Journal of Applied Psychology Copyright 2006 by the American Psychological Association

2006, Vol. 91, No. 1, 166 175 0021-9010/06/$12.00 DOI: 10.1037/0021-9010.91.1.166

Toward a Better Understanding of Psychological Contract Breach: A Study

of Customer Service Employees

Stephen J. Deery Roderick D. Iverson

Kings College London Simon Fraser University

Janet T. Walsh
Kings College London

Experiences of psychological contract breach have been associated with a range of negative behavior.
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However, much of the research has focused on master of business administration alumni and managers
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and made use of self-reported outcomes. Studying a sample of customer service employees, the research
found that psychological contract breach was related to lower organizational trust, which, in turn was
associated with perceptions of less cooperative employment relations and higher levels of absenteeism.
Furthermore, perceptions of external market pressures moderated the effect of psychological contract
breach on absenteeism. The study indicated that psychological contract breach can arise when employees
perceive discrepancies between an organizations espoused behavioral standards and its actual behavioral
standards, and this can affect discretionary absence.

Keywords: psychological contract breach, absenteeism, trust, customer service employees, call centers

There is a growing body of empirical research on the breach or
violation of the psychological contract (Conway & Briner, 2002;
Lo & Aryee, 2003; Robinson & Morrison, 2000). The stimulus for
this research has been the apparent change in the nature of the
employment relationship, occasioned by a loss of job security, the
erosion of promotional opportunities, and the increased uncertainty
of regular and orderly pay increases. In this context, researchers
have suggested that employees are less likely to believe that
employers are fulfilling their obligations and responsibilities (Mor-
rison & Robinson, 1997). Traditional psychological contracts built
on an exchange of loyalty and effort for job security, career
development, and predictable pay systems are said to be giving
way to more fragile relationships in which reciprocal obligations
are less certain and in which expectations of mutual benefit are less
likely to be realized (Turnley, Bolino, Lester, & Bloodgood, 2003).
In those circumstances in which individuals believe that their
organizations have failed to fulfill their obligations, there is evi-
dence to indicate that this perception can lead to a range of
negative outcomes, including higher turnover, reduced job satis-
faction, increased cynicism, diminished organizational citizenship
Stephen J. Deery and Janet T. Walsh, Department of Management,
Kings College, London, University of London, London, England; Rod-
erick D. Iverson, Faculty of Business Administration, Simon Fraser Uni-
versity, Burnaby, British Columbia, Canada.
An earlier version of this article was presented at the 63rd annual
meeting of the Academy of Management, Seattle, Washington, August
2003.
Correspondence concerning this article should be addressed to Stephen
J. Deery, Department of Management, Kings College London, University
of London, Franklin-Wilkins Building, 150 Stamford Street, London SE1
9NN, United Kingdom. E-mail: stephen.deery@kcl.ac.uk
behavior, and changes in mood (Conway & Briner, 2002; Coyle-
Shapiro, 2002; Robinson, 1996; Robinson & Morrison, 2000;
Turnley & Feldman, 1999, 2000).
The purpose of this study was to examine the effects of psy-
chological contract breach on employee absence. The present
article seeks to extend existing research on psychological contract
breach in two ways. The first relates to the issue of sampling. Most
of the research has been conducted on recently graduated MBAs or
managerial or professional staff. There have been calls for more
diverse sample populations in order to assess the generalizability
of findings to other employee groups (Guest, 1998; Robinson &
Morrison, 2000). Indeed, Turnley and Feldman (1999) called for
the research to aggressively expand its sample base lest it be
reduced to the investigation of the disappointments and perceived
entitlements of highly paid new MBAs simply experiencing entry
shock as they make the transition from school to work (p. 383).
This study examines the consequences of psychological contract
breach among a sample of call-center customer contact workers
who are emblematic of the rapidly growing interactive service
sector (Batt, 2002; Frenkel, Korczynski, Shire, & Tam, 1999).
Second, much of the past research has relied almost exclusively on
individual self-report measures of performance, such as turnover
intentions, organizational citizenship behavior, and job satisfac-
tion. A number of researchers have raised concerns about the
limitations of these data and urged that future studies should
examine individual work behaviors using archival personnel
records (Turnley et al., 2003; Turnley & Feldman, 2000). Our
study assesses the effect of psychological contract breach on
employee absenteeism by drawing on data collected from com-
pany personnel files. Absenteeism has been overlooked as a pos-
sible behavioral outcome despite its serious organizational conse-
quences (Harrison & Martocchio, 1998).

