Determinants of Psychological Contract in IT/ITES Industry

M G Shahnawaz* and Md. Hassan Jafri**

The present study is designed to investigate the influence of organizational culture and Human Resource practices (HR practices) on the development of psychological contract as such and two dimensions of it, transactional and relational. Data were collected from 95 full-time working employees based on convenience and snowball sampling from Information Technology/Information Technology Enabled Services (IT/ITES) companies situated in two metros in India. The results indicate that only HR practices, taken collectively, influence the psychological contract of IT/ITES professionals. The results further indicate that only maintenance and retention dimension of HR practices impacts relational contract and no dimension of culture has any influence on it. However, three dimensions each of culture and HR practices influence transactional contract. This suggests that HR managers need to ensure that the HR policies and practices and culture are all well in place to reap the positive benefits of a balanced psychological contract.

Introduction
Organizations in the contemporary world could be seen as a place where various forms of exchanges among various stakeholders of the organizations take place (Hecker and Grimmer, 2006). How these exchanges are carried out, maintained, respected and kept/ breached have great implications for organizational members as well as for the organizations as a whole. The exchange/relationship may not always be formalized in terms of formal contract or agreement. In the recent years, increased attention has turned to the psychological aspects of this relationship because it works as a powerful vehicle that drives employees behavior in the organization, and this aspect of relationship is aptly called psychological contract. In modern business environment, it is well known that employees and employers form assumptions about their mutual expectations and obligations in their employment relationship and this develops because of both individual as well as organizational factors or because of interaction of various macro and micro variables (Coyle-Shapiro and Neuman, 2004). Before we proceed further, a brief introduction of the market segment, on which the present research is based, is presented. Information Technology/Information Technology Enabled Services (IT/ITES) is a growing sector in India. Over the past decade, India has
Author pls pro* Associate Professor, Department of Psychology, Jamia Millia Islamia, New Delhi 110025, India. vide email ID E-mail: xxxxxxxxxxxx
** Lecturer, Gaedddu College of Business Studies, Gedu, Bhutan, India. E-mail: hassaan_j@rediffmail.com DeterminantsAll Rights Reserved. 2011 IUP. of Psychological Contract in IT/ITES Industry 1

emerged as one of the fastest growing IT markets in the Asia-Pacific region. According to the India Brand Equity Foundation (IBEF, 2010), based on the statistics of the National Association of Software and Service Companies (NASSCOM), the apex body for software services in India, which recently released the publication Strategic Review 2010, the ITBPO sectors revenue as a proportion of the countrys Gross Domestic Product (GDP) grew from 1.2% in FY 1998 to an estimated 6.1% in FY 2010. The Indian workforce in this sector has earned an image of low cost but high quality technical workers. This has helped the Indian IT/ITES industry to maintain a promising growth rate. In order to maintain the growth rate and competitive advantage in this sector, it is necessary to understand employees expectation and perceived obligations as these influence many personal and organization-related outcomes. Therefore, how psychological contract develops in this market segment has both theoretical and practical implications. The issue becomes even more relevant, as except for very few studies (Tyagi and Agrawal, 2010), the construct of psychological contract has so far been a neglected area of research in the Indian context. Thus, this research was aimed at exploring the antecedents of psychological contract in IT/ITES industries in India. More specifically, two organizationrelated factors such as organizational culture and HR practices have been chosen for the present research. In the next section, the relevant concepts are explained and literature is reviewed on how organizational culture and HR practices are linked to the development of psychological contract. This review leads to the development of the hypotheses to be tested in this study. The details concerning the methods are provided next, including the different measures used in this study. Then results are discussed, together with a concluding section to reflect on the theoretical and practical relevance of the findings.

