The fulfillment of the Psychological Contract has been

purpose of this study is to investigate relationship between Psychological
Contract Breach, Job Satisfaction, while focusing on the mediating role of Occupational
Stress. The original concept of the Psychological Contract first took shape in
the 1960s (“The Psychological Contract”, 2017), and gained much recognition in
Denise Rousseau’s article “Psychological and implied contracts in
organizations” (Rousseau, 1989). Since then, there have been many contributions
to this topic and there is an increasing focus on its relationship and
implications with other workplace factors, namely such as, job satisfaction and
occupational stress. Job satisfaction develops through cognitive and affective
reactions of employees to their jobs (Locke, 1969; Judge and Ilies, 2004; Rich
et al., 2010) and Psychological Contract Breach, as suggested by the
literature, appears to have a significant and inverse relationship with
employees’ job satisfaction (Portwood & Miller, 1976).  The perceived fulfillment of the
Psychological Contract has been found to serve as a motivational factor for the
employee that ultimately leads to an enhancement in work and a perceived breach
leads to a loss of motivation and loss of effort (Parzefall & Hakanen,
2010).  Occupational stress, also known
as job stress, is an employee’s psychological and physiological reaction in the
situation where the demands of their work exceed their abilities and resources
(Colquitt, LePine & Wesson, 2013). Extreme stress occurring due to unmet
expectations, can lead to decreased productivity and according to Yaacob &
Long (2015) individuals with a higher percentage of occupational stress may not
be satisfied with their job and would, as a result, therefore not feel happy
working in the organization.

Problem Statement

in the past have placed more focus on the development of the Psychological
Contract and what factors may contribute to either its fulfillment or breach in
the workplace (“The Psychological Contract”, 2017). Through current research
conducted in recent years, the Psychological Contract has gained prominence in
literature with more emphasis now being placed on the impactions and effects of
its fulfillment and breach. As a result of findings of such studies, the
psychological contract has been linked to significant work outcomes such as
commitment, job satisfaction, worker engagement and performance (“The
Psychological Contract”, 2017).

regard to the Pakistani context, very limited research has been done on the
topic of Psychological Contract and its implications, however the studies that
have been conducted support the general consensus that perceived psychological
contract fulfillment or breach impacts the employees’ attitude towards their
jobs (Mubeen, 2009; Ahmed, Nisar & Naqvi, 2016; Khalid & Malik, 2016).
studies have also been conducted within different sectors concerning the impact
of occupational/job stress on job satisfaction and have found similar results
that support the overall negative relationship between the two variables
(Mansoor, Fida, Nasir & Ahmed, 2011; Khan, Ramzan, & Butt, 2013;
Razzaghian & Ghani, 2015; Danish, Shah, Aslam & Ali, 2015; Riaz, Ahmed,
Riaz, Murtaza, Khan & Firdous, 2016).

Contracts play an essential role in deciphering employer-employee relations and
employee behavior in general. The breaching of such contracts have a
significant negative impact on an individual’s well-being (Reimann & Guzy,
2017), therefore, it is important to shed more light on how Psychological
Contract Breach acts a workplace stressor and what implications it holds on
employees’ overall job satisfaction while looking into what other constructs
may influence or facilitate this particular relationship. Since no evidence of a
research focusing on all three variables together was found and it is believed
that such a study is expected to contribute to literature.


idea of the Psychological Contract first emerged in the 1960s, and since then
there have been many contributions, with the focus of research now shifting
towards the implications of the Psychological Contract in the workplace and its
relationship with other workplace factors and outcomes, as compared to earlier
researches such as those of Morrison and Robinson (1997) and Cullinane and
Dundon (2006) that primarily focused on its development (“The Psychological
Contract”, 2017).  This, however, is
still a relatively new area of research and while the relationship between
Psychological Contract Breach and Job Satisfaction has been established, a gap
still exists concerning what other factors or variables may facilitate or
impact this relationship, which is particularly why this research focuses on
the role of occupational stress, one of the major health hazards of the modern
workplace, as mediator.

