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In today’s VUCA business world, the skilled knowledge workers are the most valuable assets of any organization. It is critical for the success of the organizations to maintain progressive and harmonious relationships with the employees. The increasing global competition intensifies stiff economic uncertainty leading to an environment of volatility and an aura of uncertainty for the employers (Rousseau, 2011). The ever-changing dynamics of organizations makes it challenging for the employers to retain efficient, dynamic and a profitable workforce. IT industry in India has been in the forefront of this challenge for quite some time now.
The Indian IT industry is the vanguard of the country’s resurgence story post liberalization. In FY - 2015, the industry clocked revenues of USD 146 billion with its exports segment poised to reach USD 98.5 billion (NASSCOM press release, 2016). In FY 2016 the exports are expected to grow by 12-14% as per NASSCOM’s estimates. The industry currently employs more than 1 million people directly with indirect employments reaching to 2.5 million people. Amidst such a glory tale, there are certain blemishes as well. International Business Times reported that the attrition rate of TCS touched almost 13.3% in the second quarter of 2016. Infosys also seemed to be having a hard time as well. As per its publicised reports, attrition has been 21% for the quarter ending on June 30th, 2016 (Prabha, 2016). At a juncture like this, it is very important for organisations to understand what can help arrest this surging rate of attrition.
Clear understanding of psychological contract and its determinant factors can help Indian IT organisations in this direction proactively to curb the turnover intention of their employees (Ballou, 2013). Psychological contract is a perceived mutual agreement that exists between two parties (Argyris, 1962; Levinson, 1962; Rousseau, 1998); the employee and the employer in this case. It is an employees’ discernment about a relationship of obligatory reciprocity that they feel exists between them and their employer (Rousseau, 1989). It is quite subjective in its disposition, owing much to the individual differences in cognitive and perceptual frontiers (Levinson, 1962). However, in essence, it is a promissory contract comprising of a promise, payment and acceptance (Rousseau & Parks, 1993). The various determinant factors that drive psychological contract between employees and their organisations can lay the foundation of this proactive approach. As psychological contract and its fulfillment has been found to augment engagement amongst employees (Chang et al., 2013; Bal et al., 2013).