The psychological contract is an unwritten, informal agreement between an employer and an employee. It encompasses mutual expectations, unspoken obligations, and reciprocal beliefs regarding what each party will give to and receive from the working relationship, shaping daily behavior and overall job satisfaction

Why It Matters

While a formal employment contract outlines basic legal duties, the psychological contract represents the human side of the working relationship.

• For Employees: It governs deeper needs like trust, perceived fairness, recognition, and opportunities for growth.
• For Employers: It defines an employee’s intrinsic motivation, willingness to collaborate, and tendency to go above and beyond their formal job description (often referred to as Organizational Citizenship Behavior).