In this series of posts, we are examining the impact of salary negotiations on the formation and evolution of the psychological contract. In the first post in the series (see Part 1: dramatis personae) , we looked at the concept of psychological contract, outlined the stages at which salary negotiations take place and also looked at some basic principles in the domain. In the second post (see Part 2: before joining) we examined the interaction between the employer and the employee before the employee joins the company and its impact on psychological contract. In the third post (see Part 3: after joining) we looked at the interaction between the employer and the employee after the employee joins the company and examined how these interactions are influenced by (and influence) the psychological contract.
In this post, we will turn the spotlight on the interaction between the employer and the employee after the employee submits his resignation and explore its impact on psychological contract (and how the psychological contract influences those negotiations).
The salary negotiations that take place during this phase (after the employee submits his resignation) are the most complicated ones. One of the key components of the psychological contract in any relationship is the expectations/assumptions about the continuity of the relationship. Here the expectations/assumptions vary widely – across various employees and across various organizations. Hence there is a very high possibility that the expectations (assumptions) the employee have are very different from the expectations (assumptions) that the employer has.
In some organizations, not questioning the continuity of the employment relationship is a necessary condition for any salary negotiations and hence once the employee submits the resignation, the organization does not negotiate at all. Thus the psychological contract prevents salary negotiations in this case. Other organizations have varying degrees of openness for renegotiating salary/making a counter offer once an employee submits his/her resignation. However, these negotiations throw up many complicated issues – for both the employee and the employer. The act of submitting the resignation (or not preventing the circumstances that lead to the resignation of the employee) often creates irreparable damage to the psychological contract for the employer and the employee (unless both the parties believe that they themselves were at fault - at least in part - for creating the situation).
If the employer negotiates with employee who has submitted the resignation and manages to retain him/her by making an offer with a higher salary, it might be perceived as a violation of psychological contract by the other employees. Once it becomes known that it is culturally acceptable to submit the resignation and renegotiate the salary, it might encourage other employees to follow suit creating long term damage to the organization culture. Even the employee who managed to get the salary hike might find it difficult to digest that the organization did not recognize his contribution/value till he put in his papers!
It is interesting to note that there is another psychological contract involved in these situations. Since the employee who managed to get the offer from a new organization would have gone through selection process (that would have involved multiple interactions with the organizational representatives of the new organization) his/her psychological contract with the new organization would also have got formed – at least to some extent. Taking the offer and negotiating with the current employer is usually a violation of that psychological contract!
Another variation of this theme is when an employee resigns from the organization, joins another organization and comes back to the first organization within a short time period with a higher salary and possibly at a higher responsibility level. If this happens in quite a few cases, it can be highly damaging for the psychological contract with the other employees. Hence organizations should have clear norms for rehiring. Keeping all these in mind, my opinion is that salary negotiations after submitting the resignation make sense only under exceptional circumstances.
In the next post in the series, we will look at a special phenomenon in this domain – ‘batch mentality’ and its implications for the psychological contract during the various phases of the employee life cycle.
Please let me know if you have any comments/suggestions at this stage!