BISNIS & BIROKRASI: Jurnal Ilmu Administrasi dan Organisasi, January 2020 Volume 27, Number 1

DOI: 10.20476/jbb.v27i1.11757

The Effect of Employer Branding on Contractual Employees:

Engagement and Discretionary Effort
Human Hardy1, Tri Wulida Afrianty2, Arik Prasetya3
Faculty of Administrative Science, Universitas Brawijaya, Malang, Indonesia1,2,3
humanhardy@student.ub.ac.id1, twulidafia@ub.ac.id2, arik_p@ub.ac.id3

Abstract. Employees are the most valuable assets in various types of organizations, and to retain valuable employees, organizations
need employer branding strategies. This study examines the effect of employee engagement as a mediator variable of employer
branding and discretionary effort relations. The sample used in this study are 110 contractual employees who worked at the
State-Owned Enterprises (SOE) Commercial Banks in Kota Malang. The data in this study were collected through direct surveys
using questionnaires. Explanatory methods and Structural Equation Modeling (SEM) are used to explain the influence between
variables. The results of this study indicate that employer branding has a positive and significant effect on employee engagement
of contractual employees and positive but not significant effect on discretionary effort of contractual employees. This study also
proves the role of employee engagement that successfully mediates the influence of employer branding on discretionary effort
to be positive and significant. The role of employee engagement becomes essential, indicating SOE Commercial Banks should
increase contractual employee’s engagement level before expecting an enhancement on discretionary effort through employer
branding strategy.

Keywords: contractual employee, discretionary effort, employer branding, employee engagement, state owned enterprises

Abstrak. Karyawan adalah aset yang paling berharga dalam berbagai macam organisasi, dan untuk mempertahankan
karyawan yang berharga, organisasi membutuhkan strategi employer branding. Penelitian ini menguji pengaruh employee
engagement sebagai mediator hubungan employer branding dan discretionary effort. Sampel yang digunakan pada penelitian
ini adalah 110 karyawan kontrak yang bekerja pada Bank Umum Badan Usaha Milik Negara (BUMN) di Kota Malang. Data
pada penelitian ini dikumpulkan melalui direct survey menggunakan kuesioner kepada responden. Metode eksplanatori dan
Structural Equation Modeling (SEM) digunakan untuk menjelaskan pengaruh antar variabel. Hasil penelitian ini menunjukkan
employer branding memiliki pengaruh positif dan signifikan terhadap employee engagement karyawan kontrak dan pengaruh
positif tidak signifikan terhadap discretionary effort karyawan kontrak. Penelitian ini juga membuktikan peran employee
engagement yang berhasil memediasi pengaruh employer branding terhadap discretionary effort menjadi positif dan signifikan.
Peran employee engagement menjadi sangat penting, menunjukkan bahwa Bank Umum BUMN harus meningkatkan level
engagement pada karyawan kontrak agar terdapat peningkatan pada discretionary effort melalui srategi employer branding

Kata kunci: employer branding, karyawan kontrak, keterikatan karyawan, usaha diskresional, BUMN