Concepts and Literature Review

Psychological Contract
Psychological contract refers to individual beliefs or perceptions regarding reciprocal obligations. Psychological contracts are beliefs, based upon promises expressed or implied regarding an exchange agreement between an individual and the organization. Psychological contract in the employment refers to the belief in mutual obligations between that person and another party such as an employer (Rousseau and Tijoriwala, 1998). It has been argued that perceived obligations within the psychological contract are often more important to job-related attitudes and behavior than are the formal and explicit elements of contractual agreements (Thomson and Bunderson, 2003). Psychological contract thus tends to play a key role in the contemporary employment relationship (Sels et al., 2004, Sturges et al., 2005). It reduces uncertainty and gives employees a greater sense of predictability and security and control (Shore and Tetrick, 1994). There are two types of psychological contracttransactional and relational (Rousseau, 1995). Transactional contract is based on economic exchange, which
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translates to a short-term, with a closed-ended focus on material rewards in return for well-defined employee contributions to the organization (Rousseau and McLean Parks, 1993; Millward and Hopkins, 1998; and Aselage and Eisenberger, 2003). Employees with transactional contracts tend to adhere to its specific terms and they feel obligated to complete the explicit requirements of their role. On the other hand, relational psychological contract is characterized as socioeconomic exchange and is broader in nature, as opposed to the closed-ended focus of the transactional psychological contract. In relational contract, employees place a large number of expectations on their organization. However, in return, they feel obligated to go beyond the explicit requirements of their role. This is manifested in behaviors such as working additional hours, sharing innovative or creative ideas with the organization, or through long-term loyalty to the company. However, in the era of downsizing and restructuring the longterm relational contract seems to be a difficult proposition. Transactional contract is the reality of modern organization which provides employees with a job where they can learn and practice new skills for future employability in exchange for their just-in-time knowledge and expert performance. Organizations expect full commitment from the employee until the job is completed, and then he/she moves on to a different job within the same company or to a different company completely. The transactional and relational contracts represent different ends of a continuum, and individual contracts typically fall between the two poles at any point of time.

Organizational Factors and Psychological Contract

Psychological contract of employees is formed as a result of interaction between various macro and micro variables (Coyle-Shapiro and Neuman, 2004). It includes both individual as well as organizational factors. However, the focus of the present research is on the organizational factors that influence the development of psychological contract. According to Rousseau (1995), psychological contract is the individual belief shaped by the organization. The statement clearly shows that organizational variables have been given significant importance in the development of psychological contract. Although there are several organizational factors that affect the employees psychological contract, in the present study, only two important organizational variablesorganizational culture and HR practiceswere considered as the determinants of employees psychological contract.

Organizational Culture and Psychological Contract

The concept of organizational culture has gained significant importance in the age of globalization due to its potential to affect a range of organizationally and individually desired outcomes such as commitment, loyalty, turnover intent and satisfaction. In the organizational behavior literature, organizational culture has been defined in many ways by various authors and researchers. However, many would agree that organizational culture is a set of shared values, beliefs and assumptions which interact with an organizations people, structure and systems to produce behavioral norms.
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One important aspect of culture is that it is closely related to the psychological contract existing within the organization. Organizational culture forms the core identity of organizations and that helps in shaping their employees behavior (Lund, 2003; and Rashid et al., 2003). The basic assumptions and values are taught to new members as the way to perceive, think, feel, behave and expect others to behave in the organization. Corporate culture is thus able to influence the thoughts, feelings, interactions and performance in organizations (Saeed and Hassan, 2000). Culture offers a powerful position for understanding organizations, as it is governed by multilayered systems of collective beliefs (Deal and Kennedy, 1982; and Schein, 1985). Organizational culture is the vehicle for understanding the basic meaning and character of organizational life. Role of culture in the development of psychological contract is also emphasized by Turnley and Feldman (1999). Organizational culture guides organizational members how to interpret the behavior and language of others in the organization. Culture is the environment that surrounds employees at work all the time and shapes employees work behavior, work relationships and work processes. Work environment of an employee, like system-support, encouragement to creativity and conformity, includes important predictors of psychological contract fulfillment (Bose and Agarwal, 2003). Role of organizational culture is visible in the psychological contract content (Aggarwal and Bhagrava, 2009). Thus organizational culture provides one of the key lens through which employees perceive organizational expectations and obligations. Moreover, different organizational cultures (clan versus hierarchical) are associated with different forms of psychological contract (Richard et al., 2009). These researchers found that clan culture is related to relational contract, while hierarchical is related to transactional type of contract. In other words, it can be said that the employer-employee relationship is also shaped by the cultural milieu in which it is embedded. Based on the above discussion, the following hypothesis was proposed: H1: Organizational culture will influence the development of psychological contract in Indian IT/ITES industry.

