A psychological contract refers to __________.

A psychological contract represents the informal expectations and agreements that exist between an employee and an organization. This concept emphasizes the mutual beliefs, perceptions, and informal understandings that develop over time as individuals engage with their workplace. Unlike a formal employment contract, which outlines specific rights and obligations in a legal context, the psychological contract encompasses the unwritten rules and expectations that influence job satisfaction, engagement, and overall workplace dynamics.

This understanding is crucial because it shapes how employees perceive their commitments and the commitments of their employers, impacting relationships, motivation, and performance. The psychological contract can evolve based on experience, communication, and changes in the work environment, making it essential for management to remain attuned to employees' perceptions to foster a positive organizational culture.