The Erosion of the Psychological Contract: Why Modern Employees Prioritize Mobility Over Loyalty in Sri Lanka’s Evolving Labor Market.

 

For generations a plethora of firms have always operated on unwritten agreements with their workforce. An employee’s loyalty would often be rewarded with constant career succession, stability and job security. However in today’s evolving job market the psychological contract is under heavy scrutiny. The employees are no longer loyal or under any liability to commit themselves to organizations often opting for personal growth, remuneration and are prioritizing flexibility and mobility. This leads to an imminent predicament.

                              

Figure 1: Comparison of Psychological and Employment Contracts

Source (Jay and Boatman, n.d.)

Has organizational loyalty become obsolete, particularly in emerging economies such as Sri Lanka?

The framework of psychological contract (Rousseau, 1995) often emphasizes on the unwritten expectations between the organization and employees. In a traditional point of view, this agreement was trust based, long term and stability oriented. Nonetheless modern employment practices are navigating towards a transactional contract which entails employees to exchange their innate skills for rewards and the aspect of loyalty is considered conditional rather guaranteed (Jacobsen, 2026).

This impending shift can further be clarified through the social exchange theory (Blau, 1964), which highlights that employee conduct is indeed influenced by reciprocal associations within the organizations. When the workforce believes that their contributions are not respected or complemented by career development opportunities, recognition or rewards, the balance of exchange is interrupted resulting in reduced loyalty and an attention to shift to other organizations (Coyle-Shapiro and Kessler, 2000).

This transformation is clearly visible in Sri Lankan firms such as John Keells holdings and Mas Holdings. These firms have made significant investments towards talent development, training, workplace wellbeing programs and employee engagement aspects. Despite these efforts employee turnover specially among early career professionals continues to rise (John Keells Holdings, 2023; MAS Holdings, 2023).

A driving force to this change is skilled migration and there has been a significant increase in Sri Lankan professionals who tend to look for opportunities abroad due to superior wages, enhanced working conditions and professional growth. In addition, the development of remote working facilities has empowered employees to access opportunities without relocating resulting in weakened conservative attachments to organizations.

 

             

Figure 1: Willingness to Work for Foreign Employers by Region
Source: (People Mobility Alliance, 2024)

 

As illustrated in figure 1, the majority of the workforce are willing to work for foreign employers without physical relocation highlighting the shifting mindset of employees. This trend reinforces the decline of organizational loyalty and the rise of cosmopolitan career paths. A majority of professionals from South Asia demonstrate openness to foreign employment reflecting comparable behavioral patterns within Sri lanka.

 

Many firms consider this shift as a steep decline in employee loyalty, such a view can be considered desperately naive.   A refined overview suggests that the psychological contracts are not obsolete but it has progressed. Employees at present are not intrinsically disloyal but are opportunity driven, more versed and discourage imbalance in working systems.

In a Sri Lankan context this shift is inevitable due to limited career growth, economic uncertainty and an ever increasing need for a knowledgeable workforce (International Labor Organization, 2022). From a social exchange theory perspective when employees recognize an inequality between involvement, empowerment and rewards, they often look for alternative opportunities (Hom et al., 2017). However, this theory assumes that employees make rational decisions based on perceived exchange and in reality, external influences such as demand for skilled labor and migration pathways also play a substantial role in employee mobility.

Conclusion

The erosion of conservative psychological contract does not directly signal the decline of employee loyalty and organizational commitment but rather its transformation. In a local context firms should have a rational ideology and transcend from expectation of loyalty to constantly earning it through meaningful working environments, adaptive HR strategies and dynamic career trajectories.

 

Blau, P.M. (1964) Exchange and power in social life. New York: Wiley.

Coyle-Shapiro, J.A.M. and Kessler, I. (2000) Consequences of the psychological contract for the employment relationship. Journal of Management Studies, 37(7), pp. 903–930.