HR Practices and Psychological Contract

The role of HR Practices is given significant importance in the development of psychological contract (Guest and Conway, 2002). HR practices are generally defined as a set of activities that businesses use to ensure that they have an effective workforce in place to meet operational and business-related needs. HR practices govern and control the behavior of employees in the organizations to a greater extent. In the present study, five common HR practiceshiring, training, compensation, motivation and performance appraisalhave been taken to explore the relationship with the psychological contract. The psychological contract construct has been repeatedly used in attempts to explain how HR practices mediate the relationship between the employee behaviors and organizational performance. In addition, research suggests that HR Practices of firms have
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an influence on the psychological contract of employees (Pathak et al., 2005; and Aggarwal and Bhargava, 2009). The relationship between psychological contract and HR practices was examined in a nationally representative survey of 1,000 UK employees (Guest and Conway, 1999). Employees reporting their organization as having such practices were also much more likely to report promises as having bee made to them by their organization. A later study of 1,300 senior managers perception of the promises made to the employees found similar results in that managers in organizations with more HR practices also tend to report that more promises have been made (Guest and Conway, 2002). The psychological contract a person forms can be greatly influenced through the recruiting process (Shore and Tetrick, 1994; and Robinson and Morrison, 2000)) and compensation (Zhu et al., 2006). An employees relationship with an organization is shaped by Human Resource Management (HRM) actions such as recruiting, appraising performance, training, and benefits, through which employees come to understand the terms of their employment (Rousseau and Greller, 1994). HR practices send strong messages to individuals regarding what an organization expects of them and what they can expect in return. Hence HRM practices play an important role as message-senders, shaping the terms of the psychological contracts (Rousseau and Wade-Benzoni, 1994). Moreover, transactional and relational psychological contract can be impacted differently by various HR practices as they have different origins, and they also differ in their manifestation. Shuping (2009) found training and development as the most important predictor of relational contract, while pay emerged as a significant predictor of transactional contract. Thus the following hypothesis was formulated: H2: HR Practices will influence the development of psychological contract in Indian IT/ITES industry.

Methodology
Sites and Subjects
Participants in this study were employees working in IT/ITES organizations in two metropolitan cities of IndiaDelhi and Mumbai. Data were collected from a total of 95 junior level employees. All were full-time employees working in their respective organizations. Out of the total respondents, 66% were male and 34% female, with a mean age of 27.6 years. Average job tenure for the sample was around 3.9 years, and as far as the level of education was concerned, 32% were graduates and below and 68% were above graduate level.

Procedure
Prior to data collection for the present study, respondents willingness to participate in the study was taken by researchers. Participants were briefed about the purpose of the study and also given the opportunity to ask any question. It was previously agreed by the researchers that anyone objecting to the survey would be permitted to leave, however,
Determinants of Psychological Contract in IT/ITES Industry 5

there were no objections. Data were gathered by administering a questionnaire personally to the employees using convenience and snowballing sampling method. E-mails were also used in sending and receiving filled-in questionnaire from some of the participants. The respondents were assured of the confidentiality of their responses and informed that their responses shall be used for research purpose only.

Measures
Organizational Culture Survey
In order to measure the organizational culture, the culture survey developed by Pareek (1997) was used in the present study. The survey measures 15 dimensions (internality, ambiguity tolerance, context sensitivity, narcissistic, future-oriented, individualistic, inner directed, universal, role-bound, androgynous, power parity, expressive, conserving, assertive and expanding culture) of the organizational culture, each consisting of three items and a total of 45 items. Respondents were required to rate items 1 to 33 on a 5-point scale on how accurately respondents describe their departments/organizations. Each of the last three items (34 to 36) contained four alternatives, and the respondents were required to rank them (4 to 1) from the most characteristics of the organization to the least characteristics. The reliability coefficient measured by coefficient alpha, as reported by the author, was 0.73.

Measures of HR Practice
The instrument was developed by the researcher himself for the purpose of using the same in this research study. The measure comprises 32 items and adopts a 5-pointrating scale anchored from strongly disagree to strongly agree and the responses to items were scored from 1 to 5 respectively. The scale was constructed by the authors for this work. The reliability coefficients for each of the dimensions were obtained using coefficient alpha method. Reliability for hiring dimension was found to be 0.65, training and development 0.52, maintenance and retention 0.63, appraisal 0.67 and motivation and empowerment 0.59.

Psychological Contract Scale (PCS)

Psychological Contract Scale (PCS) consists of 17 items developed by Millward and Hopkins (1998). The PCS assesses the relational-transactional dimensions of the psychological contract and produces a sub-scale score for each of these constructs. Millward and Brewerton (1999) stated that this scale is a valid means of operationalizing the two dimensions and noted its validation on five workplace samples (professionals from various companies, n = 476; telemarketing, n = 144; engineering, n = 472; insurance, n = 882; cinema, n = 784). Millward and Herriot (2000) also revealed that evidence for the construct validity of the sub-scales of the PCS was obtained. Cronbachs alphas were gained for both sub-scales; each revealed an internal consistency just below the rule of thumb cutoff of 0.70 (relational = 0.65; transactional = 0.62). The participants were
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requested to indicate the extent to which they agreed with the given items on a 5-point scale ranging from 1 (strongly disagree) to 5 (strongly agree).

