Impact of the Psychological Contract on Employee Engagement in a Selected Finance Company: Special reference to Banking and Finance Sector

Abstract

The workplace is governed by various formal contracts that outline the terms of employment between employers and employees. However, there exists an often overlooked yet crucial aspect of the employment relationship known as the psychological contract. This informal agreement plays a pivotal role in shaping employee engagement within organizations. This study aimed to investigate executive officers' perceptions regarding the influence of the psychological contract on employee engagement within the Sri Lankan banking and finance sector, with a specific focus on selected Finance Company. Additionally, it aimed to propose suitable strategies and initiatives to enhance employee engagement levels and improve overall performance within the finance sector. Using a quantitative research approach, this study employed random sampling techniques to select participants. Structured questionnaires were then distributed to collect relevant data. The findings of the study revealed a positive and significant relationship between psychological contracts and employee engagement. This underscores the importance of considering and optimizing the psychological contract to enhance employee engagement levels. In conclusion, the study highlights the need for company management and financial sector policymakers to prioritize the optimization of the psychological contract to foster higher levels of employee engagement. By focusing on enhancing the psychological contract, organizations can create a conducive work environment that promotes employee engagement, ultimately leading to improved performance within the finance sector.