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Exploring psychological contract contents in India: The employee

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 Journal of Indian Business Research
Exploring psychological contract contents in India: the employee and employer
perspective
Upasana Aggarwal Shivganesh Bhargava
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JIBR
1,4 Exploring psychological contract
contents in India: the employee
and employer perspective
238
Upasana Aggarwal and Shivganesh Bhargava
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Shailesh J. Mehta, School of Management, Indian Institute of Technology,

Bombay, India

Abstract
Purpose – This paper aims to examine psychological contract contents, as perceived by two parties
of the employment relationship, the employee and the employer.
Design/methodology/approach – The study is conducted in two phases. Study 1 employs critical
incidence technique (CIT) to elicit from individuals their perceptions regarding organization
obligations. Study 2 is designed to corroborate the findings of the first study through a survey of 401
employees and 66 employer representatives (functional heads).
Findings – The results of the two studies are consonant with existing literature; nevertheless the role
of culture on psychological contract contents is visible. The study reveals variation in employee and
employer perspective regarding organizational obligations.
Practical implications – In India, recruiters need to go far beyond the discussions on compensation
and focus on building relational aspects of job such as the job content avenues for career growth as
well as creating a supportive work culture.
Originality/value – The study contributes to existing literature by examining content of
psychological contract, a relatively neglected area of research in a fast growing Asian economy, India.
Keywords Psychological contracts, Industrial relations, India
Paper type Research paper

Journal of Indian Business Research
Vol. 1 No. 4, 2009
pp. 238-251
q Emerald Group Publishing Limited
1755-4195
DOI 10.1108/17554190911013274
Introduction
In recent years, the concept of psychological contract (PC) has achieved considerable
prominence as it advances our understanding of employee’s attitudes and behaviors in
the contemporary times (Coyle-Shapiro and Kessler, 2000). Psychological contract
refers to the relationship between employee and employer in terms of the unwritten
expectations that exists (Rousseau, 1989). At an aggregate level, psychological contract
have been classified into transitional, transactional, balanced and relational contracts,
which vary in strength and generality (Rousseau and McLean Parks, 1993).
Transitional contract, as the name suggests, is a passing phase of relationship between
the two parties reflecting the absence of commitments regarding future employment.
Transactional psychological contract indicates obligations that may be considered to
be “economic” in nature, largely based on remuneration and other short-term benefits
to the employee which are publicly observable. Relational contracts (RC) on the other
hand involve long term obligations based upon trust and are concerned with personal,
socio-emotional as well as economic resources. Rousseau (2000) proposed a third type
of psychological contract referred to as “balanced contract”, which contains both
transactional and relational dimensions.
Although PC has been researched for many years, there are certain aspects of the
concept that warrant scholarly attention. First, efforts to examine its contents, i.e. what
 psychological contract actually comprise of, have been meager (Blancero et al., 2007). Psychological
Scholars (Guest, 1998; Rousseau, 1989; Rousseau and Tijoriwala, 1998) for a long time contract contents
have reiterated the need to examine PC contents “in order to form a satisfactory
understanding about the employment relationships” (Herriot et al., 1997, p. 152). in India
Further, of the limited studies examining PC contents have been conducted in the west,
leaving Asian countries under-represented (for exceptions see Westwood et al., 2001;
Truong and Quang, 2007; Bellou, 2007). Second, there are two different schools of 239
thought regarding the appropriate levels of engagement of contract. While, Rousseau
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gives emphasis on individual’s (employees) perception regarding organizational

