Describe psychological contract.

A psychological contract represents the unwritten, implicit set of expectations and obligations that form between an employer and an employee. Unlike formal, written contracts detailing job responsibilities, salary, and benefits, the psychological contract encompasses the intangible aspects of the working relationship.

This contract includes expectations about the work environment, job satisfaction, career development opportunities, and mutual respect and fairness. For the employer, it might involve expectations regarding the employee's loyalty, commitment, and productivity. For the employee, it often includes expectations about job security, work-life balance, recognition, and being valued and supported.

The psychological contract is dynamic and evolves over time, influenced by changes within the organization, individual experiences, and broader social and economic factors. A positive psychological contract can foster employee engagement, loyalty, and productivity, while a breach or imbalance in this contract can lead to dissatisfaction, reduced commitment, and turnover. Therefore, maintaining a healthy psychological contract is crucial for organizational success and employee well-being.