Psychological Contract Breach and Organizational Outcomes: Moderating Effect of Tenure

Abstract

Conventional wisdom tells us that only if the employees are paid enough, they can be made happy consequently productive. However, studies have suggested that the nature of the relations between employer and employee have a vital role to play in employee’s job satisfaction, Likewise, employee’s intention to leave the organization is influenced by both money related factors and relational elements. Studies suggest that the nature of the employer-employee relationship significantly affects the employee perceptions and reactions. Psychological Contract is a model which will help one to understand the employer-employee relationship. The mutual expectations and obligations proportionate to each one’s contribution is a general way to define psychological contract. Research suggests that a breach of this contract can affect the organizational outcomes and employee reactions negatively. This study considers the psychological contract breach from the employees’ perspective. Although studies have been made on the effect of psychological contract breach on several organizational outcomes, little effort has been noticed to be made to study the effect of the commonly identified dimensions – relational contract breach and transactional contract breach- on the employee reactions. While social and emotional factors such as loyalty and support contribute to relational contract, compensation and personal benefits contribute to transactional contracts. This work is noteworthy as it assesses the effect of relational contract breach and transactional contract breach on job satisfaction and employee turnover intention. The study also examines the effect of individual level variable- tenure – on the relationship of RCB and TCB with job satisfaction and turnover intention. Respondents to this study were 228 teachers from the self-financing colleges in the district of Ernakulam, Kerala in India. The results suggest that relational and transactional contract breaches will lead to significant employee reactions- reduces job satisfaction and enhances turnover intention. Tenure moderates the relationship between relational contract breach and turnover intention but not between relational contract breach and job satisfaction. Conversely, tenure moderates the transactional contract breach- turnover intention relationship but not transactional contract breach- job satisfaction.