obligations, advocates of broad, multi-level approach (Coyle-Shapiro and Kessler, 2000;
Guest and Conway, 2002), believe that the perceptions of mutuality can be investigated
only by incorporating both, the employee as well as the employer perspective
regarding organizational obligations. Importantly, literature provides evidence that the
employee and employers often have different perceptions regarding what
organizations owe to them. This incongruence in the perceptions of the two parties
results in perceived contract breach (Morrison and Robinson, 1997) that has deleterious
effects on employee attitudes and behaviors (Zhao and Chen, 2008). Strangely, despite
the significant impact of incongruent perceptions on perceived breach and
organizational outcomes, very few studies have examined the perceptions of the
both the parties regarding organizational obligations (Rousseau, 1989; Herriot et al.,
1997; Tallman and Bruning, 2008; Truong and Quang, 2007)
Finally, psychological contract is an individual’s perception regarding terms of
exchange in employment relationship and lies in the “eye of beholder” (Rousseau,
1989). In order to measure a subjective-perceptual construct, as is the case with
psychological contracts, approaches that elicit employee perceptions should be used
(Herriot et al., 1997). However most of the researches done on the subject have used
survey questionnaire method and rating scales developed in the west. Over use of this
methodological approach has invoked criticism (Coyle-Shapiro et al., 2004; Atkinson
and Butcher, 2003; Rousseau and Tijoriwala, 1998) as quantitative techniques do not
adequately capture the idiosyncratic nature of the contract (Atkinson and Butcher,
2003; Conway and Briner, 2002).
In this background, the paper examines the perceptions of the two parties, employee
and employer and differences if any, regarding organizational obligations. In line with
the literature definition of employer, “organizations become party to psychological
contract as principals who directly express their own terms or through agents who
represent them” (Rousseau, 1995, p. 60), for the purpose of this study, functional heads,
representing the senior management, were considered as employer representative. In
response literature call to use qualitative approaches to measure PC (Taylor and
Tekleab, 2004; Coyle-Shapiro and Shore, 2007), study 1 of this paper uses qualitative
technique to elicit contents of psychological contract, which is later validated by a
survey methodology in study 2.
Examining psychological contract of employees in Indian context is both timely and
significant in the present economic scenario. India is a preferred business location
because of its established infrastructure, technology parks, a well developed software
industry, existing base of blue-chip companies and a development oriented stable
government in the center which has created a conducive regulatory environment for
global corporations. India also has the advantage of a trained and relatively
 JIBR inexpensive human capital (NASSCOM-Everest, 2008). However, with increasing
1,4 changes in the economic and demographic environment, attracting and retaining the
best talent has emerged as one of issues of strategic importance for Indian
organizations (Bhatnagar, 2007). It is critical therefore that employers, domestic as well
as international, make efforts to better understand the attitudes and behaviors of
individuals, particularly their expectations, in order to help improve individual and
240 firm performance.
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Study 1
Methodology
In order to understand the PC contents in India, we met employees from various
organizations, both men and women, positioned at various levels of management
hierarchy. The groups of employee interviewed were random as well as convenient
samples. Random, in the sense that certain organizations were approached and the
sample population was decided based on representation of people at various levels as
well as gender. Few others were approached by the researcher in course of daily life
and work, hence convenient samples. The prime objective of study 1 was to inform our
understanding regarding contents of PC amongst Indian employees and not to make
generalization from a sample to a population of people (Thompson, 1999). The
demographic profile of the employees has been presented in Table I.
Critical incidence technique (CIT) of Flangan (1954) was used to elicit from
employees their perceptions of organizational obligations. The method has been used
earlier by Herriot et al. (1997) and Atkinson (2007). Employees were asked to recall
incidence(s) at work where the organization went beyond or fell short of what might
reasonably be expected of them in their treatment of their employees. It was assumed
that the more frequently a particular category of obligation was cited, the more salient
it was overall in the minds of respondents, and thus the more prominent the component
of the psychological contract to them. The key points of the interview were taken down
verbatim during the course of discussion and consistent with 24-hour rule by
Eisenhardt and Bourgeois (1988), discourse was transcribed immediately after
interviews.