166
 RESEARCH REPORTS
The Shared Nature of the Psychological Contract
Rousseau (1989) has defined the psychological contract as an
individuals belief about the terms of the reciprocal exchange
agreement that exists between themselves and their organization. It
emerges when an individual believes that their organization has
made a promise of future benefits in exchange for a contribution
that has been given. This may consist of a belief, for example, that
an organization has promised to provide career advancement in
exchange for hard work and good performance. These understand-
ings are subjective. The belief that a promise or future obligation
exists is based on the employees perceptions. Such a belief may
be conveyed through recruitment interviews, performance apprais-
als, written personnel policies, or organizational practices.
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Psychological contracts may be shared (Rousseau, 1995).
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Where employees hold similar interpretations of their commit-
ments and obligations, their psychological contracts can take on a
strongly normative or shared character. This is most likely to occur
where employees are party to the same contract terms as their
fellow workers and where they identify others as having the same
employment deal (Rousseau & McLean Parks, 1993). Individual
psychological terms are more uniform where standardized employ-
ment arrangements apply and where there are limited opportunities
to negotiate individualized or idiosyncratic contracts of employ-
ment (Rousseau & Schalk, 2000). Workers who occupy jobs at the
bottom of the organizational hierarchy and whose terms of em-
ployment are set through collective bargaining will tend to fall into
this category.
Where individuals in a work unit have a shared understanding of
the terms of their psychological contract, there will be a tendency
for them to reinforce each others assessments of it and perceive
breaches by observing organizational practices affecting fellow
employees (Rousseau, 1995). Common understandings and beliefs
can develop through social information processing (Salancik &
Pfeffer, 1978). Organizational actions can be subjected to both
group discussion and socially derived interpretations. Individuals
will make comparisons with fellow workers in order to evaluate
events and circumstances relevant to their job (Brockner, 1988). In
such circumstances, individual attitudes can coalesce, and work
groups can agree on their interpretation of their organizations
behavior (Nicholson & Johns, 1985). A belief that the organization
has broken its promises to employees within the work unit can
undermine the relationship upon which the individuals employ-
ment contract is based and result in lower discretionary inputs. It
can also produce feelings of betrayal and wrongdoing.
Theory and Hypotheses
Social exchange theory has commonly been used as a means of
explaining how employees may respond to psychological contract
breach (Lester, Turnley, Bloodgood, & Bolino, 2002; Turnley et
al., 2003). Employees are said to be motivated by a desire to
maintain a reciprocal or balanced relationship with their organiza-
tion in terms of inducements and contributions (Blau, 1964).
Should they believe that their organization has not fulfilled its
contractual obligations, this perceived breach will tend to under-
mine assumptions of fair dealing that underlie long-term employ-
ment relationships (Rousseau & McLean Parks, 1993). This, in
167
turn, will erode trust in the organization. Trust reflects a confi-
dence between the parties that they will not be harmed or put at
risk by the actions of the other party and that neither party to the
exchange will exploit the others vulnerability (Jones & George,
1998). Both behavioral consistency and behavioral integrity influ-
ence employees perceptions of managerial trustworthiness (White-
ner, Brodt, Korsgaard, & Werner, 1998). In circumstances of
perceived contract breach, the employers integrity will be ques-
tioned, as their actions will be seen as incongruent with their words
(Mayer, Davis, & Schoorman, 1995). Moreover, doubts may
emerge about the consistency and predictability of the organiza-
tions future actions and behavior (Butler, 1991). Perceptions of
broken promises will therefore lead to a loss of trust (Robinson,
1996). Thus,
Hypothesis 1: Perceived contract breach will be negatively
associated with an employees trust in the organization.
Trust is an important precursor of cooperation. Indeed, it has
been described as the key factor in forming cooperative relation-
ships within organizations (Smith, Carroll, & Ashford, 1995). It is
also widely acknowledged that a loss of trust can lead to a less
cooperative relationship among organizational members (Axelrod,
1984; McAllister, 1995). In such circumstances, individuals will
have less confidence that they will not be put at risk by the actions
of their organization and will often seek to defend themselves
against the possibility of opportunistic behavior (Jones & George,
1998; Kramer, 1996). This can result in a variety of responses
ranging from confrontation to a withdrawal of support and a
reassessment of the relationship with their employer (Bies &
Tripp, 1996). Perceptions of untrustworthiness will increase an
employees awareness of existing conflicts of interest and encour-
age them to view the relationship as less cooperative (Mishra,
1996). Thus,
Hypothesis 2: Lower levels of trust in the employer will be
associated with less cooperative employment relations.
Organizational climate can influence the motivation and behav-
ioral patterns of individuals within a workplace (Hellriegel &
Slocum, 1974; Litwin & Stringer, 1968). A more cooperative
employment relationship can improve performance (Cutcher-
Gershenfeld, 1991; Katz, Kochan, & Weber, 1985). It can increase
discretionary effort and reduce shirking (Kidwell & Bennett,
1993). Absenteeism is also sensitive to the character of the em-
ployment relationship (Dastmalchian, Blyton, & Abdollahyan,
1982; Deery, Erwin, & Iverson, 1999; Johns, 2003). As a behav-