INTRODUCTION organizations, and to retain valuable employees, it

In recent years, the economy has experienced
a slowdown caused by the magnitude of financial
crisis in 2008, as companies face increased costs and
stagnant or falling revenue, causing unemployment
rates around the world to increased significantly,
from 5.0% in 2008 to 5.6% in 2009 (ILO 2019). The
recovery to the levels that prevailed before the global
financial crisis has taken a full nine years, but the
global unemployment rate stood at 5.4% in 2019,
this means that the gradual decline of the unemploy-
ment rate observed between 2009 and 2018 appears
to have come to a halt (ILO 2020). Conversely, many
CEOs and managers assume the number of competent
talent pools has not experienced a significant increase
and having difficulty in recruiting decent employees
(Burawat 2015). Company rivalry in fighting over
talented employees is still going on, and the competi-
tion is getting tighter every day.
Employees are the most valuable assets in
is essential for organizations to implement employer
branding strategy. Organizations with strong employer
branding are able to attract the interests of prospective
employees while retaining existing employees, and
through their employees can lead to the success of
sustainable competitive advantage. Many researchers
support the benefits of being the best employer, some
of the benefits are lower recruitment costs (Hasan
and Shabana 2016; Anne-Mette, Ragnhild, and H.
2013), lower turnover rate (Sangeeta, Avinash, and
Anupam 2018; Vaneet and Neha 2018; Kashyap and
Rangnekar 2016; Cascio 2014), lowering employee
absenteeism (K. De Stobbeleir et al. 2014; K. E.
M. De Stobbeleir et al. 2018), increasing employee
engagement (Burawat 2015) and commitment (Jack,
Céleste, and Kathie 2013; N. and Aiswarya 2019;
Fernandez-Lores et al. 2016). In addition, the best
employer can be distinguished from its competitors
as seen from the high level of employee engagement
that is associated with high discretionary effort and
 HARDY, AFRIANTY, PRASETYA, THE EFFECT OF EMPLOYER BRANDING
generates high revenues and profits which then pro-
duces a company that is able to compete (Gatewood,
Gowan, and Lautenschlager 1993; Backhaus and
Tikoo 2004; Kunerth and Mosley 2011).
A global survey by consulting firm
PricewaterhouseCoopers (PWC) of employer
branding trends shows top five benefits of employer
branding are to retain existing employees, increas-
ing employee engagement, attracting job applicants,
increasing employee performance and leads to
positive business results (PWC 2017a; 2017b).
Employers who understands this problem and are
serious about applying employer branding strategy
to their companies will automatically gain a competi-
tive advantage in the market (Marusarz et al. 2009).
A study by Powell and Goulet (1996) revealed that
positive impressions and values of an organization
that are perceived by employee have a significant
effect on employee engagement. Later, Richman et
al. (2008) found that work flexibility and fairness of
organizational policies also have a significant effect
in increasing employee engagement. Another predic-
tors like supportive and fair supervisor whom concern
about employee work experience, high-value of con-
tract offering, opportunities for career development,
and receiving appropriate wages are found to be asso-
ciated with the high level of employee engagement
(Aquino et al. 1997; Tepper 2000).
Discretionary effort refers to the quantity of time
and intensity per unit of time given by the employee,
which is then allocated to work beyond the minimum
demand that required and expected by the company.
Yankelovich and Immerwahr (1984) found 23% of
workers claimed that they worked with full potential,
while 44% claimed their work efforts to keep their
jobs, and 75% claimed that they could be better than
their current performance. Following a report from
Lloyd (2012), which shows that employees, of whom
12% are from North America, 10% from Europe,
and 22% from Asia Pacific (including Indonesia),
reveal that they are satisfied by their performance
and do it as expected by the employer. Discretionary
effort is an essential organizational variable, some
studies also support that discretionary effort is the
result of employee engagement (Kular et al. 2008) and
successful employer branding strategies (Marusarz
et al. 2009). Academic researchers and practitio-
ners affirm their interest in the relationship between
employees and employers, some studies reveal the
significant relationship between employer branding
and employee engagement (Barrow and Mosley 2005;
Kunerth and Mosley 2011; Sanborn, Malhotra, and
Atchison 2011), while some studies also reveal the
significant relationship between employee engage-
ment and discretionary effort (Robertson-Smith and
Markwick 2009; Kular et al. 2008; Shuck, Reio Jr, and
Rocco 2011; Vijay Anand et al. 2016). However, this
causality is separated from the theories that originated
to these causalities. Also, studies that emphasize the
simultaneous relationship between employer brand-
ing, employee engagement, and discretionary effort
13
are rare, especially those in an academic approach
(Burawat 2015).
This research was conducted in the Banking
Industry of State-Owned Enterprises (SOEs) in
the category of Commercial Banks registered at
the Otoritas Jasa Keuangan (OJK), including Bank
Mandiri, Bank Negara Indonesia (BNI), Bank Rakyat
Indonesia (BRI) and Bank Tabungan Negara (BTN).
