Employment relation, generally, is the interaction amongst both parties in the organization. To be more specific, it is a deal with the agreement of terms and conditions between employers and employees. The purpose of employment relationship provides a foundation for employment and employee relations’ policies (Armstrong, 2009) and consistently in dealing with employee relation issues, fairness processes that can affect and improve employee behavior or mechanism to resolve differences/disputes (Beardwell & Claydon, 2007). As in the context of the contemporary or recently employment relationship, modern organizations impact and are impacted by the environment. Obviously, therefore a positive employment relationship need to be priority required and carefully develop in dealing with organization’s contribution. By this way, psychological contract has long been considered one of the most important elements in achieving both organizational and individual goals. However, distinctively, the original of the psychological contract is changing due to external and internal changes in order to fit that organization (Hiltrop, 1995). To address this phenomenon, this paper focuses on the following issues: defining the psychological contract, the changing of the old and the new psychological contract. Moreover, it also illustrates the importance of managing this contract. Finally, the challenges associated with managing the psychological contract is sketched.
Defining the psychological contract
The paper begins by defining the psychological contract. Obviously, there are many primary function of the psychological contract are explained in different ways by a lot of literature.
Argyris (1960) is one of the many first writers who use the concept of the psychological contract. He defined that: “A relationship may be hypothesized to evolve between the employee and the foremen which might be called the ‘psychological contract’. The employee will maintain high production, low grievances etc. if the foreman guarantees and respects the norms of the employee informal culture (i.e let the employees alone, make certain they make adequate wages and have secure job). From this understanding, we can define the psychological contract as the relationship between the employee and the foreman or team leader.
While Morrison (1994) claimed that, ‘The psychological contract enables the human side of organizations to function smoothly and is particularly important in times of uncertainty and risk such as during corporate restricting.’ Unlike Argyris’s point of view, the interpretation of the terms of the psychological contract from Morrison is the structure of the organization.
Then, according to Guest (2007), however, he noted the psychological contract as “ the perceptions of both parties to the employment relationship, organization and individual, of the reciprocal promises and obligations implied in that relationship’. Which leads to answer two fundamental...