A Psychological contract refers to mutual unwritten expectations that exist between an employee and his/her employer regarding policies and practices in their organization. Even if an employer has not made specific promises in that regard, every employee will appreciate clarity, fairness and good communication. The global economic downturn has led to the restructuring, downsizing, mergers and takeovers in many organizations. That was accompanied by changes in how personnel felt and acted towards their employers. Violations or breaches of the psychological contract occur when an employee perceives that the organisation has failed to fulfill one or more of its obligations comprising the psychological contract. This research study aims at developing a deeper understanding about psychological contract and employment relationship in light of the current global slowdown. Six psychological contract variables - relational contract, transactional contract, employer's commitment/obligation to employee, employee's commitment/obligation to employer, employer's relationship with employee, and employee's relationship with employer - were measured by means of questionnaire and personal interviews on 100 samples randomly chosen employed in different sectors viz. IT, ITES, Financial Services, Insurance, Pharmaceuticals, Retail and Real Estate. A 22-item Psychological Contract Questionnaire (PCQ) adapted from the Psychological Contract Scale (Millward and Hopkins, 1998) and the Psychological Contract Inventory (Rousseau, 1995), along with a few other close-ended and open-ended questions was used for collecting the data. The study revealed that the relative importance of various psychological contract obligations is different for different levels of employees. Also, there is a considerable discrepancy between promised and fulfilled psychological contracts in organizations. While organizations were successful in fulfilling monetary promises like competitive salary, pay and bonuses tied to performance and health care benefits , most of them either failed or refused to provide non-monetary benefits like flexible work schedule , opportunity to develop new skills ,freedom of creativity at work, vacation benefits,etc as perceived by employees. The study further established that breach of psychological contracts result in negative behaviors from employees. Where some employees started neglecting their duties in the workplace, most others planned to quit the organization as soon as possible as a response to the perceived violation of psychological contracts by the employers.