There are several challenges of talent management
faced by the banking industry in Indonesia, especially
state-owned banking enterprises. Based on the survey
results by PWC (2014), as many as 40% of banks in
Indonesia experienced difficulties in finding high-
quality human resources, the remaining 30% banks in
Indonesia have difficulty in developing future leaders
for their organizations, and 30% of banks in Indonesia
have difficulty in retaining valuable employees for the
organization. Based on the explanation and reason-
ing above, this study aims to (1) analyzing the effect
of employer branding on employee engagement; (2)
analyzing the effect of employer branding on discre-
tionary effort; (3) analyzing the effect of employee
engagement on discretionary effort and (4) explains
the role of employee engagement in mediating the
causality between employer branding and discretion-
ary effort.
Employer Branding and Employee Engagement
Employer branding is defined as a long-term strat-
egy targeted to manage the awareness and perceptions
of employees, prospective employees, and stakehold-
ers relating to corporate branding (Backhaus and
Tikoo 2004). The process of internalizing employer
branding encourages individuals to accept external
values and show authentic attitudes (Saleem and
Iglesias 2016). Internalization occurs when employ-
ees feel that they share the same or similar values with
employer branding (Baker et al. 2014). However, for
the internalization of employer branding to occur,
leaders must consistently talk about their employer
brand, act as a role model, live their employer brand,
and therefore, implement their employer brand by
"walking the talk" (Sharma and Bhatnagar 2016).
Employees feel greater value congruence when mes-
sages are communicated through employer brand
values and when they experience regular interaction
with employer brands (Charbonnier-Voirin, Poujol,
and Vignolles 2017; Chawla 2019). Senior manage-
ment behavior, which reflects the values of employer
brands, can fulfill a vital role in increasing employee
engagement through employees who internalizes
employer branding values.
Employee engagement is defined as an individual
engagement, satisfaction and enthusiasm for work
(Saks 2006). To successfully increase engagement,
employees need to internalize the company's employer
branding values as their own (Shamir, House, and
Arthur 2008). Conformity between employee's values
and employer branding values is called employee-
brand fit. This concept is derived from Cable and
DeRue (2002) definition of person-organization fit.
14 BISNIS & BIROKRASI: Jurnal Ilmu Administrasi dan Organisasi, January 2020
The research investigates employees' subjective
perceptions of employer branding values because
their employer branding perceptions tend to deter-
mine their attitude towards brands (Davies, Mete,
and Whelan 2018; Tanwar and Prasad 2016; 2017;
Alshathry, Clarke, and Goodman 2017). Also, sim-
ilarity-attraction theory (Byrne, Clore, and Worchel
1966) shows that if two individuals feel that they have
the same belief, they become very interested to each
other (Zhang and Bloemer 2011). In the context of
branding, employees who considers ethical values in
line with company’s employer branding, feel a higher
similarity with their employer branding, and thus feel
more engaged to the company. The compatibility
of the employer brand and employees encourages
employees to develop an emotional attachment to the
company. In addition, when employees believe that
their values are consistent with the values of employer
branding companies, they feel more involved with
the company's vision and beliefs, and they are more
likely to be emotionally connected to the company
(Ghielen, De Cooman, and Sels 2020).
Several studies, both conducted by academics
and practitioners, confirm the influence of employer
branding on employee engagement, for instance,
Drizin (2005) summarizes the results of the 2004-
2005 National Workforce Engagement Assessment,
which was preceded by the Performance Assessment
Network, Inc. their study concluded that the most
significant drivers of engagement were job satisfac-
tion, the reputation of the management team and the
company, and the effectiveness of senior leadership.
In addition, Kunerth and Mosley (2011) examined
the impact of employer brand management on
employee engagement by surveying 104 companies,
including Coca-Cola HBC in Southern, Eastern, and
Central Europe, as well as Russia and Nigeria, their
study found that companies that have implemented
employer branding have developed to be more attrac-
tive to job applicants, engage and retain more talented
employees, and in return, employee are able to main-
tain their performance in challenging times. Barrow
and Mosley (2005) also express the same thing,
where they assume a company that consists of good
senior leadership, which leads to a strong employer
brand, will ultimately have an impact on high levels
of employee engagement. Global factors that affect
employee engagement consists of career develop-
ment, leadership, support, and corporate image
(Macey and Schneider 2008; Sanborn, Malhotra, and
Atchison 2011; Kunerth and Mosley 2011), combined
with work experience, developing opportunities, and
leadership will also increase employee engagement
(Truss et al. 2006; Kahn 1990).
H1: There is a significant positive effect of
employer branding on employee engagement.
Employer Branding and Discretionary Effort
McGregor (1957) examined the behavior of indi-
