The need for organizations to quickly respond to change, to be adaptive and to learn from experience has become an imperative in the 1990s. As a result, there is a current trend toward the externalization of work. This change is a response to economic pressures; changing business needs; demographic changes; organizational dynamics; social and technological change. Organizations pursue employment externalization (part-time, temporary, casual and fixed-term contract arrangements) as a means of increasing labour flexibility. Such externalized work arrangements punctuate a changed relationship between employee and employer. This trend is facilitated by advances in information technology (IT) which enable actors and machines to communicate with each other and extend the available range of vicarious actor experiences across time and space boundaries.
There is a growing body of literature that suggests that the implicit psychological contract typically held with employees-job security in exchange for 'loyalty'-is changing. Employees no longer acknowledge the existence of an implicit or explicit social contract between themselves and their employer. This paper aims to address the notion of the 'new' psychological contract and work externalization, given that change is acknowledged as stressful and that employees have to learn to cope with such stress and employers need to provide opportunities for further development and re-employability. A parallel theme throughout the paper is that the psychological ramifications of externalized work arrangements should be closely monitored in order to determine the 'costs and benefits' of new employment relationships for both employers and employees. The public policy implications of the re-regulatory aspects of changing employment contracts are also briefly outlined.