How the Covid-19 Pandemic Hastransformed the Psychological Contract

Published: 2023/07/05 Number of words: 1473


In March 2020, the UK Government imposed restrictions on employers in order to avoid the spread of Coronavirus Covid-19, stating that employees should work from home wherever possible (House of Commons, 2022).  The imposition of home working, referred to as lockdown, irrevocably transformed the employer-employee relationship, for instance working practices (Kropp, Cambon & Clark, 2021; Petersen, 2021). Employee surveys have demonstrated that a large proportion of the labour force does not wish to return to previous office based working routines (Smith, 2020; IACEW, 2021). Recently, the Government has admitted that it is considering a law that allows employees the legal right to request home working.  This proposal is strongly opposed by the Confederation of British Industry (CBI) in so far as it could prevent employers from controlling the location in which specific tasks are conducted (Stewart & Jolly, 2021).

This essay defines the meaning and substance of the psychological contract and then critically appraises the major changes in working practices generated by the Covid-19 restrictions. It also identifies the skills and knowledge required by leaders/managers and employees to ensure the accomplishment of organisational goals in the new world of work.

Change in the Psychological Contract

The legally binding work contract between employee and employer confirms their mutual obligations in formal terms, whereas the psychological contract is associated with how each party perceives it will meet those commitments, and is dependent on their respective values, beliefs and expectations (Torrington, Hall, Taylor & Atkinson, 2020; Wong, 2021). The psychological contract comprises five elements: the support given to employees by managers; training and development initiatives, career progression pathways; job security; the employer’s reputation and how it influences society generally (Wong, 2021, p.2).  Individual perceptions of the psychological contract were unexpectedly altered by the acceleration of digital working forced upon managers and employees at the beginning of lockdown (World Economic Forum, 2021). The consequence of this sudden change on the five elements of the psychological contract and how they were addressed by leaders/managers is established from recent studies.

The impact of home working on employees had many dimensions; attempting to balance domestic and work commitments; learning to use new technologies in order to communicate with managers and colleagues; working in a virtual rather than a physical team environment; operating on a basis of greater autonomy.  The personal impact on employees was to enhance job insecurity and anxiety as the pandemic restrictions continued on a long-term basis (Petersen, 2021; Kirby, 2020). Many companies introduced communication technologies, such as Zoom and Microsoft teams, which many employees and managers had never experienced previously. Whilst some companies provided training on their use, this was not universal practice, and associated technical difficulties were also experienced (Kirby, 2020). Employee learning during this period was also characterised by employee self-learning as they identified, which working practices were most effective in their context. Consequently, control of work passed from the manager to the employee and required higher levels of mutual trust than in the past (Kirby, 2020; Kropp, Cambon & Clark, 2021).

Leaders and managers also had to quickly learn new skills, particularly crisis management skills. These comprised a combination of ensuring that the business survived and identifying the leadership styles that would stabilise it, which inferred that quick solutions must be found to motivate and support employees, and that the leader could operate effectively under pressure (Deloitte, 2020, Claes, 2021). Hence, whilst leadership was required to provide the tools and processes for employees to work successfully in the virtual environment, it also needed to demonstrate confidence, strategic focus on accomplishment of specific goals, and be supportive of the challenges that employees were experiencing; a balance of traditional leadership with human characteristics (Deloitte, 2020; Claes, 2021, p.1). Therefore, leaders needed to shape the organisation for the future, whilst providing vision, remaining composed and communicating reliable information (Deloitte, 2020). They began to realise that successful future operations could no longer rely on the regular 9 to 5 routines, but would be characterised by remote or hybrid working, recruiting the best talent from any location and employees changing jobs more often. High levels of job performance would depend on reskilling and upskilling every member of the organisation to optimise the use of digital technologies, and consequently to generate innovation and higher productivity (Peterson, 2021). The implication of these changes was that future employees would be selected on the basis of excellent digital skills, resilience, creativity, collaborative capacity, flexibility in terms of working practices and location, and agility to support the firm’s growth (Claes, 2021)

Career progression would also demand different employee qualities, for example leaders/managers would be selected according to their capacity to lead teams virtually and to develop their skills including building high levels of collaboration and cohesion, without the support of traditional means such as informal lunches or face to fact conversations (Sneader & Sternfels, 2021). Additional human orientated personal skills for career advancement were forecast as being pragmatic, courageous and demonstrating compassion (Deloitte, 2020).

The role of Human Resource Managers (HRM) in supporting the successful transition in all these five aspects of the psychological contract would be vital to maintaining and strengthening the employer brand, its reputation and values (Clais, 2021). This goal would be achieved by interventions that included specific leadership training to be undertaken by all senior managers regarding how to support the emotional well-being of employees and understanding the challenges of remote working. Initiatives to accomplish this goal incorporate: the creation of cross functional learning circles that have the purpose of identifying and resolving cross-company challenges, facilitated by shared responsibility for accomplishing outcomes; development of peer learning, mentoring, reverse mentoring, self-analysis, remote learning. HRM should also create a leadership development programme focused on career progression, which develops a growth mindset (Dweck, 2007), and the new leadership skills that are vital in the digital workplace, (Clais, 2021).

The empirical research conducted by the Chartered Management Institute identified several implications for leadership practice post Covid-19, which tend to confirm the findings of other experts whose perspectives have been integrated into this essay.  In order to rebuild the psychological contract effectively, leadership/managers must be able to build an atmosphere of trust with employees, by maintaining continuous communication, which expresses understanding of their situation and challenges, and that requires high level listening skills. Managers must demonstrate openness to different ideas and viewpoints and therefore treat each employee as a valuable individual contributing to organisational success (Bassett, Orton-Jones & Rock (2021).
The purpose of this essay was to establish how the Covid-19 pandemic transformed the psychological contract and to identify the implications this had for leaders and employees in the post pandemic workplace.  The changes to the five elements of the psychological contract demonstrate that the Covid-19 pandemic permanently altered the employee-employer relationship, generated a new hybrid, digital working environment and the requirement for new leadership skills and knowledge so that employees would remain committed to the employer brand.
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