What is described as a set of perceptions of what employees owe their employers, and what their employers owe them?

The notion of a psychological contract refers to the unwritten set of expectations and mutual obligations that exist between employees and their employers. It encompasses the beliefs and perceptions about what employees feel they owe to their employer in terms of effort, loyalty, and performance, alongside what employees expect in return—such as career development opportunities, fair compensation, and a supportive work environment.

This concept emphasizes the subjective interpretations made by both parties, reflecting the importance of trust and reciprocal obligations in the workplace. While an employment contract is a formal legal document that specifies the terms of employment, it does not capture the nuanced interpersonal dynamics of expectations that define the psychological contract.

Options such as a fair treatment agreement and a non-disclosure agreement are even narrower in focus and do not encompass the broader array of mutual expectations inherent in the psychological contract. Therefore, understanding the psychological contract is crucial for both management and employees, as it can significantly influence job satisfaction, engagement, and ultimately organizational success.