The Individual–Organization Relationship

Use your knowledge of the psychological contract to answer the questions below.

The relationship between employees and employers implied by the concept of the psychological contract is similar to that of the relationship between buyers and sellers   in that each party seeks to gain value from the exchange.


The psychological contract is much like a purchase agreement between buyers and sellers, because both parties believe they will benefit from the exchange. Employees offer their time and effort in exchange for pay. Customers offer their money in exchange for a company’s product.

When it comes to the psychological contract, individuals make contributions to the organization, and the organization provides the employee with inducements.