Hom, P.W., Lee, T.W., Shaw, J.D. and Hausknecht, J.P. (2017) One hundred years of employee turnover theory and research. Journal of Applied Psychology, 102(3), pp. 530–545.

International Labour Organization (2022) Labour migration in Sri Lanka: Trends and challenges. Available at: https://www.ilo.org (Accessed: 1 April 2026).

Jacobsen, D. (2026) 15 ways employee recognition builds a better employer deal. Workhuman Blog, 24 March. Available at: https://www.workhuman.com/blog/15-ways-recognition-builds-a-better-employee-deal/ (Accessed: 2 April 2026).

Jay, S. and Boatman, A. (n.d.) What is a psychological contract: Types with examples. AIHR. Available at: https://www.aihr.com/blog/psychological-contract/ (Accessed: 2 April 2026).

John Keells Holdings (2023) Annual Report 2022/23. Available at: https://www.johnkeells.com/investor-relations/annual-reports/ (Accessed: 2 April 2026).

MAS Holdings (2023) Sustainability Report. Available at: https://www.masholdings.com/sustainability (Accessed: 2 April 2026).

People Mobility Alliance (2024) Global talent mobility trends: Key insights from the Decoding Global Talent 2024 report. Available at: https://people-mobility.org/global-talent-mobility-trends-key-insights-from-the-decoding-global-talent-2024-report/ (Accessed: 2 April 2026).

 

 

Comments

  1. Janith WijekoonApril 4, 2026 at 3:13 AM

    The idea of a “psychological contract” helps explain why traditional loyalty is weakening—not because employees lack commitment, but because the workplace itself has changed. Many professionals now prioritize career growth, fair compensation, skill development, and work-life balance over long-term attachment to a single organization.

    In Sri Lanka, this is even more visible among younger employees who see mobility as a strategy rather than instability. With increasing exposure to global opportunities and remote work, staying in one place no longer feels necessary for career success.

    ReplyDelete
    Replies
    1. Shewan SundarampillaiApril 6, 2026 at 12:03 PM

      Thank you for your comment, the aspect of psychological contract has shifted from loyalty to mutual value. The workforce at present are not less committed but rather simply reedifying what organizational commitment is. The younger generation of employees in Sri lanka are showing us that mobility can be an conscious strategy for career growth and not a clear sign of instability.
      This Perspective clearly emphasizes that firms should focus on flexibility, fair reward/ remuneration and career growth in order to expect long term loyalty. fundamentally loyalty at present is no longer about remaining with an organization but feeling invested and recognized for your inputs.

      Delete
  2. Ashan WimalasurendraApril 4, 2026 at 1:05 PM

    Great perspective! It shows how unmet expectations can gradually impact employee morale and loyalty. Do you think regularly revisiting and aligning expectations between employers and employees could help prevent this erosion?

    ReplyDelete
    Replies
    1. Shewan SundarampillaiApril 6, 2026 at 12:16 PM

      I strongly believe that regularly revisiting and aligning expectations will make a significant difference. The psychological contract constantly evolves in regard to the change with employees and the organization. When leaders entertain space for open minded conversations about work life balance, career opportunities and compensation, it could reduce the risk of silent frustrations and dejections.
      Its not all about lifetime loyalty but it is certainly about feeling recognized at each stage and in practice , this could be communication about professional development, willing to negotiate when circumstances shift and the ability to have periodic check ins. This way the collective drive is protected and organizational loyalty becomes rooted in trust rather in tradition .

      Delete
  3. Piyumal ManchanayakeApril 4, 2026 at 11:59 PM

    Given that the psychological contract has evolved from long-term loyalty to a more transactional and opportunity-driven relationship, how can organizations in Sri Lanka realistically redesign their HR strategies to “earn” employee commitment continuously especially when external factors like global mobility, remote work, and higher foreign wages are beyond their control?

