This was an interesting theory of motivation. The basic idea behind it is that the two parties involved in an employment relationship – the employee and the organisation – have mutual obligations to each other. The obligations may result from a formal contract, but are just as likely to be implied by the expectations each has of the other. These expectations are not always clearly communicated.

The psychological contract is based around elements of giving and receiving on both sides, and as long as the expectations are met by both parties the employee and organisation should remain committed to each other.

However, if one party breaches the pscyhological contract – for example, a manager asks an employee to work unpaid overtime – the other party will recognise the violation and motivation can suffer as a result.

It’s therefore very important for managers to be acutely aware of employees’ psychological contracts with the organisation!