Psychological Contract Theory

Psychological Contract Theory refers to the unwritten set of expectations between an employee and their employer regarding mutual obligations. While a formal contract outlines specific duties and pay, the psychological contract encompasses beliefs about job security, career development, and work-life balance. It influences employee satisfaction and motivation. If either party fails to meet these expectations, it can lead to feelings of betrayal, decreased engagement, or turnover. Understanding this concept helps organizations foster better relationships with employees by aligning their actions and communication with these unspoken expectations.