No of employees

Total sample size 71

Sector
Manufacturing 45
Services 26

Gender
Male 54
Female 17

Organizational level
Table I. Junior 36
Demographic profile of Middle 20
respondents in study 1 Top 15
 As many respondents gave more than one incident, a total of 214 incidences were taken Psychological
down verbatim. Upon analysis 150 overlapping items emerged. With the help of three contract contents
PhD students, the overlapping items were merged reducing the number of items to a
total of 43 (Appendix). These were further subjected to thematic content analysis in in India
two-phases. The first stage of content analysis involved utilizing data. According to
Krippendorff (2003), units can be defined on the basis of categorical, thematic,
syntactical, physical and propositional distinctions. In our study, units were defined on 241
the basis of thematic distinctions. In the second phase of analysis, group of three
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assessors from the field of human resources and organizational behavior (two of them
were PhD students and one professor) independently examined and extracted themes
from these incidences and organized data into meaningful categories. Cohen’s Kappa
(Cohen, 1960) was used to compute the inter-coder reliability, because it is considered
most appropriate for classification of non-quantitative data (Futrell, 1995). The overall
Kappa coefficient was 0.65, a value acceptable for qualitative studies.
The most important themes were identified based on the overall frequency of the
elements belonging to each of the themes mentioned by respondents (Table II). It is
important to point out that although there was gender, hierarchal as well as
organizational differences on relative importance of themes, examination of these
variances was beyond the scope of this paper.
Overall, these incidents help identify employees expectations from their
organizations. It was found that employees expected that people in authority,
especially their immediate supervisor, should develop not just work relationship, but
also family ties with them. For instance, one of the managers of a manufacturing
organization said:
My wife was not well and hospitalized. I could not get time to see her very regularly as we had
some critical audit going in the organization. My seniors were aware of my position. So
whenever my bosses went out for some official work, they made it a point to go to the hospital
to look her up. They looked after us extremely well during the difficult times.
Besides supervisory support, employees also expected support from organization at
large. This is evident from one of the incidents narrated by the manager of a
manufacturing firm:
In 1998, when I was working for this organization, my father was diagnosed with a heart
problem. As I had to look after my father, I could not attend work from Oct 1998 to March

Frequency Percentage

Fair policies 47 21.9

Support of the immediate supervisor 45 21.8
Organizational support 36 16.8
Growth and recognition 19 8.8
Work environment 17 7.9
Benefits 14 6.4 Table II.
The job 14 6.4 Psychological contract
Resource support 12 5.4 contents emerging form
Pay 10 4.4 the qualitative study in
214 100.0 study 1
 JIBR 1999. When my father recovered, I joined back. I was called by the plant [factory] head. He
inquired about my father’s health and asked how much of leave I had taken. He adjusted all
1,4 my leave for that period with that year’s authorized leave and the balance with next two
years. That was the day I decided that I will not leave this company and to give it my best.

Study 2
242 Methodology
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Study 1 elicited expectations regarding organizational obligations. Since this is an