ioral response to a negative work situation, absenteeism can be
influenced by the nature and quality of the interaction between
workers and their managers (Nicholson & Johns, 1985). Where
employees believe that their organization is less willing to main-
tain a mutually beneficial employment relationship, it is likely that
they will be less motivated to contribute to the exchange relation-
ship (Edwards & Whitston, 1993). We would therefore expect that
perceptions of a more conflictual relationship would be associated
with greater indifference to the interests and concerns of the
organization and with higher levels of work withdrawal in the form
of discretionary absence (Fox, 1974). Thus,
 168 RESEARCH REPORTS
Figure 1. Proposed indirect and moderator effects of breach of psychological contract on absenteeism.
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Hypothesis 3: Less cooperative employment relations will be
associated with higher levels of employee absence.
Researchers have suggested that perceptions of contract breach
will trigger a cognitive process through which employees will
seekto explain the event (Robinson & Morrison, 2000). This will
include a search for the reasons for the nonfulfillment of the
contract. Rousseau (1995) argued that an employees affective
response to the breach will be affected by their interpretation of
why the breach occurred. Should the employee attribute the breach
to a deliberate unwillingness of the organization to fulfill its
obligations, it could be expected that they would be resentful and
react negatively to that breach (Turnley et al., 2003; Turnley &
Feldman, 1999). Alternatively, where an employee believed that
there were mitigating circumstances that made it difficult for the
organization to live up to its promises, it could be expected that
that employee would feel less betrayed (Morrison & Robinson,
1997). Thus, we would postulate that attributions of blame will
moderate the relationship between perceived breach of contract
and feelings of trust in the organization. If the circumstances that
inhibit contract fulfillment are perceived to be outside the control
of the organization (such as external market factors), then it is less
likely that it will lead to a decline in trust (Lewicki & Bunker,
1996). Thus,
Hypothesis 4: The relationship between perceived contract
breach and trust will be weaker (less negative) to the extent
that external market pressures are believed to inhibit contract
fulfillment.
Not all employees will feel free to withhold effort in response to
perceptions of an uncooperative employment relationship. Where
individuals have few available job opportunities, for example, they
may be unwilling to reduce their contribution to the organization
and take time off work for fear of being dismissed from their job
(Mowday, Porter, & Steers, 1982). There is evidence to indicate
that perceptions of restricted ease of movement to comparable jobs
have been associated with lower levels of absence (Larson &
Fukami, 1985). Alternatively, where job opportunities are per-
ceived to be more plentiful, it could be expected that an employee
would be more willing to risk their job and reduce their work effort
by being absent more frequently. Thus,
Hypothesis 5: The relationship between cooperative employ-
ment relations and absenteeism will be stronger (more nega-
tive) to the extent that the employee perceives greater avail-
able job alternatives.
The hypothesized model is presented in Figure 1.1
Method
Research Site and Sample
The study was conducted in a large telecommunications company in
Australia that supplied local, international, and mobile telecommunication
services. In the 1990s, the industry was subjected to deregulation and
market liberalization not unlike that which had occurred in the United
States and Britain (Batt & Keefe, 1999; Katz, 1997). This resulted in
changes to the companys organizational structure and in a rationalization
of its business activities. It lost its monopoly status and was partially
privatized. In the face of more widespread competition, the company
signaled its intention to become more customer-focused. It committed itself
to devolved decision making and joint problem solving with its customer
service staff and to a program of training and development, skill enhance-
ment, and performance-based pay.
1
Although it is not shown in Figure 1, we controlled for the effects of
five demographic variables: age, sex, education, tenure, and employment
status (full- and part-time). Research indicates that organizational trust is
negatively associated with full-time employment status, tenure, and age,
whereas higher levels of education have a positive relationship (Eberhardt
& Shani, 1984; Kiffin-Petersen & Cordery, 2003; Lo & Aryee, 2003).
Female employees could be expected to exhibit lower trust in their orga-
nization because they often encounter greater uncertainty and vulnerability
in the workplace (Kramer, 1996). We also predicted that older and longer
tenured employees would view the employment relationship as more
cooperative because they enjoy the benefits of seniority systems of em-
ployment (Deery et al., 1999). More educated employees are less likely to
assess the employment relationship favorably because they have greater
alternative job opportunities and fewer side bets in the employment rela-
tionship (Becker, 1960). We postulated that women would have more
negative perceptions of the relationship between staff and management
because they tend to occupy more temporary and less secure jobs that may
afford them fewer employment benefits. Part-time workers were expected
to hold more positive perceptions of cooperation because of their generally
more favorable attitudes to organizational policies and reward systems
(Eberhardt & Shani, 1984). Finally, in terms of absenteeism, research has
shown that older employees and those with higher levels of education and
job tenure are less likely to be absent from work, whereas full-time
employees and women are more likely to experience higher levels of
absenteeism (Iverson & Deery, 2001; Lau, Au, & Ho, 2003; Martocchio,
1989; Rhodes & Steers, 1990).
 RESEARCH REPORTS 169