vidual organizations in the workplace. From his
Volume 27, Number 1
research, there are two models, namely Theory X
and Theory Y. McGregor's work is based on Maslow's
hierarchy of needs; he groups Maslow's hierarchy into
the needs of the 'lower demands' (Theory X) and the
needs of the 'higher demands' (Theory Y). In Theory
Y, management assumes that employees are ambi-
tious, highly motivated, and willing to accept greater
responsibility and exercise self-control and self-
direction. Employees enjoy their mental and physical
work activities and have a desire to be imaginative
and creative in their work, and this is made possible
by organizations using proper employer branding.
If these employees are given with the opportunity,
the result will be leading towards higher employee’s
productivity.
The 'Theory Y' manager believes, that under the
right conditions, most people are willing to work
well at work. They believe that the satisfaction of
doing a good job is a powerful motivator in the
organization (McGregor 1960). Theory Y bears fruit
such as independent work teams, self-management,
job enrichment, and empowerment (Carson 2005).
Discretionary effort is defined as the quantity of time
and intensity per unit of time allocated by employees
to work beyond what is needed or expected by the
company (Entwistle 2001). The discretionary effort
model that underlies this research is closely related
to Theory Y initiated by McGregor, given the 'type of
employee' targeted by the state-owned banks (PWC
2018). Extending McGregor's theory, this study con-
firms that the desires of employees in an organization
are closely related to their personal and team expecta-
tions. An employee will only give their discretionary
effort by fulfilling personal expectations by the com-
pany and to be able to be themselves.
The influence of employer branding on discretion-
ary effort shows that organizations that offer attractive
work contracts offering such as above-average salary,
promotion, coaching, challenging work, and precise
work targets will get more contributions such as high
performance, flexibility, expertise, and discretionary
efforts (Frenkel and Bednall 2016). In this regard, the
results of research from Aon Hewitt (2012) conducted
in 165 organizations with 74,000 employees spread
across Australia and New Zealand, proved that the
best employer not only creates a pleasant atmosphere
for work but also creates a condition where employees
can encourage the formation of discretionary efforts
(Hewitt 2012). Employer branding can also improve
employee performance and effort, in other words,
there is a positive relationship between employer
branding and employee performance (Buyanjargal
and Sandagdorj 2017). This relationship is also rein-
forced by research by Burawat (2015), which states
that there is a positive relationship between employer
branding and discretionary effort.
H2: There is a significant positive effect of
employer branding on discretionary effort.
Employee Engagement and Discretionary Effort
 HARDY, AFRIANTY, PRASETYA, THE EFFECT OF EMPLOYER BRANDING
The more employees understand their expectations
to be met through their work, the more self-employees
will be affirmed, thereby directing employees to offer
discretionary efforts voluntarily. Self-Affirmation
Theory can be described as a theory which states
that people look for ways to see themselves as: 'com-
petent, good, coherent, united, stable, able to choose
freely, able to control important outcomes' (Steele
1988). This theory tries to explain that people will
reduce the impact of threats to their self-concept by
focusing on and emphasizing their competence in
several other fields. Selective self-affirmation can lead
people to modify their self-concept by identifying
aspects of their self that justify dissonant behavior
and by denying the standards that are violated by that
behavior (Aronson, Blanton, and Cooper 1995). If the
workplace starts to 'violate' the concept of employ-
ee’s self-affirmation by not involving the employee
effectively, then the employee will release a part of
himself from the organization (disengaged). Kahn
(1990) defines personal engagement as the harnessing
of organization member’s selves to their work roles; in
engagement, people employ and express themselves
physically, cognitively, and emotionally during role
performances. It’s important to distinguishes engage-
ment and disengagement in employee engagement
investigation with discretionary effort, because each
concept are caused by different antecedents and could
lead to different consequences (Saks 2006; 2019).
Empirical research on the relationship between
employee engagement and discretionary effort by
Kahn (1990) suggests that satisfaction levels are not
enough to produce the discretionary effort, whereas
employee engagement is more likely to be found
in employees who work harder. Robertson-Smith
and Markwick (2009) said that engaged employee
would be more likely to be part of an organization
that dedicates their companies to the performance
of extra-roles, not limited to in-roles, as long as they
are organize. Corresponds to the study conducted
by Sanborn, Malhotra, and Atchison (2011), who
studied global engagement, the results of the study
showed that the employees involved made discre-
tionary efforts. Meanwhile, some researchers define
engagement as the emotional and intellectual level
experienced by an employee, which is realized in
the form of organizational support behavior, such as
