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This study contributes to the research of employee health and well‐being by examining the longitudinal effects of psychological contract (PC) breach on employees’ health. We integrate Social Exchange and Conservation of Resources theories to position effort–reward imbalance (ERI) as the mediating mechanism. We also assessed the moderating role of perceived job control as a boundary condition through which employees could prevent PC breach and ERI from adversely affecting their health. Using three‐wave longitudinal survey data from 389 employees, we estimated a path model using each variable’s growth parameters (intercept and slope). We found support for our hypotheses regarding stable effects; we found positive associations between PC breach and physical and mental health complaints and a need for recovery through ERI perceptions. We further tested employees’ perceived control over the work environment as a boundary condition and found support for its role in attenuating the positive relationship between PC breach and ERI perceptions, but not for its moderating role in the ERI–health outcomes relationship. Our findings indicate that exposure to PC breach has a detrimental impact on employee health/well‐being via perceptions of ERI and allow us to unravel one of the cognitive mechanisms leading to potential employee ill‐health. We conclude with theoretical and practical implications.

How psychological contract breach affects long‐term mental and physical health: the longitudinal role of effort–reward imbalance