Table 1
Means, Standard Deviations, Correlations, and Reliabilities

Number
Determinants of items M SD 1 2 3 4 5 6 7 8 9 10 11

1. Absenteeism 1 6.63 6.12

2. Cooperative employment relations 6 2.65 0.76 .16 .84
3. Trust 3 2.70 0.83 .08 .65 .76
4. Breach of psychological contract 5 3.55 0.79 .04 .60 .60 .82
5. External market pressures 3 3.49 0.78 .06 .15 .12 .19 .62
6. Available job alternatives 4 3.62 0.91 .06 .05 .06 .02 .02 .76
7. Age 1 35.45 10.33 .16 .06 .01 .01 .04 .10
8. Female 1 0.69 0.46 .07 .04 .08 .12 .06 .03 .06
9. Education 1 11.90 1.67 .05 .02 .08 .02 .01 .06 .07 .08
10. Tenure 1 7.42 6.62 .11 .03 .06 .01 .06 .12 .49 .11 .18
11. Full time 1 0.85 0.36 .13 .17 .08 .06 .01 .01 .08 .19 .08 .04
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Note. Reliabilities are reported along the diagonal. Correlations above [.08] are significant at p .05, one-tailed.

In December 1996, the companys revamped organizational structure
was put into writing in a collective-bargaining agreement known as the
Competency Based Training and Pay Structure Agreement, which ap-
plied specifically to the companys customer service representatives. Its
objectives were, first, to Develop a highly skilled workforce that is
adaptable in a customer service and sales environment and is able to . . .
initiate changes to maintain excellent customer service; second, to Es-
tablish a stable workforce; third, to Establish clear . . . accountabilities
which are directly related to competency standards; fourth, to Develop a
management and team culture based on recognition of shared responsibil-
ities for training, development, and continuous learning . . . and individual
and team performance management and improvement; and finally, to
Establish a clear relationship between different levels of competencies . . .
and levels of pay. In exchange, employees were expected to apply their
customer service skills to provide excellent customer service and to employees on involvement in decision making (R). A higher score on the
improve the effectiveness and efficiency of customer service. . . and
thereby improve returns to the business. A copy of the agreement was
supplied to all customer service staff. The message was reinforced by the
union that represented the staff and by the company that continued to
emphasize its strong commitment to devolve responsibility to employees
for sales performance and to introduce a system of pay on the basis of sales
and service delivery.
In February 1998, a survey was administered to a group of 562 customer
service representatives who were employed to answer inquiries about both
bills and accounts and new products and services. The questionnaire was
completed during working hours. Employees were provided with time off
the job to complete the survey and were also encouraged to express their
views at the end of the questionnaire about work and employment in the
company. A total of 480 employees completed the survey. This represented
an 85% response rate. Of the respondents, 69% were female, and 85%
worked full time. The mean age of the respondents was 35 years, and the
average tenure was 7.4 years. The average level of education was 11.9
years (see Table 1).
Measures
All questionnaire items were measured on a 5-point Likert scale ranging
from 1 (strongly disagree) to 5 (strongly agree), with the exception of
absenteeism and the demographic details. The Cronbachs alpha reliabili-
ties of the multiple-item scales are shown along the diagonal in Table 1.
Absenteeism was measured as the number of 1- and 2-day absences the
employee had taken on sick leave in the 12-month period to the date at
which the survey was administered.2
The absence data were collected from the personnel records of each
employee. These data were supplied to each respondent who inserted the
relevant information into the questionnaire. No statistical difference was
found between the aggregated frequency of 1- and 2-day absences col-
lected from the personnel records and that reported by the respondents,
t(479) 0.53, p .05. It should be noted that the frequency of short-term
absences1 or 2 daysis regarded as the most reliable measure of
voluntary or avoidable absence (Brooke & Price, 1989; Price, 1997).
Breach of shared psychological contract was assessed with a five-item
scale. Respondents were asked to indicate the degree to which they felt that
their organization had fulfilled its obligations to employees on five dimen-
sions of the employment relationship that were shared by those employees:
training, career development, pay based on performance, involvement in
decision making, and long-term job security. Sample items included [The
organization] has fulfilled its obligations to employees on training (re-
verse scored; R) and [The organization] has fulfilled its obligations to
recorded items indicated a greater perception of contract breach. It should
be noted that our psychological contract construct is broader than that used
by Rousseau (1989, 1995) in that we are measuring the individuals
perception of the organizations fulfillment of its obligations to employees
in general.
Trust in the organization was measured with three items from a scale
developed by Robinson and Rousseau (1994) and included questions such
as In general, I believe [the organizations] motives and intentions are
good and I am not sure that I fully trust [the organization] (R).
Cooperative employment relations was a six-item scale adapted from
Hammer, Currall, and Stern (1991) that assessed the degree to which
individuals believed that the relationship between employees and the
employer was cooperative. Items included Staff and management try to
2
We were not provided with the opportunity of gathering absence data
longitudinally in the period following the survey. However, there is a large
body of research evidence to indicate that prior absenteeism is the best
predictor of subsequent absenteeism (Breaugh, 1981; Chadwick-Jones,
Brown, & Nicholson, 1971; Hardy, Woods, & Wall, 2003; Harrison &
Martocchio, 1998; Ivancevich, 1985; Johns, 2003; Rentsch & Steel, 1998).
In a 6-year panel study of the frequency of absenteeism, for example,
Rentsch and Steel (1998) reported consecutive yearly correlations of .74,
.71, .63, .62, and .60. The authors also found that job characteristics
predicted absence over the 6-year study period and that the magnitude of
the relationships remained relatively constant. Hence, although we mea-
sured the frequency of 1- and 2-day absences in the 12 months prior to the
date at which the survey was administered, we have made use of this
measure as our dependent variable because of the stability of absence
behavior and because it is the best predictor of subsequent absenteeism.
 170 RESEARCH REPORTS