Analysis
The present study is a correlational study where dimensions of psychological contract were examined in relation to dimensions of organizational culture and HR practices. Thus data were evaluated and hypotheses were tested using multiple regression analysis. Analysis was performed using SPSS software, version 12. Table 1 shows that two organizational variables, organizational culture and HR practices, taken collectively, were significantly related to and predicted psychological contract. R is 0.106 which indicates that organizational variables explain around 11% variance in the development of psychological contract, which was found to be significant (F = 5.771, p = 0.004). The finding shows that organizational factors contribute to the development of psychological contract in the Indian IT/ITES industry. In order to know which of the two organizational factors is significantly influencing the development of psychological contract, we need to take a look at the Beta value of Table 1. Table 1: Results of Multiple Regression Analysis with Psychological Contract as the Outcome Variable and Organizational Culture and HR Practices as Explanatory Variables
Variables Organizational Culture HR Practices Beta 0.125 0.312 t-Value 1.296 3.239 Significance 0.198 0.002

R = 0.32; R = 0.106; Adjusted R = 0.088; F = 5.771; and p = 0.004.

Beta value reveals clearly that organizational culture is not significantly influencing the development of psychological contract. This finding does not fully support our first hypothesis. Although organizational culture is not predicting psychological contract significantly, it is positively correlated ( = 0.125). This shows that organizational culture influences psychological contract in IT/ITES industry. However, HR practices ( = 0.31, t = 3.239, p = 0.002) were found to be significantly predicting psychological contract, thus supporting our second hypothesis. Further, stepwise multiple regressions were carried out to find which dimensions of organizational culture and HR practices were significantly influencing the two dimensions of psychological contract. Table 2 shows that only maintenance and retention emerged as a significant predictor in the formation of relational psychological ( = 0.23, t = 2.42, p = 0.01). Adjusted R2 is 0.047, which indicates that only around 5% variation can be explained in the relational psychological contract. The finding implies that equitable and competitive rewards and
Determinants of Psychological Contract in IT/ITES Industry 7

benefits significantly affect the formation of relational psychological contract in IT/ITES industry. Table 2: Stepwise Multiple Regression with Relational Psychological Contract as Outcome Variable and Organization Culture and HR Practices as Explanatory Variables
Independent Variables Maintenance and Retention
2 2

Beta 0.237

t-Value 2.420

Significance 0.017

R = 0.056; Adjusted R = 0.047; F = 5.856; and Level of Significance = 0.017

Note: Dependent Variable: Relational Psychological Contract.

Table 3 depicts that in IT/ITES industry, maintenance and retention ( = 0.36, t = 4.61, p = 0.0001), assertive ( = 0.26, t = 3.35, p = 0.001), expressive ( = 0.26, t = 3.27, p = 0.002), motivation and empowerment ( = 0.19, t = 2.62, p = 0.01), appraisal ( = 1.7, t = 2.27, and p = 0.02) and individualism ( = 0.16, t = 2.17, p = 0.03) were found to be statistically significantly related with the transactional psychological contract. These six predictor variables which consist of both organizational culture and HR practices together explained around 49% variances (Adjusted R2 = 0.485) in transactional psychological contract which was found to be statistically significant (F = 16.55, p = 0.0001). Table 3: Stepwise Multiple Regression with Transactional Psychological Contract as Outcome Variable and Organization Culture
Independent Variables Maintenance and Retention Assertive Expressive Motivation and Empowerment Appraisal Individualism Beta 0.368 0.263 0.262 0.196 0.176 0.161 t-Value 4.610 3.357 3.270 2.625 2.270 2.179 Significance 0 0.001 0.002 0.010 0.026 0.032

Note: Dependent Variable: Relational Psychological Contract.

Dimension of HR practices was found to be significantly predicting relational psychological contract in IT/ITES industry but not even a single dimension of organizational culture, whereas some dimensions of organizational culture and HR practices were found to be significantly predicting transactional psychological contract. Out of these, maintenance and retention was the strongest explanatory variable to explain relational and transactional psychological contract in IT/ITES industry.

