INTRODUCTION

Emergence of new markets, competitors and technologies increased the necessity of skilled and
talented employees in the organization. Increase in demand for skilled employees lead to deal with
the better choice of inducements. Understanding the people’s desire, the human resource
management, recruiters and organizational management are trying to attract the employees by
offering them the right combinations of inducements. In order to satisfy each other obligations,
formal and indefinite, they started exchanging an agreement between employer and employee and
these perceptions is known as Psychological contract.[ CITATION Joh98 \l 2057 ],[ CITATION Jan03 \l
2057 ] This research study basically deals with the Psychological contract, why people starting
adopting it so seriously, frame work of psychological contract, how it promotes effective
communications and employment relations, strategic implications of psychological contract and how
to measure it, impacts on violation of contract, its limitations and the future of psychological
contract.

Psychological contract is different from the legal contract that includes limited representation of
employment relationship but is definitely more influential than the latter or formal contract. A
formal contract could provide a job security but cannot promote trustworthy employment
relationships but psychological contract enforces mutual trust and confidence between employee
and an employer. The contract includes mutual understanding regarding the needs of each other
and satisfying them which beneficially leads to the increase in employee commitment, promotes
communication between employees and would have a positive impact on the performance of the
business carried out.. There are certain benefits which an employee can acquire under this contract
like guaranteed hikes, job security, efficient career paths, proper training and development. But
when violated would have a strong negative impact on the employee relation, commitment towards
job and job satisfaction. Being a part of organisation every employee likes to be respected and would
be more satisfied with the job if they are considered and taken into account while taking important
decisions. Such a mutual conversation leads to encouraging the employee ‘voice’. Therefore the
research study conveys how the organisation or a manager understand the needs of an employee
and converts them into inducements so as to acquire better results and increase the business
performance. Psychological contracts are not consistent and varies from time to time and employee
to employee depending upon the changing needs.[ CITATION Jan03 \l 2057 ] Besides the positive
impacts of Psychological contract there are certain limitations which were distinguished in the
Rousseau’s study. Denise M. Rousseau highlighted the distinct and misinterpreted aspects of
Psychological contract. The limitations and its effect on understanding the psychological contract are
studied clearly in the following research study on Psychological contact.[ CITATION Joh98 \l 2057 ]

AIMS AND OBJECTIVES:

 Commitment toward the job increases the business performance.
  Mutual understanding between the employer and employee results in individual
achievements and satisfaction in concern to the job.
 To acquire effective recruitment process.
 To improve the social and economic conditions.

LIMITATIONS:

 Risk in expecting something without judging.

 No effective methodology to determine psychological contract.
 Violated contracts have extreme negative results.
 No quality exchange between employee and organization.
 Employee feelings have strong implications on the socio economic conditions.