cooperate as much as possible and The relationship between staff and
management is hostile (R). The variable external market pressures was
measured with three items, including Increased competition makes it
difficult for [the organization] to maintain the same conditions of employ-
ment for its staff and [The organization] faces business pressures today
that it did not in the past. Available job alternatives was operationalized
by using three items from Meyer and Allens (1991) Continuance Com-
mitment scale and included I feel that I have too few job options to
consider leaving [the organization] right now (R) and One of the few
serious consequences of leaving [the organization] would be the scarcity of
available job alternatives (R).
The control variables were measured in the following way: age (in
years); female (dichotomous variable coded 1 female; 0 male);
education (in years); tenure (years of service with employing organiza-
tion); and full time (dichotomous variable coded 1 full time; 0 part
time).
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RMSEA .10. The result of the chi-square difference test demon-
strated that the partially mediated model, 2(1) 1.41, p .05,
failed to provide a significant improvement in fit over the more
parsimonious, fully mediated model. In addition, the fully medi-
ated model was found to be a significant better fit than the
nonmediated model, 2(1) 226.10, p .05. Therefore, the
hypothesized (fully mediated) model was retained in the analysis.
The LISREL results of the hypothesized model (see Figure 1)
are presented in Table 2. It can be seen that there was support for
our initial three hypotheses, controlling for the demographic vari-
ables. Hypothesis 1 predicted that psychological contract breach
would be associated with lower trust. This was supported by the
results ( .827, p .001). We also hypothesized that lower
levels of trust would have a negative effect on perceptions of

cooperative employment relations. The results provided support

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for this hypothesis ( .893, p .001). In Hypothesis 3, we