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Discussion
One of the objectives of the present study was to see the effects of organizational culture and HR practices on the development of psychological contract of IT/ITES employees. The study revealed that organizational factors influence the psychological contract when taken collectively. In the present study, only HR practices were found to be significantly influencing the employees psychological contract. HR practices signal employees expectation from the employment relationship and act as a mechanism through which employees come to understand the terms of their employment contract; changes in these practices have significant implication for the psychological contract that employees develop. HR practices work as a signal or send message to the employees regarding what is expected from employees and what employees can expect from the organization. This finding is in line with other findings (Guest and Conway, 2000). HR/personnel departments of organizations, through their policies, practices and actions, are the face of employment relations and are, therefore, considered to be particularly instrumental in the determination of psychological contracts (Rousseau and Greller, 1994; Rousseau, 1995; Westwood et al., 2001; and Koene and Van Riemsdijk, 2005). Organizational culture, in the present study, did not emerge as a significant predictor of psychological contract. It seems strange because HR practices in any organization reflect the applied aspect of overall organizational culture. This could be because culture is the abstract part, while HR practices are the visible aspects of the organization. So, it is much easier for employees to relate to HR practices than to the culture of the organization. It is also possible that IT/ITES industry is characterized by turnover culture (Abelson, 1993), where employees generally do not tend to stay for long to be able to really understand the deeper aspects of culture.

Maintenance and Retention Dimension of HR Practices and Relational and Transactional Psychological Contract
Maintenance and retention dimensions of HR practices were found to be explaining both the relational as well as transactional psychological contract development positively. The present study supports the finding of Zhu et al. (2006) who explored the role of compensation and psychological contract and found positive relationship. Maintenance and retention refers to the rewards and benefits that employees receive from the company for their contribution to the company. Providing high compensation could lead to relational and transactional contract because of several reasons. Firstly, it allows an organization to attract a large pool of applicants and therefore can be very selective. Secondly, high compensation serves as an indicator of value that is placed on individuals by the organization, thereby enhancing self-worth and feelings of importance amongst those who are recruited and retained. Thirdly, linking compensation to individual performance motivates employees to perform better. For these reasons, compensation can lead to increased level of transactional contract. Thus, a linear and positive relationship between

Determinants of Psychological Contract in IT/ITES Industry

satisfaction with pay and relational and transactional psychological contract was observed in this study. Compensation and benefits that employers provide to employees can have a major impact on their conception of employment relationships (ODriscoll and Randall, 1999; and Rousseau and Ho, 2000). Normally, rewards and benefits are commensurate with the contribution in these sectors. Employees, who get commensurate rewards, probably want to continue with the organization for fairly long time and try to develop a more lasting relationship with the organization, that is, the employee wants to develop relational psychological contract. It may also lead to the development of transactional psychological contract, probably because of the employees increased expectations that high performance will be rewarded accordingly by the organization.

Assertive and Transactional Psychological Contract

Assertive dimension of organizational culture emerged as a predictor of transactional psychological contract amongst the IT/ITES professionals. Assertive culture emphasizes on competition and achievement of results. Development of transactional contract in an assertive culture could be the result of the emphasis that is placed on achievement, productivity, profitability, etc. in the IT/ITES sector. A high performance culture is characterized by demanding organizational expectations and in exchange for meeting these demands, employees want their own expectation to be met (Cooke and Rousseau, 1988). In the IT/ITES sector, employees are encouraged to achieve the results within the given time frame, and winning and outperforming are encouraged through high rewards. This encouragement for achievement and productivity leads to the development of expectation in employees of a comparable share in rewards and benefits, thus leading to the development of a transactional nature of relationship. In such a culture, employees know that if the organization prospers, they too will prosper.

Expressive and Transactional Psychological Contract

Expressive dimension of organizational culture emerged as a positive predictor of transactional psychological contract amongst the IT/ITES professionals. Expressive culture refers to the culture which emphasizes on creativity and provides an opportunity to their members to experiment, create and innovate. It involves taking a fresh look at problems, trying out new ideas, innovating new methods and processes, etc. Newton et al. (2007) conducted a research on IT professionals to find out the relationship between the level of psychological contract fulfillment and its effects on innovative behavior and found positive relationships between the two. In an era, where work has become more knowledge-based and is less rigidly defined, it has become possible for employees to help improve business performance through their ability to generate ideas and use these as building blocks for new and better products, services and work processes. Many practitioners and academicians now endorse the view that individual innovation helps to attain organizational success (Unsworth and Parker, 2003). IT professionals are encouraged to innovate and succeed in todays highly competitive business environment.
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Probably, this encouragement of innovation may lead to the development of expectation of transactional nature amongst the employees.