Importance of research

made evident by the literature, Psychological Contract is becoming an
increasingly relevant aspect of workplace relationships and employee behavior
in general (“The Psychological Contract”, 2017). Previous researches on
psychological contract breach have sought to understand its relationship with
job satisfaction. This current study will add to the existing body of
literature by exploring the mediating effect of occupational stress on the
relationship between psychological contract breach and employee’s job

by realizing the implications of a psychological contract breach, organizations
would perhaps be better able to assess and manage how to avoid such breaches
and enhance job outcomes. Finally, the findings of this study would also add to
the importance of the Psychological Contract in the workplace, the breaching of
which has become a norm rather than an exception and the serious implications
it can hold on an employee’s health and their work. This study will also
highlight how the psychological contract serves as an important factor in
determining an employee’s level of satisfaction with their job and work. Implications
of the findings would be discussed to gain better understanding on how the
avoidance of PCB can lead to better management of job satisfaction.


main objective of this research is to study the relationship between PCB and
Job Satisfaction in small-scale companies in private sector of Lahore,
Pakistan. The role of Occupational Stress as a meditating variable is also to
be investigated in order to shed more light on the importance of Psychological
Contract Breach and its implications and consequences within the workplace.

Research Question

As the purpose of this research is to gain
further understanding of Psychological Contract Breach based on its impact on
Job Satisfaction through Occupational Stress, this study deals with the
following research questions:

·       What
is the relationship between Psychological Contract Breach and Job satisfaction?

To what extent does PCB act as a predictor
for Occupational Stress?

To what extent does occupational stress
mediate the relationship between PCB and Job Satisfaction?

2.     Literature Review

Psychological Contract Breach

psychological contract is an unsaid, unwritten contract that refers to the
mutual expectations that exist between the employer and employee (Rousseau,
1989). The Psychological Contracts play an essential role in understating
employee behavior as well as the employee-employer relationship.

to Rousseau (1989), there are essentially two types of psychological contracts.
A transactional psychological contract is short-termed and places emphasis on
the exchanging of extrinsic factors (De Cuyper & De Witte, 2006).  Employees who base their contract on
transactional terms may expect monetary rewards and financial gains in exchange
for their services and efforts (Bellou, 2009). However, on the other hand,
employees whose psychological contract is relational in nature seek reward
based on status, recognition, job security and promotion (Bellou, 2009). This
is because a relational psychological contract is established on more than just
tangible rewards and involve intrinsic factors (Rousseau, 1990).

development of a psychological contract begins on the basis of the potential employee’s
subjective point of view that there will be a fair exchange of needs once hiring
is complete (Hess & Jepsen, 2009). Rousseau (1989), while seeking to
explain the nature of a psychological contract, its development, evolvement, maintenance,
and violation, stated that during the starting phase of a psychological
contract, the organization would offer consideration to the employee while
expecting that the employee would return the benefit. Such expectations and
promises are both implicit and based on subjectivity, and the employee generally
believes that the contract is founded on trust and fair dealing. In turn, the
organization expects an employee to perform their responsibilities and duties
through the use of their abilities and skills. This reciprocity of
consideration and promise allows for the relationship between the employee and
the organization to take root.

the course of the psychological contract, there are times when the employee and
the organization may have different expectations. Such incongruence between the
expectations of the employer-employee may lead to the violation of the
psychological contract (Ballou, 2013). Psychological Contract Breach is defined
as the perception of the employee that the organization they are affiliated
with has failed to meet the obligations and promises offer to them during the
initial stage (Gakovic & Tetrick, 2003). In the employee’s view any action
that goes against their expectation holds the potential to create a contract
breach (Rousseau, 1989).

breaching of such contacts is associated with multiple significant work place
outcomes such as, decrease in organizational commitment, citizenship behavior
and worker
engagement, and an increase in demotivation, intent to leave and absenteeism (Ballou,
2013; Rayton & Yalabik, 2014). As established by research there is also a
significant negative effect on an employee’s well-being as well as their job
satisfaction, however the nature and impact of this relationship is still open
to further research and debate (“The Psychological Contract”, 2017).