Analysis
We used the linear structural relations (LISREL) VIII program (Joreskog
& Sorbom, 1996a) to estimate the hypothesized model (see Figure 1). It is
well established that our measure of absenteeismthe frequency of 1- and
2-day absenceswould be associated with problems of skewness and
truncation (Hammer & Landau, 1981; Price & Mueller, 1986). We there-
fore censored (transformed via normal scores) this measure using the
PRELIS program (Joreskog & Sorbom, 1996b). The PRELIS correlation
matrix was then used as the input to LISREL following the screening of all
data (e.g., continuous, censored, and ordinal variables).
Confirmatory factor analyses were undertaken using LISREL VIII
(Joreskog & Sorbom, 1996a) to assess the convergent and discriminant
validity of the multiple-item measures (Gerbing & Anderson, 1993). In
terms of the convergent validity using a nested approach, the hypothesized
five-factor model was found to significantly better fit the data than both the
null, 2(31) 4520.43, p .001, and the one-factor, 2(10) 1507.16,
p .001, models.3 Examination of the parameter estimates (factor load-
ings) of the best fitting nine-factor model were all significant ( p .05) and
ranged from .57 to .90. These results affirmed the convergent validity of
the model. The discriminant validity of all constructs was also supported
(see Bagozzi & Yi, 1988, for the procedure). The measurement model
demonstrated acceptable fit: goodness-of-fit index (GFI) of .87, a normed
comparative fit index (CFI) (Bentler, 1990) of .89, and a root-mean-square
error of approximation (RMSEA) (Browne & Cudeck, 1993) of .084
(Browne & Cudeck, 1993; Gerbing & Anderson, 1993). The average
reliability of the multiple-item measures displayed a good internal consis-
tency of .76.5 The results of the structural model are described below.
Results
Multivariate Data
The hypothesized mediated model provided an acceptable fit of
the data, 2(143) 626.221, p .001; GFI .88; CFI .90;
RMSEA .08.6 However, Kelloway (1998) recommended that
before this model is used, two other nested structural models
should be tested. These models compose a partially mediated
model in which a path between breach of psychological contract
and absenteeism was added, and a nonmediated model, which
encompassed the partially mediated model with the paths from
trust and cooperative employment relations, removed. The par-
tially mediated model provided satisfactory fit to the data,
2(142) 624.812, p .001; GFI .89; CFI .90; RMSEA
.08. Conversely, the nonmediated model did not provide a good fit
to the data, 2(144) 852.318, p .001; GFI .85; CFI .80;
predicted that perceptions of a less cooperative employment rela-
tionship would be associated with higher absenteeism. The results
were consistent with our expectations ( .100, p .05).
It should also be noted that education ( .081) was signifi-
cantly related to trust, whereas the determinants comprised of
female ( .122), education ( .110), and full-time (
.173) employment were associated with perceptions of cooper-
ative employment relations. In addition, the determinants com-
prised of female ( .192), education ( .114), full time
( .331) employment, and tenure ( .108) were related to
absenteeism.
3
On the basis of the sample size (N) to number of variables ( p) ratio
(480:21), p to number of factors (r) ratio (21:5), and the average commu-
nality of .54, our sample size was sufficient to recover the factor solutions
(MacCallum, Widaman, Preacher & Hong, 2001; MacCallum, Widaman,
Zhang & Hong, 1999).
4
We also used the comprehensive exploratory factor analysis program
with the PACE option (Browne, Cudek, Tateneni, & Mels, 2002). This
option provides true estimates for the population communalities for the five
factors. The 90% confidence interval ranged from .05 to .07, indicating that
the hypothesis of close fit (H0: 0.05 and Ha: 0.05) is plausible and
that the hypothesis of not close fit (H0: 0.05 and Ha: 0.05) cannot
be rejected (MacCallum, Browne, & Sugawara, 1996). However, if
0.08 (reasonable fit), then the hypothesis of not close fit can be rejected.
Hence, the fit of the model is considered to be acceptable and reasonable
(Browne & Cudek, 1993).
5
Although the scale of external market pressures had an alpha lower
than .70, we retained it for several reasons. Cortina (1993) has noted that
the number of items used to measure a construct must be considered.
Accordingly, as we used three items that were found to be unidimensional
and had item intercorrelations ranging from .35 to .38 as well as the fact
that the scale was developed by the researchers, it was retained in the
analysis.
6
We calculated the statistical power of the model (i.e., probability of
rejecting a false null hypothesis-Type II [] error) (see SAS program by
MacCallum et al., 1996). Inputting the null and alternative values of the
root-mean-square error of approximation ( 0 0.05 and a 0.08; 0
0.05 and a 0.01; 0 0.00 and a 0.05) (see Browne & Cudeck,
1993, for discussion of 0 and a), the alpha level, degrees of freedom, and
sample size, the power estimate exceeded Cohens (1988) recommended
criterion of .80. As the model was observed to have sufficient power to
detect effect sizes (i.e., parameter estimates), we proceeded with our
analysis.
 RESEARCH REPORTS 171

Table 2
LISREL (Standardized) Results for Trust, Cooperative Employment Relations, and Absenteeism

Cooperative employment
Determinants Trust Unique R2 relations Unique R2 Absenteeism Unique R2

Control variable
Age .018 .017 .069
Female .020 .122*** .192***
Education .081* .110*** .114**
Tenure .047 .016 .108*
Full time .036 .032* .173*** .057* .331*** .129*
Independent variable
Breach of psychological contract .827***
Trust .893***
Cooperative employment relations .668* .771* .100* .010*
R2 .700 .828 .139
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Note. Dashes indicate that data were not obtained or are not reported.
* p .05, one-tailed. ** p .01, one-tailed. *** p .001, one-tailed.

