A frequent theme in the research on HRM practices and the employment relationship in SMEs is that HRM practices in SMEs are often informal (Marlow, Taylor, & Thompson, 2010; Patel & Conklin, 2012) associated in part with smallness and resource constraints (Lai, Saridakis, & Johnstone, 2016). HR formality is defined as the extent of documentation, systemization, and institutionalization of HR practices (Nguyen & Bryant, 2004). Different degrees of formality may depend on the firm’s reaction to specific internal and external demands and, instead of a competing duality, informality and formality can be taken into account as coexistent (Atkinson, Mallett, & Wapshott, 2016; Marlow et al., 2010). Therefore, achieving an appropriate balance between both formality and informality in order to capture the advantages of the two within SME context is a dilemma that warrants further research (Bartram, 2005; Saridakis, Muñoz Torres, & Johnstone, 2013). The psychological contract provides a theoretical and empirical framework for conceptualising the relationship of these informal and formal influences within the employment relationship (Atkinson et al., 2016). In this study, a key element in the psychological contract-making process - the organisation’s management of reward - is examined. Drawing upon the psychological contract theory as an analytical framework, this study attempts to investigate the relationship between the formality of reward management, key dimensions of the psychological contract (i.e., employees’ perceptions of fairness, trust, and potential breach) and consequently employee motivation and turnover within SME context from the perspective of both employees and employers. By exploring these relationships this study makes a contribution to both the reward literature and the psychological contract literature, especially within the SME context. The Small and medium size enterprises in Ireland is the main focus of this study.
References
Atkinson, C., Mallett, O., & Wapshott, R. (2016). ‘You try to be a fair employer’: Regulation and employment relationships in medium-sized firms. International Small Business Journal, 34(1), 16-33.
Bartram, T. (2005). Small firms, big ideas: The adoption of human resource management in Australian small firms. Asia Pacific Journal of Human Resources, 43(1), 137-154.
Lai, Y., Saridakis, G., & Johnstone, S. (2016). Human resource practices, employee attitudes and small firm performance. International Small Business Journal, 0266242616637415.
Marlow, S., Taylor, S., & Thompson, A. (2010). Informality and Formality in Medium‐sized Companies: Contestation and Synchronization. British Journal of Management, 21(4), 954-966.
Nguyen, T. V., & Bryant, S. E. (2004). A study of the formality of human resource management practices in small and medium-size enterprises in Vietnam. International Small Business Journal, 22(6), 595-618.
Patel, P. C., & Conklin, B. (2012). Perceived Labor Productivity in Small Firms—The Effects of High‐Performance Work Systems and Group Culture Through Employee Retention. Entrepreneurship Theory and Practice, 36(2), 205-235.
Saridakis, G., Muñoz Torres, R., & Johnstone, S. (2013). Do human resource practices enhance organizational commitment in SMEs with low employee satisfaction? British Journal of Management, 24(3), 445-458.