2.2. Job Satisfaction

satisfaction is the extent to which an employee’s job needs are met and in
turn, perceived by the employee to be met (Porter, 1962).  It is “a positive (or negative) evaluative
judgment one makes about one’s job or job situation” (Weiss, 2002, p.175). It
is essentially a combination of both what an employee feels about his/her job
and what s/he thinks about the various aspects of his/her job (Colquitt, LePine
& Wesson, 2015).

one the most desirable outcome of workplace behavior, Job Satisfaction is one of
the most extensively studied workplace behavior and found to be quite prevalent
in the literature (Judge  & Church,
2000). Job satisfaction has been explained through a number of work
motivation theories such as Maslow’s (1943) Hierarchy of Needs, Bandura’s
(1977) Social Learning Theory and Hackman and Oldham’s (1976) Job
Characteristics Model.

the theory of  Job Satisfaction that has
gained most prominence and acceptance was proposed by Locke (1976), who explained
job satisfaction as “a pleasurable or positive emotional state resulting from
the appraisal of one’s job or job experiences” (Locke, 1975, p.1304). According
to Bernstein and Nash (2008), job satisfaction consists of cognitive, emotional
and behavior components. The cognitive component of job satisfaction alludes
to thoughts and beliefs regarding the extent to which the job is considered to
be challenging or rewarding. The emotional component pertains to feelings of
excitement, happiness, sadness, anger or boredom that are affiliated to the
job. The behavioral component consists of actions performed by individuals
related to their work such as working overtime, being absent, coming late, etc.
(Bernstein & Nash, 2008).

satisfaction has become a central focus of organizational behavior owing to its
significant association with important work factors such as job performance,
job withdrawal behaviors, organizational commitment, turnover, and absenteeism
(Judge, Thoreson, Bono, & Patton, 2001; Kazi, & Zadeh, 2011; Medina,
2012). It is important to study what factors shape job satisfaction as it is an
important element that enables organizations to gain an advantage over its
competitors. Employees often regarded as the most valuable asset of an
organization as it is the workforce that sets apart successful organizations,
and such success can only be achieved if the employees are satisfied with their
work and organization (Grant, Fried & Juillerat, 2010).

2.3. Relationship
between Psychological Contract Breach and Job Satisfaction

negative impact of PCB on job satisfaction has gained much recognition in
literature (Robinson & Rousseau, 1994; Coyle-Shapiro and Kessler, 2000;
Gakovic and Tetrick, 2003; Rigotti, 2009). It has been illustrated that PCB leads
to a decrease in job satisfaction due to a number of reasons, such as “unmet
expectations, loss of trust, loss of inducements, feelings of inequity and
impediments to goal progression” (Conway& Briner, 2005, p. 71).

and Noe (1999) focused on the evolution of the Psychological Contract and found
supporting evidence that the Psychological Contract mediates the relationship
between work experiences and work outcomes such as satisfaction and intention
to leave. Research
also shows that the extent to which employees perceive psychological contract
breach has a significant effect on not only their behavior but their attitudes
towards their job as well (Kuang-Man, 2013). Furthermore, Chaubey and Bist
(2016) after conducting a descriptive research study also found that job
satisfaction is affected by the Psychological Contract.

findings of a study by Rayton and Yalabik (2014) also revealed a significant
relationship between Psychological Contract and job satisfaction and similar
other researches also support such findings and have identified the
Psychological Contract as a predictor of job satisfaction (Zhao et al. 2007;
Bal, De Lange, Jansen, & Van Der Velde, 2008).

gaining a firm-footing in the body of literature, the relationship between
Psychological Contract Breach and Job Satisfaction, is still open to further
scrutiny and debate. Taken as a whole, evidence points toward the existence of
a significant relationship between PCB and Job Satisfaction and this study aims
to further the research by focusing the role of occupational stress, one of the
major health hazards of the modern workplace, as mediator and exploring how it
may facilitate or impact the relationship between PCB and job satisfaction.