    ReplyDelete
    Replies
    1. Shewan SundarampillaiApril 6, 2026 at 12:24 PM

      It is an evident factor that firms in Sri lanka cannot control the global mobility or foreign remunerations but they can certainly earn the trust of their employees by focusing on fair and flexible work arrangements, constant skills development, fostering career growth and building a culture of trust. Regardless of any circumstances, when employees feel that their wellbeing and development are actively supported, the aspect of loyalty becomes innate and also about staying engaged with the firm.

      Delete
  4. Sanjeewa RathnayakeApril 7, 2026 at 6:39 AM

    A very well-articulated post! The distinction between loyalty being obsolete versus simply being redefined is a critical one that many organisations still fail to grasp. In the construction industry context, this erosion is particularly visible among skilled tradespeople who leave not because they lack commitment but because the sector consistently fails to offer structured career progression or recognition. The conclusion that organisations must earn loyalty continuously rather than simply expect it is exactly the mindset shift that HR leadership in Sri Lanka urgently needs to adopt.

    ReplyDelete
    Replies
    1. Shewan SundarampillaiApril 20, 2026 at 9:01 AM

      You have captured the issue very well. Loyalty today isn’t automatic, it must be continuously earned through fair rewards, growth opportunities, and respect. In Sri Lanka, HR leadership needs to embrace this mindset shift urgently, especially in industries like construction where retaining skilled talent is vital. Building career pathways and recognition systems could go a long way in redefining loyalty as a mutual commitment rather than a one sided expectation.

      Delete
  5. Lakmina LiyanahettiApril 9, 2026 at 1:16 PM

    The psychological contract in Sri Lanka is shifting from long-term loyalty to a more transactional, opportunity-driven relationship. From a Social Exchange Theory perspective, employees stay only when perceived rewards match their contributions, meaning organizations must continuously earn commitment through fairness, development, and meaningful work.

    ReplyDelete
    Replies
    1. Shewan SundarampillaiApril 21, 2026 at 3:46 AM

      I agree that commitment today is conditional, shaped by fairness, growth, and meaningful work. For Sri Lankan organizations, this means loyalty can’t be taken for granted, it must be earned continuously through transparent HR practices and genuine investment in employees. Those that adapt to this new psychological contract will be better positioned to retain talent and build sustainable success in the future.

      Delete
  6. Madavi HemachandraApril 16, 2026 at 7:08 AM

    Excellent, modern employees are no longer loyal simply for job security they seek growth, flexibility, and fair rewards in return for their contribution. Loyalty today must be earned, not expected. How can companies demand commitment when employees feel their efforts are not equally valued?

    ReplyDelete
    Replies
    1. Shewan SundarampillaiApril 20, 2026 at 8:59 AM

      I completely agree, modern employees expect reciprocity. Organizations cannot demand commitment if they don’t show that they value contributions equally. Loyalty now comes from creating an environment where employees feel respected, supported, and given room to grow. When companies invest in their people, commitment follows naturally.

      Delete
  7. Gayan halangodaApril 21, 2026 at 5:45 AM

    Great article! It clearly highlights how the erosion of the psychological contract can damage trust and employee engagement. I especially liked how you connected unmet expectations with reduced commitment, which is a critical issue in today’s workplaces.
    What practical steps can organizations take to rebuild trust once the psychological contract has already been damaged?

    ReplyDelete
    Replies
    1. Shewan SundarampillaiApril 21, 2026 at 8:19 AM

      The erosion of the psychological contract can seriously damage engagement, but trust can be rebuilt through consistent and transparent actions. Practical steps include openly acknowledging past gaps, involving employees in decision making, and ensuring promises are realistic and consistently delivered. HR leaders can also strengthen trust by prioritizing fairness in policies, offering clear career development opportunities, and maintaining open communication channels. Over time, these actions demonstrate credibility and help employees feel valued, which is essential for repairing the psychological contract and restoring commitment.

      Delete

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