Work And The Psychological Contract

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CONWAY, N (2002) defines the psychological contract as “the perception of the employer and employee providing a mutual obligation and understanding towards each other”. According to Mclean Parks &Gallagher (1998) the employee’s insight on the contract portrays expectations in regards to their work entitlements and obligations in the workplace. The psychological contract consists of two dimensional components including transactional; incorporating short term monetary duties and partial involvement via the organization enforcing the new psychological contract. The second dimension includes relational; this involves long term emotional elements such as commitment, loyalty and trust in the employment relationship in exchange for a sense of security which is more consistent in the traditional contract (De Witte 2006). Therefore the psychological contract allows employees and employers to feel comfortable in the workplace, thus creating a positive effect in their working behavior to optimally perform the job due to increased staff satisfaction and morale along with job longevity and employment wellbeing.
In contrast, the legal contract is a legally binding formal agreement between an employer and an employee, which is a written agreement being more reliable. It is based on labour market laws, regulations and agreements. It consists of common law providing a clear outline about the various entitlements and conditions of work. For example, the employer must provide a duty of care, and the employee must have appropriate skills and expertise for the allocated job. The legal contract also includes acts in which protect employees such as Work Health and Safety Act ( 2011), Discrimination Act and Fair work Act 2009(Sielearningtafensw. 2012)....

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...this is where the third party provides strategies and suggestions in order to solve the dispute to avoid legal costs. If either party is still not satisfied with the agreement, the involvement of courts and tribunals may need to be enforced.
“Arbitration” is where a third party is involved providing a legally binding decision in a court setting which must be obeyed. Thus, it is identified, conflict should not be ignored as it may create increased legal costs through courts and tribunals providing an agreement in which enhance a negative effect on the business along with relationships in the workforce. (Small business. 2013). Therefore, a business should set clear expectations and should enforce a plan of action and adequately follow both psychological and legal contracts to reduce employee conflicts, increasing staff satisfaction and morale within the workplace.

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