The renewed interest in the concept of the psychological contract has come to the fore in attempts to describe, understand and predict the consequences of changes occurring in the employment relationship. Recognizing that the employment relationship includes two parties to the exchange process, we set out to examine the content and state of the psychological contract from both the employee and employer perspective. The two perspectives permit an examination of the mutuality of obligations, which has not received much empirical attention to date. The research methodology consists of two surveys conducted in a large local authority directly responsible and accountable for a range of public services including education, environmental health and social care to the local population. The key findings suggest that the majority of employees have experienced contract breach. This view is also supported by managers, as representatives of the employer, who further indicate that the organization, given its external pressures, is not fulfilling its obligations to employees to the extent that it could. Overall, the results indicate that employees are redressing the balance in the relationship through reducing their commitment and their willingness to engage in organizational citizenship behaviour when they perceive their employer as not having fulfilled its part in the exchange process.