exploratory study of PC, empirical validation of these contents in form of factors was
warranted. Study 2 was designed to identify the core factors of PC. A total of 38 of the
43 PC contents which emerged from study 1 were in line with literature and have been
used in prior studies (Lester et al., 2002; Herriot et al., 1997; Kelley-Patterson and
George, 2002; Roehling et al., 2000). However five additional contents like family-like
culture, supportive co-workers, approachability of superiors, ownership by the
superiors when there is an honest mistake, and concern/involvement of the superiors in
work and non-work spheres of the employees, have not been explicitly studied in the
past. To confirm the relevance and suitability of these contents, we contacted human
resource managers of some organizations who confirmed these new items as important
expectations of employee in India. Thus the questionnaire comprised of a total of 43
items (appendix). Finally, the contents were converted into statements and subjected to
pilot study on 50 PhD and management students to check for its meaning as well as
grammatical correctness. After making required changes in the questionnaire, a
large-scale survey was conducted to empirically validate and get factor structure of the
contents of psychological contract in India.
We got consent from six large organizations to participate in study 2. These
organizations represented four different industries, including manufacturing (two
companies), business process outsourcing (two companies), information technology
(one company) and energy (one company). These sample differences in terms of
salience of contents was expected. However, in order to maintain the diversity of our
sample pool and capitalize on the statistical power, we combined the samples in
analyzing the PC contents. Sampling procedure is in line with the literature
recommendation to use diverse population to allow variability in responses (Turnley
and Feldman, 2000; Restubog et al., 2009).
We received responses from 401 employees and 66 employer representatives. Each
questionnaire was coded according to the respondent category-the employee or
employer. The actual wording of the psychological contract survey questionnaire to
the employees was “please indicate how much you believe that your company has
promised to provide you with the following”. The functional heads were asked to
indicate “how much you believe that you as an organization have promised to provide
your employees the following”
In terms of the sample characteristics, of the employee respondent’s sample, 80 per
cent were male. The sample population comprised of relatively young employees with
mean age being 33.6 years. As the respondents were managerial employees holding
positions of responsibility, 99.5 per cent of them had tertiary education (ten plus two
plus three). In terms of the organizational tenure, 14 per cent of employees had spent
less than one year in the organization, 77 per cent spent between two and 15 years and
about 12 per cent of the employees had spent more than 20 years in the organization.
 There was a close split in terms of the hierarchical level (a self-classification). A total of Psychological
30 per cent were junior managers and 35 per cent belonged to middle management. contract contents
Organizational representative sample constituted of 83 per cent male. 80 per cent of the
employees were between 40 and 60 years. In terms of educational qualification, 58 per in India
cent of the employees had tertiary qualification (ten plus two plus three) and 38 per
cent were postgraduates (tertiary þ two years). A total of 60 per cent of the employer
representatives had a tenure of more than ten years in the organization. 243
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Data analysis
The data in this study were submitted to a factor analysis. Principal component
analysis was run in order to simplify and better explain the data. Varimax rotation
with Kaiser normalization was used to reduce the likelihood of items loading on more
than one factor. At this point, as per the thumb rule, items with loading of less than 0.45
and a cross loading greater than 0.32 on the other factors were dropped (Comrey, 1973).
Incase of employees perceptions, 33 organization obligations items combined into
four factors (Table III). These factors were named “growth and developmental
opportunities”, “work culture”, “salary and benefits” and “resource availability” in
order of ranking. The first factor “growth and developmental opportunities” included
eight items. The second factor, namely “supportive work culture” constituted of ten
items. Six items constituted the third factor named “salary and benefits”“. Rest of the
items constituted the fourth factors “resource availability”.
Similarly, based on the thumb rule of Comrey (1973), ten items had to be deleted. A
total of 33 organizational obligations revealed six factors (Table IV) as perceived by
organizational representatives. The first factor namely, Job and resource support
constituted of seven items. The second factor constituted of six items and was named
“salary and benefits”. “Growth opportunities” which emerged as the third factor
comprised of five items, while factors fourth, fifth and seventh factors were named as
“equity”, “work culture” and “developmental opportunities”, constituting four, eight
and three items respectively.
Typological classification of perceptions of employees and employers regarding
organizational obligation is presented in Table V.

Conclusion
An understanding of the motivations of employees is important since it determines
their attitudes and behaviors and also helps organizations in unleashing the potential
of their talented employees (Katzenbach, 2000). The objective of this study was to
explore psychological contract contents of employees in India. The findings of the
study 1 and 2 are consonant with existing literature. Suggestively Indian employees in
our sample are broadly similar to their western counterparts in terms of their
expectations from their organizations. Nevertheless, certain aspects of the study can be
viewed in the light of broader Indian culture.
The results of the study revealed that employees ascribe great importance to people
in authority and considered their employers and immediate supervisors as provider
and caregiver of their needs and interests. In terms of the relative importance of
psychological contract, it was found that employees primarily expect the organization
to provide them opportunities for growth and development opportunities and work
culture followed by salary, benefits and resource availability. These findings are
 JIBR
Items 1 2 3 4
1,4 Growth and Supportive Salary
developmental work and Resource
Factors opportunities culture benefits availability

Healthcare benefits 0.69

244 Retirement benefits 0.64
Fringe benefits that are comparable to
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employees doing similar work in other

