Psychological contract refers to mutual unwritten expectations that exist between an employee and his/her employer regarding policies and practices in their organization. Psychological contract influences job attitudes and performances of the employees. This study aims at developing a deeper understanding about psychological contract and employment relationship. Six psychological contract variables—relational contract, transactional contract, employer's commitment/obligation to employee, employee's commitment/obligation to employer, employer's relationship with employee, and employee's relationship with employer—were measured on 202 employees from 15 IT companies randomly chosen for the study. A 52-item Psychological Contract Questionnaire (PCQ), adapted from the Psychological Contract Scale (Millward and Hopkins, 1998) and the Psychological Contract Inventory (Rousseau, 1995), was used for collecting the data. The study revealed that relational contract was dominant in the IT companies under study. Employees' commitment/obligation to their employers was higher than employers' commitment/obligation to their employees. Employees' relationship with their employers was also stronger than employers' relationship with their employees. The implications of the study for the IT industry have also been discussed for harnessing the energy, knowledge and creativity of employees for competitive advantage.

Psychological contract has now become an accepted part of the thinking and vocabulary of human resource practitioners. The relationships between employers and employees in many modern Indian organizations resemble a marriage under stress, characterized by poor communication and low levels of trust. Neither gets the full benefits from the employment relationship, which has to be a top priority for organizations. Getting people to turn up for work is the easy part. Getting them to go that extra mile requires effort and imagination. Employers should be looking to generate passion and enthusiasm, and to make work a happier experience for all their employees. This can be achieved by building a positive psychological contract which results in good employment relationships.

In the new people economy, organizations cannot survive unless they have the right kind of knowledge. It is the people who drive organizations to success or failure. People, as a resource, have gained paramount importance, as reflected in most of the annual reports and comments from the CEOs. This turnaround in attitude is because access to other resources is no longer limited—capital flows freely across borders, technology is available at a price to CEOs who cannot develop it, raw material is free to be transported across the globe, and information is available to any hitchhiker on the digital highway. Globalization has created an all-important quality standard. The world economy has increasingly become service-oriented.

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