To evaluate the effects of common method bias (see Podsakoff,
MacKenzie, Lee, & Podsakoff, 2003, for a review), we used the
procedure recommended by Podsakoff, MacKenzie, Moorman,
and Fetter (1990).7 This involved adding a same-source first-order
factor for our multiple-item measures (i.e., breach of psychological
contract, trust, and cooperative employment relations)8 to the
model to capture any systematic method variance. The overall fit
of the model was significantly improved, 2(8) 168.12, p
.001, although there were no substantial effects on the magnitude
or significance of our findings. Psychological contract breach was
negatively associated with trust ( .758, p .001), which
then predicted perceptions of cooperative employment relations
( .763, p .001), which, in turn, led to absenteeism (
.173, p .01). We did observe that the explained variance
decreased from 70% to 59.2% and from 82.8% to 64% for trust
and cooperative employment relations, respectively. In relation to
absenteeism, however, the proportion of variance increased from
13.9% to 16.1%. In summary, we obtained similar findings for our
original analysis after controlling for common method biases.
Interaction Effects
We expected that the relationship between contract breach and
trust would be moderated by perceptions of external market pres-
sures (see Hypothesis 4), whereas available job alternatives would
moderate the relationship between perceptions of cooperative em-
ployment relations and absenteeism (see Hypothesis 5).9 To test
these two interactions, a nested goodness-of-fit strategy with a
multiple-group solution was used (see Jaccard & Wan, 1996, for
the procedure).10 In the first step, the fit of the model was calcu-
lated by means of a chi-square test. In this test, parameters were
estimated using LISREL for the respective high and low external
market pressures and perceived available job alternatives using
mean splits,11with no across-group constraints imposed. In the
second step, the same procedure was followed, except that across-
group constraints were imposed. An interaction effect is present
when the chi-square change between the unconstrained and con-
strained model is significant. We found interaction effects for
perceived external market pressures, 2(1) 4.78, p .05, but not
for available job alternatives, 2(1) 2.47, p .05.12 Specifi-
cally, contract breach had a significantly stronger negative effect
when perceived external market pressures were low ( .885,
SE .09, p .05) than when perceived pressures were high (
.728, SE .06, p .05). The implications of these findings are
outlined below.
Discussion
The study found that perceptions of a shared psychological
contract breach were associated with higher absenteeism. Employ-
ees who believed that their organization had not fulfilled its
obligations to them and their fellow customer service workers
were significantly less likely to trust their organization. This, in
turn, was associated with perceptions of less cooperative employ-
ment relations and higher levels of absence. Perceptions of exter-
nal market pressures were seen to mitigate the negative effect of
contract breach on absenteeism. However, the availability of at-
tractive job alternatives did not affect the relationship between
perceptions of employer employee cooperation and absence
behavior.
The research confirmed the important link between psycholog-
ical contract breach and the erosion of trust (Robinson & Rous-
seau, 1994). A loss of trust can seriously undermine an employees
7
We acknowledge the limitations of this approach in that we had to
constrain two of the method factor loadings to be equal to address identi-
fication problems (MacKenzie, Podsakoff, & Paine, 1999; Podsakoff et al.,
2003).
8
We did not include the absenteeism measure, as it was supplied to
respondents from their personnel records.
9
In additional analyses, external market pressures ( .001, p .05)
and available job alternatives ( .038, p .05) failed to have significant
main effects on trust and absenteeism, respectively. We also found no
significant effects of common method bias for these analyses.
10
Ping (1998) has provided general support for this estimation technique.
11
We obtained similar results using median splits.
12
The explained variance for the interaction effect of perceived external
market pressures was a significant .8%, F(1, 417) 5.77, p .05; and for
perceived available job alternatives, the explained variance was a nonsig-
nificant .1%, F(1, 17) 0.294, p .05.
 172 RESEARCH REPORTS
relationship with their employer. Judgments about organizational
integrity and reliability can be thrown into question (Whitener et
al., 1998). Expectations of an ongoing relationship based on rec-
iprocity and fair dealing can be undermined, and individuals can
become less confident about predicting their employers future
actions and conduct (Lewicki & Bunker, 1996). This is particularly
salient for those at the bottom of the organizational hierarchy
where employees depend crucially on senior management for pay
raises, promotion opportunities, and for their job responsibilities
(Kramer, 1996). In this context, inconsistencies between actions
and words can seriously damage trust between subordinates and
their managers (Mishra, 1996).
In our study, employees reported inconsistencies between the
companys statements of intent and their actual practices. The
This article is intended solely for the personal use of the individual user and is not to be disseminated broadly.
collective-bargaining agreement contained promises about cus-
This document is copyrighted by the American Psychological Association or one of its allied publishers.
tomer service excellence and pronouncements on employee prob-
lem solving and recognition that were not fulfilled. The organiza-
tions formal commitments helped construct expectations about
the nature of the exchange relationship. Those expectations also
shaped the nature of the psychological contract and created under-
standings about what actions should be reciprocated by each party.
There was evidence that the employees had developed a strong