organizations 0.60
Competitive salary 0.53
Pay tied to my level of performance 0.51
Fair pay in comparison to employees
doing similar work in other organizations 0.45
Opportunities for the career development 0.68
Opportunities to receive promotion 0.67
Recognition of my accomplishments 0.72
Opportunities for personal growth 0.74
Opportunity to develop new skills 0.77
Job training 0.63
Feedback on performance 0.70
Assistance with career management
(e.g. mentoring and coaching) 0.68
Fairness in selection, appraisal and
promotion 0.67
A reasonable workload 0.45
Meaningful work 0.73
Flexible work schedules 0.72
Freedom to be creative/discretion on how I
perform my job 0.45
Adequate equipment to perform job 0.59
Enough resources (physical and
manpower) to do the job 0.58
Physical working conditions 0.57
Job security 0.46
Quality of working conditions 0.45
Being treated fairly 0.68
Humanity, acting in responsible and
supportive way towards employees 0.61
Work-life balance 0.59
Family-like culture 0.54
Organizational support during personal
exigencies 0.52
Supportive co-workers 0.51
Approachability of superiors 0.45
Ownership by the superiors when there is
Table III. an honest mistake 0.41
Items defining Concern/involvement of the superiors in
dimensions of work and non-work spheres of the
psychological contract as employees 0.41
perceived by Indian Eigen value 18 2.7 2.1 1.2
managerial employees of
private sector Note: n ¼ 401
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1 2 3 4 5 6
Job and Salary
resource and Growth Work Developmental
Factors support benefits opportunities Equity culture opportunities
Healthcare benefits 0.46
Retirement benefits 0.75
Fringe benefits that are comparable to employees doing similar work in other organizations 0.74
Competitive salary 0.71
Pay tied to my level of performance 0.64
Fair pay in comparison to employees doing similar work in other organizations 0.61
Opportunities for the career development 0.72
Opportunities to receive promotion 0.68
Recognition of my accomplishments 0.63
Opportunities for personal growth 0.62
Opportunity to develop new skills 0.45
Job training 0.67
Feedback on performance 0.51
Assistance with career management (e.g. mentoring and coaching) 0.68
Fairness in selection, appraisal and promotion 0.61
A reasonable workload 0.47
Meaningful work 0.71
Flexible work schedules 0.45
Freedom to be creative/discretion on how I perform my job 0.60
Adequate equipment to perform job 0.50
Enough resources (physical and manpower) to do the job 0.53
Physical working conditions 0.77
Job security 0.67
Quality of working conditions 0.62
Being treated fairly 0.45
Humanity, acting in responsible and supportive way towards employees 0.48
Work-life balance 0.45
Family-like culture 0.67
Organizational support during personal exigencies 0.67
Supportive co-workers 0.45
Approachability of superiors 0.46
Ownership by the superiors when there is an honest mistake 0.50
Concern/involvement of the superiors in work and non-work spheres of the employees 0.56
Eigen value 11.66 3.24 2.19 1.84 1.36 1.29
Note: n ¼ 66
Psychological

Items defining

sector
employers of private
perceived by Indian
in India
contract contents

dimensions of
psychological contract as
245

Table IV.
 JIBR particularly interesting because it has been conventionally believed that extrinsic
1,4 factors are far more important in motivating Indian employees than intrinsic measures
such as recognition and autonomy (Kanungo, 1983; Gopalan and Rivera, 1997). One of
the reasons that can be ascribed for changing work values is the increasing exposure to
western ideas through technology, media access, and globalization.
The study revealed differences in the employee and employer perceptions regarding
246 organizational obligations. While, growth and developmental opportunities and
supportive work culture emerged as most important organizational obligations as
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perceived by the employees, employers on the other hand believed that firms are
primarily obliged to provide its employees with job and resource support along with
salary and benefits. It was also found that certain factors were specific to each group.
For instance “equity” emerged as an independent factor in case of employer
representatives but not employees. Similarly, “working conditions and resource
support” emerged as independent factors incase of employees but not employers. Also,
employee representatives perceived “growth” and “developmental” opportunities as
two different factors. These results suggest that while employers consider maintaining
an equitable and fair organization as their prime obligation, for employee’s growth and
development opportunities are of concern. It seems that organizations in India are still
guided by their traditional conceptualization of employment relationship. In terms of
nominal classification, while employees showed inclination towards relational
contents, the employer representatives perceived balanced and transactional
contents as prime organizational obligations towards its employees.
As a practical implication, the study suggests that in India, recruiters need to go far
beyond the discussions on compensation and focus on relational aspects of job such as
the job content and avenues for career growth. Opportunity to constantly upgrade
skills seems to be a good retention mechanism that organizations could employ. Since
employees in India have high need for psychological support, managers and
organization should strive to develop supportive work culture. Creating a
family-oriented work environment will not only motivate employees go beyond the
call of their duty but also help in reducing employees tendency to react if expectations
are not met. The results of the study suggest that there is incongruity between
employee and employer perceptions regarding organizational obligations. As unmet
expectations result in breach of trust and have serious implications on the working
relationship, it is crucial that organizations live up to their promises and avoid
incidences of breach. As a organizational culture, a norm of open communication
should institutionalized right from the recruitment process and continued even when

