Purpose – Changes in employment contracts and the provision of occupational pension schemes together with the Employment Equality (Age) regulations are likely to impact on the psychological contract between employers and employees. This paper aims to investigate the potential nature of this impact.
Design/methodology/approach – The role of DB and DC pension schemes are examined. The psychological contract, e.g. the employer's promise to the employee of a certain pension outcome in return for long-term loyal service and sense of loyalty and commitment, have prompted employers to rethink.
Findings – DC pensions do not reward workers who have risen through an organisation in the same way as DB schemes and are generally less expensive. It is argued that employers have shifted their emphasis from the relational component of the psychological contract to the transactional. In contrast with the difficulties that the Regulations may create for employers, they provide greater flexibility and choice to those who, for whatever reason, wish to remain in employment, at least until the age of 65.
Originality/value – This paper was compiled through a literature review and the authors' own knowledge of the subject and will be of interest to those in business.