The Effects of Layoff Experience on Victim's Future Employment Relationship: A Longitudinal Study on Contract Violation and Fairness

The Effects of Layoff Experience on Victim's Future Employment Relationship: A Longitudinal Study on Contract Violation and Fairness

It is evident from recent studies that downsizing appears to be a continual process favored by many organizations as a means to remain competitive and viable in the marketplace around the world. It is a practice that is causing employees to change how they view their careers and to modify their psychological contracts to fit the realities of the current workplace. Psychological contracts are unwritten agreements that individuals form based on their beliefs concerning the terms of an exchange agreement with their employer. Research has shown that psychological contracts are affected by contract violation and that the strength and the direction of the change in employee and employer obligations are related to individuals perceptions of the inequities involved in the violation. While there has been growing academic interest in psychological contracts in recent years. there are still relatively few empirical studies to support theoretical discussions of the topic, particularly when it comes to the specific effects of downsizing and layoffs on psychological contracts. Based on longitudinal data in Korea. I examined the changes in the psychological contract with their future employers after the layoffs from the layoff victim's viewpoint. This study is designed to answer the following questions: 1) Following a layoff. is there any effects of the layoff experience on a victim's psychological contract with his or her future employer? and 2) Does a victim's perception of layoff fairness moderate the layoff effects on the subsequent contract? The results indicate that layoff victims who perceived their layoffs as a contract violation show lower expectation for their new employers. Also those who experienced low interactional justice in their layoffs were likely to decrease their own obligations in their subsequent contract with increasing level of violation, although those who experienced high interactional justice were likely to maintain the previous level in their own obligations. Although those who experienced low procedural justice and those who experienced high procedural justice both decreased their own obligations with increasing levels of violation perception, the decrease was greater for those with low procedural justice.