations have concluded that they need to create a corporate personality or identity with a set of corporate values or a stated mission - ‘an employer brand’ - which employees as well as customers will recognise and relate to. In practice the employer brand can be seen as an attempt by the employer to define the psychological contract with employees so as to help in recruiting and retaining talent. For more information see our factsheet on emplyer branding.
The changing employment relationship
The traditional psychological contract is generally described as an offer of commitment by the employee in return for job security provided by the employer - or in some cases the legendary 'job for life '. The recession of the early 1990s and the continuing impact of

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