2.4.Occupational Stress as a Mediator

stress is a major, recognized problem that occurs within the workplace and
often adversely affects employees (Oginska-Bulik, 2006). As reported by
Jahanzeb (2010), due to increasing technological changes, information overload,
and demand for greater productivity, fierce competition and uncertain future,
the workplace has become a source of extreme stress. To remain in stride with
the dynamic and ever-changing nature of today’s organizations, employees more
often than not are preoccupied with meeting the obligations and demands of
their jobs while not paying attention to “stressors” that are adversely
impacting their lives. As a consequence, work demands may end up harming both
mental as well as the physical health of the employee (Yaacob & Long, 2015).

general review of the literature present reveals that Psychological Contract
Breach is believed to have a negative impact on overall employee behavior and
health (Kuang-Man, 2013). For instance, Jong, Clinton, Rigotti and
Bernhard-Oettel (2015), conducted a research that demonstrated an negative
relationship between breached obligations and employee well-being. Another
study by Bocchino, Hartman, and Foley (2003), concluded that individuals with
higher levels of perceived psychological contract violations reported higher
stress symptoms than those with lower levels of perceived psychological
contract violations.

Similarly, Gakovic and
Tetrick (2003) investigated the role of psychological contract breach in
employees’ experience of emotional exhaustion and found that psychological
contract breach contributes to employee experience of job strain and feelings
of stress. Reiman and Guzy (2017) also sought to elaborate on the effects of
psychological contract breach (PCB) on mental and physical health of the
employee and called for further study to further establish the role of Psychological
Contract Breach as a psychosocial, workplace stressor.

With regard to job
satisfaction, a study conducted by Burke (1976) revealed that there is a
significant relationship between occupational stress index and job satisfaction
index, that is; the greater the amount of stress, the lower the level of job
satisfaction. Similarly, meta-analysis of 485 studies by Faragher, Cass &
Cooper (2005) provided evidence of a strong association of an employee’s job
satisfaction with their mental and physical health, and that job
dissatisfaction was strongly related to feelings of burnout, depression and
anxiety. A recent research by Annamalai and Kamalanabhan (2016) also found a
negative association between job satisfaction and occupational stress.

As a whole, the effect of
occupational stress on job satisfaction has also been well-documented across
different contexts and professions and findings of multiple studies have come
to the same conclusion: occupational stress has a strong, negative impact on an
employee’s job satisfaction (Ahsan, Abdullah, Gun Fie & Shah Alam, 2008;
Trivellas, Reklitisa & Platis, 2013; Yaacob & Long, 2015).


Theoretical Support

The relationship between Psychological
Contract Breach (PCB) and Job satisfaction can be better understood on the
basis on the Social Exchange Theory (SET) (Cropanzano & Mitchell, 2005).
According to the Social Exchange Theory, PCB can be established as a predictor
of Job satisfaction because the perception of un-fulfilled promises and
obligation would lead to employees feeling less satisfied with their job (Conway
& Briner, 2005).

Additionally the role of
occupational stress as a mediator can be established through the Effort-Reward
Imbalance (ERI) model (Siegrist, 1996). Similar to the SET, the ERI theory
proposes the relationship between the employer and employee is based on the
reciprocity of efforts and a deficit in this reciprocity would lead to a state
of emotional distress stress which in turn to lead to a loss of motivation and effort
(Siegrist, 1996). In short, so long as both parties (the employer and the
employee) perceive fair exchange, a healthy relationship would continue where
both parties would demonstrate willingness to make sacrifices and efforts for
one another, however, when an imbalance in the contract is perceived the
exchange relationship would deteriorate (Rupp & Cropanzano, 2002).


Psychological Contract is an evolving concept that holds many implications in
the workplace. Taken as a whole, evidence points toward the existence of a
significant negative relationship between Psychological Contract Breach (PCB)
and Job Satisfaction and this study aims to further the research by focusing on
the mediating role of Occupational Stress. Furthermore, since there is yet to
be a study in Pakistan that has investigated the influence of PCB on an
employee’s job satisfaction with regard to occupational stress, this current
research can be considered a pilot study concerning the issue.


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