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Can You Recognise When a Psychological Contract Exists?

If you don’t know about or haven’t heard of the Psychological Contract of Employment then the following concept may be more recognisable.

Have you ever been in a situation or a place that felt totally right?  Somewhere where you felt that you belonged and always had; a ‘goldilocks’ place that seemed as though it was meant for you?  It could have been a special interest or sports team during school, a hobby that you loved or…….as we will explore……….a place where you worked – or perhaps where you work now.

When you are in this place, you do your best work, your energy is high and making connections comes easy.  There is a strong sense of knowing and confidence about this place and a sense of pride.

The strong leaders and convivial peers that form your co-worker group acknowledge your efforts and achievements. There is an inner knowing that you are in the right place.

The feeling is palpable and undeniable and often hard to explain.

Beyond the Paper Contract

The people with whom we form bonds in these places have established a type of contract.

We all sign contracts when starting a new job.  A paper contract is a transactional contract.  It is written down and filled with do’s and don’t’s that establish the boundaries and limitations to our work in a legal sense. It also conveys in black and white what we can expect from our employer and what our employer expects of us.

Hopefully, yours is not one with an over-legalised format. These types of contact often confuse and intimidate and strangle the notion of simply establishing some practical expectations.

A paper contract is important.  In Australia, it is a legal requirement for our employers to provide information about our employment conditions.  Better to have it than to not have it!

The Psychological Contract [i]

There is no legal requirement however to consider the other type of contract; the one that establishes the relationship.  The contract that sets the foundation for a more engaging and satisfying working relationship.

The Psychological Contract represents the mutual beliefs, perceptions and informal obligations between an employer and an employee.  It sets the dynamics for the relationship and defines the detailed practicality of the work to be done.

We don’t need to write this contract because we sense it!  We see it, hear it and feel it; it touches our psyche.

This type of contract is more about the ‘how’ we will work together.  How, together we will build that sense of belonging and instil confidence to get the job done.  Early socialisation during the period that precedes the formal employment relationship begins the process of developing the Psychological Contract.

Through socialisation and forming relationships, getting to know people, how they work and opening the Johari Window[ii] the Psychological Contract is established.

Research tells us that Socialisation in the workplace and particularly early socialisation with co-workers establishes important interpersonal relationships that build connection.  Developing connections leads to belonging and self-confidence which in turn leads to a higher motivation to perform and ultimately greater ability to succeed.[iii]



[iii] Fisher C.D.I (1985) Social Support and adjustment to work:  A longitudinal study. Journal of Applied Psychology, 88, 779-794

Onboarding & The Psychological Contract

Before Onboarding of an employee starts, the important relationship-building has begun.  Throughout the recruitment process and often prior, the new starter will be assessing their interest in their new, potential employer.

The employer has the benefit of reviewing a CV and – on paper, assessing the applicant’s suitability for the vacancy.  Applying for work can be brutal with the vast majority of applications going unresponded.

Those Employers who understand the relationship aspects of hiring and are interested in the power of the Psychological Contract will understand the value of their Employment Brand and know that every job applicant must receive some correspondence.  Easy enough to do with a templated script and some software!

Unless the job applicant knows a current employee of their prospective next employer or can access ‘employer ratings’ (Glassdoor and SEEK offer this, although can be limited) then they will judge early impressions of their new employer by their treatment throughout the recruitment process.

The ‘Employee Experience’ has begun!

“I truly believe that onboarding is an art. Each new employee brings with them a potential to achieve and succeed. To lose the energy of a new hire through poor onboarding is an opportunity lost.”  Sarah Wetzel; Director of Human Resources at engage:BDR

In the following diagram, it is easy to see where the transactional contract fits.  Strategic Onboarding Level 1 (passive) will cover aspects of compliance which includes the employment contract; and also cover policies, procedures, codes of conduct, identity & credential verification and other requirements that fall under “Compliance”.

At Level 2 (High Potential) some additional elements of the transactional contract are also covered.  Clarification could include a Job Description, duties list, KPI’s and other expectations.  Level 2 may even include an introduction to organisational culture and if the newcomer is really lucky, a recorded welcome from the CEO and a rev-up about your decision to join the team!

It is not until Onboarding reaches Level 3 – Proactive that we can begin to appreciate a focus on the Psychological Contract.

‘Cultural Fit’ is a term regularly used to describe that ‘X’ factor that a candidate has that increases the likelihood that they will not just succeed in the role but they will flourish within the environment, connect with the team contribute to the Vision, Mission and Values of the organisation.

Underpinning a cultural fit is the concept of the Psychological Contract – going beyond the transactional elements to build a team and organisation where employees feel that they belong.  An environment where people do their best work, the energy is high and, as research has validated leads to belonging and self-confidence which in turn leads to a higher motivation to perform and ultimately greater ability to succeed.

Three Levels of Onboarding – What level of Onboarding has your Organisation achieved?

Onboarding Strategy Level





1. Passive





2. High Potential





3. ProActive





Parties to The Psychological Contract

Stakeholders who play a role in establishing, nurturing and managing the Psychological Contract are all of those people who have participated in the recruitment process.  Building a culture that elevates the Psychological Contract in importance will raise awareness throughout the organisation; but the one that is the most critical is the employee’s relationship with their line manager.

If there were clauses in the Psychological Contract, the manager-employee relationship ‘clause’ is the one to focus on, during Onboarding and beyond.

Providing managers with the skills and understanding of the Psychological Contract will help managers to navigate the ebbs and flows that occur – engagement, re-engagement, reassuring and clarifying and if necessary reinforcing expectations.

Businesses can leverage the benefits of the Psychological Contract by empowering and training managers on the importance of communication to maintain the Psychological Contract.

Which Style of Employment Contract do you Prefer?





Terms & Conditions


Frequently Discussed

Performance Expectations



Manager/Employee Relationship


Performance ‘at or above’ Expectations

Motivation & Commitment

Performance ‘at or below’ Expectations

Strive to Belong

Cultural Fit/Integration


Long Term Commitment


Short Term, Transient

Our Tips for Onboarding & The Psychological Contract

When designing an Onboarding program, pay attention to the ‘touchpoints’ that occur between the new starter and their line manager.  Particularly pre-commencement; this simply cannot be delegated – the line manager’s communication and connection with the new starter is critical

If needed, train managers and supervisors on the small things that can make a big difference when managing the Psychological Contract.  Check the table above, particularly ‘Performance Expectations’ and the relationship factors.

At Senza Carta, when we design Onboarding for our clients, a 10-minute check-in between the new starter and their manager is included at end-of-day during the first week.  At a pinch, delegate this task but heck, 10 minutes is not too much ask at the end of each day.  Use this time to see how the day has gone, answer questions and provide encouragement.

If this article was helpful then please consider sharing it with others who will benefit from understanding the importance of The Psychological Contract.  Check out our Resources page and grab a copy of the Senza Carta White Paper – Onboarding New Employees – Senza Carta’s approach to maximising the employee experience.

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