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Psychological contract was developed by Denise Rousseau in 1989 where she described it as the ‘individual’s belief regarding the terms and conditions of a reciprocal exchange agreement between that focal person and another party’ (Rousseau 1989). Subjectivity is a major component of psychological contract as employees perceptions may vary due to the uniqueness of each situation and the complexity of the working environment when compared to the initial job interview impression (Peirce et al. 2012). Psychological contract is also subjected to be interpreted differently between the employee and employer’s point of view as both have different goals and objectives within a company. For example, an employee would strive to gain recognition for his work and gain as much financial incentives as possible. On the other hand, the organisation would be trying to retain its top talent as well as securing revenue that would aid its expansion (Lester and Turnley 2002). The psychological contract consist of two forms, transactional and relational (Rousseau 1990). Transactional form of psychological contracts are generally short-term and involves with monetary exchange while relational form are often long-term and includes both monetary exchange as well as social contributions (Morrison and Robinson 1997). Failure to meet the terms of the psychological contract constitutes to a breach of trust and result in an impaired relationship to employees and the organisation. Studies have also proven that the stronger psychological contract exists between employees and managers, the higher expectation and trust that the promise would be actualised (Erkutlu and Chafra 2013). Once a breach of psychological contract found, employees might feel inequitable th... ... middle of paper ... ...ces and psychological contract breach’, Journal of Managerial Psychology, vol. 25, no. 6, pp. 620-648, viewed 02 May 2014, ProQuest Central, 746268304 Thach, L. and Nyman, M. 2001, ‘Leading in limbo land: the role of a leader during merger and acquisition transition’, Leadership & Organization Development Journal, vol. 22, no. 4, pp. 146-150, viewed 30 April 2014, Emerald Insight, doi: 10.1108/01437730110395033. Trisler, S. 1984, ‘Grievance procedures: Refining the open-door policy’, Employment Relations Today, vol. 11, no. 3, pp. 323-327, viewed 01 May 2014, Wiley Online Library, doi: 10.1002/ert.3910110313. Ubeda-Garcia, M., Marco-Lajara, B., Sabater-Sempere, V., Garcia-Lillo, F. 2013, ‘Does training influence organizational performance?’, European Journal of Training and Development, vol. 37, no. 4, pp. 380-413, viewed 02 May 2014, ProQuest Central, 1355573576

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