Ranking Employer Typology Employee Typology

1 Job and resource Balanced Growth and developmental Relational

support opportunities
Table V. 2 Salary and benefits Transactional Supportive work culture Relational
Typological classification 3 Growth opportunities Relational Salary and benefits Transactional
of perceptions of 4 Equity Transactional Resource availability Transactional
employees and employers 5 Work culture Relational
regarding organizational 6 Developmental Relational
obligation opportunities
 the individual joins the organization. Specifically, realistic job-previews (RJP) during Psychological
their entry stages can serve as an important step to bridge the perceptual gap contract contents
regarding organizational obligations, between the two parties of employment
relationship, the employee and their employer. RJP ensures that new comers have in India
accurate expectation from their new job and employer and thus avoid experience of
having unrealistic expectations.
Like all studies, this paper has certain limitations. First, the qualitative analysis 247
represents human interpretation of the themes that emerged from the critical
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incidences and no software package has been used for analysis. Second, the study
examined only organizational obligations as perceived by employee and their
organizational representatives. Future studies could incorporate the mutuality of both
the parties regarding employee’s obligations towards the organization. Third, the
study was conducted in Indian private sector but it did not represent all industries in
the sector. As psychological contract vary due to influence of gender, past work
experiences, type of sector (public and private) and tenure as well as individual and
organizational factors, future studies could address this limitation.
The limitations of the study are counterbalanced by its strength. The mixed
methodology design clearly makes the study rich. The contents of psychological
contract were generated using qualitative approach (critical incidence technique) that
was further validated through a survey questionnaire. Second, the extant literature is
limited by primarily focusing on employee side of the deal. In this paper the contents of
psychological contract as perceived by both, the employees as well as their employer
were examined. This study addresses the preceding limitations of the literature by
examining psychological contract contents in eastern culture thus broadening the
database.

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 JIBR Appendix
1,4
S.no Items

1 Healthcare benefits
250 2 Retirement benefits
3 Fringe benefits that are comparable to employees doing similar work in other
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organizations
4 Competitive salary
5 Pay tied to my level of performance
6 Fair pay in comparison to employees doing similar work in other organizations
7 Opportunities for the career development
8 Opportunities to receive promotion
9 Recognition of my accomplishments
10 Opportunities for personal growth
11 Opportunity to develop new skills
12 Job training
13 Feedback on performance
14 Assistance with career management (e.g. mentoring and coaching)
15 Fairness in selection, appraisal and promotion
16 A job that has high responsibility *
17 A job that provides high autonomy *
18 A job that is interesting *
19 * A job that is challenging *
20 A reasonable workload
21 Meaningful work
22 Flexible work schedules
23 Well defined job responsibilities *
24 Freedom to be creative/discretion on how I perform my job
25 Adequate equipment to perform job
26 Enough resources (physical and manpower) to do the job
27 Physical working conditions
28 Job security
29 Being treated with respect *
30 Quality of working conditions
31 Being treated fairly
32 Safe and congenial work environment/friendly, cooperative, fun work *
33 Participation in decision making *
34 Consultation on matters affecting employee *
35 Humanity, acting in responsible and supportive way towards employees
36 Open and honest two-way communication *
37 Work-life balance
38 Family-like culture
39 Organizational support during personal exigencies
40 Supportive co-workers
41 Approachability of superiors
42 Ownership by the superiors when there is an honest mistake
Table AI. 43 Concern/involvement of the superiors in work and non-work spheres of the
Psychological contract employees
contents used in the
study Notes: *Ten items dropped due to factor loading , 0.45 or cross-loading .0.32 on more than one item
 About the authors Psychological
Upasana Aggarwal is a PhD Scholar at Indian institute of Management (IIT), Bombay, in the
area of Human resource Management and Organizational Behavior. Her research interests contract contents
include psychological contract, work engagement, strategic human resource management and in India
organization culture. Upasana Aggarwal is the corresponding author and can be contacted at:
upasana.aggarwal@iitb.ac.in
Shivganesh Bharagava is a Professor in Human Resource Management and Organizational
Behavior at Indian institute of Management (IIT), Bombay. His research interests include 251
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leadership, performance management and talent management.

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