The level of change that occurs in the globalization scheme is very influential in the way organizations develop. This attention is mainly triggered by the strong competitive atmosphere which continues to be tight so as to encourage every organization to survive and adapt. As confirmed by John Kotter (2000), globalization presents risks by creating a more unstable environment and increasingly fierce competition. Many of the changes caused by globalization will continue in the future.
It is not surprising that such conditions are then considered to strengthen the organization’s flexibility in carrying out various adjustments. Some of them are realizing new ways of operation based on consideration of efficiency, effectiveness and work productivity to be achieved. The close thing through this consideration is the issue of human resources. His role is very large in achieving organizational goals, placing human resources as one of the important priorities to think about over the assets of other organizations.
In Indonesia, in the past few years, many organizations have refocused the issue of human resources on an approach to recruiting employees. This approach, which became known as the employment contract system, emerged as one of the implementations facing labor market flexibility.
The development of the labor relations model through the employment contract system has also given birth to a different pattern of labor relations. According to labor regulations, the employment contract model refers to temporary employment relationships. This is because the implementation of an employment contract is only allowed for certain jobs which according to the type and nature or activities of the work will be completed within a certain time. While the specifications regarding salary, facilities, welfare, leave and others are made by the organization. Some of them are determined by referring to the minimum standards determined by labor rules.
Employment contracts are seen by most practitioners as an appropriate model of labor relations at the moment because they are easier to keep up with the flow of change. This model is also considered a strategy so that organizations can focus on core competency. Therefore, in the current competitive situation, the employment contract system seems to be in great demand by various organizations. Its use is increasingly widespread in almost all types of organizations, both profit-oriented or non-profit.
If look at the general conditions, permanent employees and contract employees are human resources who are equally contributing to the organization. Both have workloads and performance demands that the organization expects to be the responsibility of employees to carry out properly. Only in the contract scheme, it seems more emphasized through the dominance of the organization over the control of membership and welfare of its employees. This dominance appeared in various decisions, for example contract extension, determination of salary amount, and several other facilities for contract employees. The consequences of being a contract employee are not the same as permanent employees. Through the contract scheme, an employee whose contract is not renewed or not appointed as a permanent employee, only works in a very limited time. While on the other hand, in most organizations in Indonesia, it is possible to receive salaries and several other facilities that are smaller than permanent employees.
The above conditions do not always bring harm, because on the other hand can spur employee motivation in the hope that the contract is extended or even be appointed as permanent employees. But beyond that, the contract scheme also has the potential to be detrimental to employees. If contract employees are asked to take responsibility for performance and profitability, they also want to enjoy the benefits. This is part of the efforts of employees to make sense of what the organization provides related to the work that has been done. This means not only about money, things like recognition, guarantees (job security), and fair treatment are also big problems. If all the benefits of employees’ abilities and efforts are only enjoyed by top management or certain types of employees, other employees will immediately see this situation as unfair, discouraging them from being disappointed, and at worst the employee will stop his effort.
The phenomenon of exchange in work relationships as described above is called a psychological contract. In a general view, a work relationship will involve a process of positive give and take, or exchange of values between individuals and organizations. This implies that one’s expectations about what will be given to and received from an organization are as part of a work relationship (Schermerhorn, 1996). The psychological contractual conception of these expectations is unwritten. Everything is based on assumptions made by one party and not another party, so there are no open statements and agreements (Armstrong, 2003). As written by Schein as expressed by Tosi, Rizzo, and Carol (1990) by stating the concept of psychological contracts as follows: Individuals have diverse expectations about the organization and the organization have of expectations varies from him. This expectation not only includes how much work must be done for the amount of salary to be received but also concerns the overall pattern of rights, privileges, and obligations between workers and organizations.
Psychological contract balance is also needed for the sustainability and harmony of the relationship between employees and the organization. Individuals take part in psychological contracts since joining the organization, whatever happens someone hopes about the contract being fulfilled is very important for the sustainability of relations with the organization. According to Northcraft and Neale (1990), equilibrium that is difficult to achieve in psychological contracts depends to a large extent on two conditions. First, the degree to which the expectations of what the organization will give and what will be received back in accordance with the expectations of the organization about what he will give and get. Second, agreement on what was actually exchanged, for example: including exchanging money for work time.
If the balance is not reached, then there is an indication of a psychological contract violation in the employment relationship. Violations of psychological contracts signify that parties no longer share (or have never shared) a number of shared values or goals. Once this happens, one party can think of a traffic jam between many parties, a failure of mutual understanding, and an increase in frustration (and emotional responses) on both sides (Northcraft& Neale, 1990).
Therefore, it is very important to underline the attention to understanding the psychological contract of contract employees. This description of understanding can provide an explanation of the meaning contained therein to see objectively the work relations that have occurred so far. This is not only useful for looking at various things that underlie employee work behavior, but also helps to improve work relationships that lead to organizational progress.