Motivation and Empowerment and Transactional Psychological Contract

Motivation and empowerment dimensions of HR practices emerged as positive predictors of transactional psychological contract amongst IT/ITES professionals. Motivation in this study was concerned with motivating employees through providing liberty, good working environment, future growth opportunity, open communication, etc., and to provide employees the freedom to complete their tasks. Rousseau (1995) speculated that a range of HR practices, including communication about the future promises, leads to the development of psychological contract in the employees. Guest and Conway (2000) found that particularly HR practices and direct participation have a significant influence on the state of the psychological contract. Motivating employees is of great concern to almost all types of organizations and organizations make conscious efforts to increase the motivation of their employees. Organizations use different techniques such as autonomy, responsibility and freedom to complete the assignment, recognition and respect, better working conditions, etc. in order to increase the motivation of employees. Organizations have adopted a management style that promotes individual and work group involvement, commitment, engagement, etc. (Greenberg and Baron, 1997). Managers are encouraged to allow a high degree of work force participation, group involvement and autonomy to develop self-managing work team etc. to empower employees. When employees are actively involved and engaged in doing the job and work to achieve the organizational objectives, it may result in experienced meaningfulness and a sense of empowerment. Direct participation can be described as the degree to which employees have decisionmaking power and autonomy in their jobs. Motivated employees excel in their job and bring innovation and creativity to their organization. Probably this results in the thinking of getting commensurate return in financial terms, thus leading to the development of transactional psychological contract.

Appraisal and Transactional Psychological Contract

Performance appraisal dimension of HR practices emerged as a positive predictor of transactional psychological contract. Performance appraisal is a process of recording assessment of employees performance, potential and development needs. Appraisal is considered as a significant factor in the development of psychological contract (Rousseau, 1995). The performance review offers an opportunity both for the organization and the employee to review and agree upon future opportunities for contribution and inducement. Appraisal also provides employers with the chance to ask the employee being appraised whether they are satisfied with the inducements provided. If not, the situation can be suitably modified if necessary. When an employer gives feedback to the employee about his/her performance, it signals to the employee whether or not they
Determinants of Psychological Contract in IT/ITES Industry 11

are providing valuable and meaningful contribution to the employment relationship. Appraisal provides an opportunity to look back and find out how well employees have performed during the reporting period and then look forward to their likely achievements. Because appraisal also provides an opportunity to share and discuss about the future performance expectation from the employees, this may probably lead to the development of expectations of reasonable compensation and return from the organization, leading to the transactional contract development.

Individualism and Transactional Psychological Contract

Individualism dimension of organizational culture emerged as a positive predictor of transactional psychological contract amongst IT/ITES professionals. Individualistic culture is characterized by people looking after their own interest and not bothering about the group member. In it, people prefer to act as individuals rather than as members of the group. Companies mainly provide pay and benefits based on the individual performance. Thus in order to stay in the company and grow financially, individual employees have to perform, and this probably leads to IT/ITES professionals expecting commensurate financial return for their contribution to the organization. Another reason could be competitive business environment, where employees are not certain about the future of the business, which in turn may affect their own future and financial security and so they want to get into, possibly, a contractual relationship primarily with an economic motive.

Conclusion
The study examined the role of organizational culture and HR practices in the development of psychological contract in one of the important market segments of the contemporary world, IT/ITES industry in India. HRM practices as a whole emerged as a significant predictor of psychological contract. Dimensionwise analyses revealed that relational aspect of psychological contract was only influenced by maintenance and retention dimensions of HRM practices. However, several predictors (three each from organizational culture and HRM practices) of transactional contract were found to be significant. In the contemporary world, short-term transactional contract, and not the long-term relational contract/old psychological contract, is the reality of modern organizations (Beck, 2003). Contemporary organizations provide employees with a job where they can learn and practice new skills for future employability in exchange for their just-in-time knowledge and expert performance (Beck, 2003). Organizations expect full commitment from their employees until the job is completed, and then the employee moves on to a different job within the same company or to a different company completely. The results of the present study clearly revealed that in IT/ITES sector, dimensions of HRM practices and organizational culture predicted the transactional contract very strongly as they were able to explain 49% of the variance in psychological contract. There is enough evidence, as mentioned in the beginning of the paper, to show that psychological contract has great potential in influencing personal and organizational level constructs. The findings of the
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present study has significant implications for practicing HRM professionals to develop strategies to create enabling and empowering organizations in one of the significant market segmentsIT/ITES organizations.

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