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What is Psychological Contract?
The term 'Psychological Contract' (PC) in HR, economics and management is a concept that primarily refers to the actual - but unwritten - expectations of an employee or workforce towards the employer.
The term represents all mutual beliefs, perceptions, and informal obligations/rights/rewards, as well as social and emotional factors that a single employee believes he/she is entitled to by his/her employer in return for his work and loyalty.
The term can also be used at group level of for an entire workforce. The perception of the PC can be different from one employee to another and can also change over time ("dynamic psychological contract").
The term is sometimes also used to indicate such unwritten, intangible expectations from both sides (employee(s) and employer) towards each other.
The term "Psychological Contract" is a bit misleading because it is not a real contract in the sense that is not a written piece of paper, nor a legal document, but just a term to indicate the notions of beliefs, relationship, trust, and understanding which can exist for one or a number of employees.
The term was first used by Chris Argyris and Edgard Schein in the 1960s and later by many others in sometimes slightly differing ways.
You'll find a full powerpoint presentation about the Psychological Contract here (Premium).