Organizational Psychology

Purpose. The purpose of the study is to identify which factors of the psychological contract contributes to the attrition level in the service and manufacturing sectors. The degree of psychological contract observed in the firms and its fluctuating degree is examined empirically in this study based on the influence of the external factors. There is evidence that the employees and the employers will notbe able to sustain with same degree of the psychological contract as they work as two entities in the organization. The businesses which are successful undoubtedly had a strong ‘Relational Psychological Contract’ that enabled them to gain competitive edge in the market. Study design. This research was conducted in two stages, case study analysis, and primary data analysis. In case study analysis, twenty fivefirms were selected of which eight were from manufacturing and seventeen from the service industry. The case study method helped to explore the employee-employer relationship. A broad-level study was conducted using a structured questionnaire in which 393 were considered for analysis.There is exploratory study with the structural equation modelling analysis done with the confirmatory factor analysis. Findings. The analysis of confirmatory factor model of structural equation modelling showed a ‘Psychological Dissonance’ between employees and employers and the negative covariance of the variables of the confirmatory factor analysis shows that the respondents have a commitment to the employers as employees but are not emotionally linked. The relationship is shrunk to a level of delivery tasks for remuneration. This leads to higher attrition rate in the service sector, comparing to the manufacturing sector among the employees with less experience which is proven in the study. Research limitations. The research limitations are the attrition data to collect from various firms as it is a negative outcome in any organization. Value of the results. The value of the results is genuine with the primary data collected from the respondents (both employers and employees of the firms) which the author could get access.