normative commitment to customer service excellence (Peccei &
Rosenthal, 1997). For example, 98% of respondents agreed or
strongly agreed with the statement Staff have an obligation to
provide the very best in customer service, whereas 90% agreed or
strongly agreed that Customers have a right to expect superior
treatment from all staff. In contrast, the employees believed that
the organization had failed to act in a way that was consistent with
its implicit promises. For example, in a written comment drawn
from the questionnaire, one respondent highlighted the apparent
contradiction between the organizations promised new ap-
proach to employee initiative and its actual policy of compliance
and control: Management are not interested in customer service
their only interest is statistics [on throughput] . . . initiative is a
dangerous quality in the new [organization]. Compliance is a
virtue.
The failure of the company to implement successfully its prom-
ised competency-based pay for performance system (known as
CBS) led one employee to comment: After the [CBS] process . . .
which was an insult to my integrity . . . I would not trust, believe
or rely on anything stated or signed by anyone from manager
upward. There was a perception that employees were not shown
due respect for their knowledge and skills and that their opinions
were not solicited despite formal policies on devolved responsi-
bility and shared problem solving. As one respondent commented:
internally the relationship between the management and em-
ployee is wider than ever, whereas another respondent added that
the company should keep their promises . . . [and] recognize
people if they do a good job. The consequences of the companys
failure to fulfill its obligations were quite profound. Perceptions of
contract breach were found to be negatively associated with trust
and cooperation. This was confirmed by comments of the staff.
One stated that The whole Centre lacks trust . . . in management;
a second employee commented that the organization suffered from
a them and us attitude, whereas a third employee complained
that it is difficult for me to enthusiastically and successfully work
in an environment where there is such a bitter attitude from my
peers toward their jobs and workplace.
It will be recalled that perceptions of a lack of employee
employer cooperation were associated with higher absenteeism.
The nature and quality of the relationship between employees and
their managers will affect the performance standards to which
employees hold themselves accountable (Deery et al., 1999). A
decline in cooperation can result in less discretionary effort and
higher absenteeism (Rousseau, 1995). Taking greater time off
work can also be part of the calculus used by employees to balance
their relationship with the organization (Adams, 1965). Should
employees perceive that the inducements or rewards they receive
are inequitable relative to their contribution, they will adjust their
contribution to that exchange relationship to restore balance. This
can, as we have seen, involve a withdrawal of effort in the form of
higher levels of absence from work. It is noteworthy, however, that
those staff who believed that the organization faced increased
competition and greater business pressures responded less nega-
tively to the perceived nonfulfillment of the companys obligations
to its customer service staff.
Overall, these findings have important implications for manage-
ment practice. Where organizations declare an intention to be
customer-focused and committed to a complementary set of hu-
man resource practices, they help to define their obligations to the
staff. More important, these obligations will come to form part of
the psychological contract with employees. Should the organiza-
tion fail to live up to those expectations, employees may feel
resentful and betrayed. This may generate a loss of trust and a less
cooperative employment relationship and lead to a reduction in the
contribution that employees make to the organization. Such be-
havior can have serious implications for the quality of service
provided by customer-contact employees (Schneider & Bowen,
1993; Wharton, 1993). Disaffection can spill over into negative
interactions with customers and weaken performance (Batt, 2002).
Organizations can, however, go some way to mitigating the ad-
verse consequences of psychological contract breach by providing
employees with credible explanations of the circumstances that led
to the nonfulfillment of those contracts.
There are a number of limitations to this study. First, the
research was cross-sectional, and causal inferences could not be
drawn. The absence data were gathered at the same point in time
as information on the other variables in the hypothesized model. A
longitudinal design would have enabled data on subsequent ab-
sences to have been collected and provided stronger evidence of a
directional relationship between the variables. Second, the data
were collected within a single organization and among one group
of employees, which imposes limits on the generalizability of the
findings. Studies in different organizational settings drawing on
different types of workers would help verify the generalizability of
our results.
Despite these limitations, the study does extend our understand-
ing of psychological contract breach by expanding the sample base
beyond managerial and professional employees to a group of
front-line service workers who were employed under standardized
employment arrangements and who experienced a common set of
reciprocal obligations. The research showed that perceptions of a
shared psychological contract breach were related to higher levels
 RESEARCH REPORTS
of individual absenteeism. It also revealed the importance of trust
and cooperation as mediators between breach and absence taking.
The level of cooperation between workers and managers in verti-
cally linked relationships would appear to be particularly influen-
tial in shaping employee reactions to perceived contract breaches.
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