Psychological Contract

Psychological Contract

Psychological Contract

Introduction

The relationship between an employer and an employee is typically guided by formal agreements, be they individual letters of understanding, union-management contracts or the government legislation that sets the standards for fair and equitable work.

The psychological contract is the basis of a partnership approach. It is the link between employers and employees. It establishes the expectations, aspirations and understandings which they have of each other (Herriot, 1998).

Discussion

The old psychological contract was based on security and predictability, now it is 'more situational and short term and assumes that each party is much less dependent on the other for survival and growth'.

According to Jean-Marie Hiltrop, the new contract can be defined as follows:

'There is no job security, the employee will be employed as long as he/she adds value to the organisation, and is personally responsible for finding new ways to add value. In return, the employee has the right to demand interesting and important work, has the freedom and resources to perform it well, receives, pay that reflects his or her contributions and get experience and training needed to be employable here or elsewhere'(Hiltrop 1995 pp.36-50).

The psychological contract has to be strong and truthful to allow a partnership relation.

The voluntary aspect of the partnership

New Labour insists on the voluntary aspect of the new work relation. The partnership should be introduced through cultural changes which will lead to 'more positive relationships between employers and employees than the letter of the law can ever achieve'. That is to say that the law itself can not resolve the problem of employee relations, some cultural changes have to emerge first. Employers and employees have to make some effort to improve the work relationship(Herriot 1998).

The advantages and the disadvantages of the partnership approach:

For the employees

Advantages

With the partnership approach, employees benefit from a Family atmosphere with friendly policies. For example, they benefit from new working arrangements which allow a greater flexibility. There is an harmonisation of working conditions, policies and procedures for all employees. The partnership approach introduces a new pay structure: pay is monthly trough credit transfer, and the traditional annual pay is replaced by an objective formula. Moreover, a reduction of the working week for manual and craft employees can be observed.

Disadvantages

However, the partnership approach introduces the notion of the individual worker. In this way, trade unions are less useful in the employer/employee relationship and lose their power. Then, the employee is in a weaker position than his/her employer (a caution has to be noticed because, trade unions have a right to accompany their members during the disciplinary or grievance interview) (Cully Woodland 1999 pp.56-70).

For the employers

Advantages

Firstly, the partnership gives a good reputation to the enterprise which applies it. Moreover, it allows a greater stability of employment because employer talks to employee and establishes some rights and some obligations that each party has to respect (limit the turnover, strikes and so on). The relationship between both is more respectful and equal.

Furthermore, the partnership allows a greater openness over the ...