discretionary effort and intention to settle (Seijts and
Crim 2006; Kunerth and Mosley 2011). Practitioner
Hewitt Associates said that engagement is a measure
of the energy and passion that employees have for
their company. The researchers also confirmed that
the employees involved referred to employees who
were committed to the company by telling good things
about their company and always trying to do more
than what was expected from their job descriptions
(Marusarz et al. 2009).
Employees who are more bound to tell good things
about their company, and want to remain in the com-
pany, give more discretionary efforts that bring the
company to a higher level of employer brand (Hughes
15
and Rog 2008). In addition, research from Beattie
and Smith (2010) conducted a study using survey
methods to collect data from 160 company directors
in the United Kingdom, and they found that employee
engagement can be measured based on employees'
commitment and discretionary effort to stay in their
company. Kular et al. (2008), Robertson-Smith and
Markwick (2009), Vijay Anand et al. (2016), further
confirms that there is a positive relationship between
employee engagement variables and discretionary
effort.
In line with this Drizin (2005) summarizes
the results of the 2004-2005 National Workforce
Engagement Assessment conducted by Performance
Assessment Network, Inc. by concluding that the rela-
tionship between employees and managers is very
influential on the engagement that illustrates more
significant discretionary work effort. Their study also
confirmed that emotional impulses had a five times
greater effect on one's discretionary efforts compared
to economic drives such as salary and compensation
and emotional impulses such as dignity at work and
good interpersonal relationships with managers had
a four times greater impact on discretionary work
effort someone compared to other factors such as
salary or payment.
H3: There is a significant positive effect of
employee engagement on discretionary effort.
Employee Engagement as a Mediator of Employer
Branding and Discretionary Effort Relationship
Related to the relationship between employer
branding and employee engagement, with discre-
tionary effort, creating a strong employer brand will
undoubtedly have an impact on sustainable success,
where their employees will be more involved and will
make discretionary efforts (Crozier 2008). In addition,
Crozier (2008) also believes that an organization can
create a world-class employer brand by improving
capacity in recruiting new employees, engaging and
maintaining employee talent, increasing employee
discretionary effort and customer satisfaction, and
emphasizing their differences with their competitor.
In line with this, Burawat (2015) explains that the
benefits of sustainable culture and employer brand-
ing are high levels of trust, motivation, involvement,
and loyalty, which in turn will increase discretionary
efforts and have a positive impact on productivity
and financial performance. Employer brands also
play a role in developing involvement to persuade
employees to make discretionary efforts while work-
ing, working beyond the minimum requirements in
terms of time and mind. A well-formed employee
brand is associated with high employee involvement,
while an employer brand that is not too good is associ-
ated with low involvement, wherein the end it results
in a bad work relationship, lower productivity, and
the absence of discretionary effort.
H4: There is an influence of employer branding
16 BISNIS & BIROKRASI: Jurnal Ilmu Administrasi dan Organisasi, January 2020
on discretionary effort through employee engagement
mediation.
RESEARCH METHOD
This research used quantitative approach with
explanatory method. Explanatory method is con-
ducted in order to find the problem that not studied
in-depth in the past research and can be useful in
understanding the problem efficiently. The main aim
of explanatory method is to identify any causal links
between the factors or variables that pertain to the
research problem (Hair et al. 2019). The locations
of this study are Commercial Banks State Owned
Enterprise (SOE) registered in Otoritas Jasa Keuangan
(OJK), which are Kantor Cabang Utama (KCU) of
Bank Negara Indonesia, Bank Mandiri, Bank Rakyat
Indonesia and Bank Tabungan Negara in Malang
City. The population in this study are 151 contractual
employees at KCU Bank Negara Indonesia, KCU
Bank Mandiri, KCU Bank Rakyat Indonesia, and
KCU Bank Tabungan Negara in Malang.
The sampling technique in this study are mul-
tistage sampling. The first sampling technique is
proportional random sampling, sampling is done
randomly without regard to existing strata, and this
technique is only used if the population is homoge-
neous. The sample size of this study was determined
by the Slovin formula with an error tolerance of 5%
which obtained 110 samples of contractual employ-
ees. The next sampling technique used is proportional
stratified random sampling, in which the randomized
samples are distributed evenly to each work division
in each state-owned bank to avoid collecting research
samples in certain work divisions. Most of the respon-
dents are female (62.7%), aged between 24-29 years
(50.9%), graduated with bachelor’s degree (86.4%)
and are undergoing their second year of contract
period (37.3%). The type of data used in this study
is primary data obtained directly from contractual
employees selected as samples using questionnaire.
Data collection techniques used in this study are
questionnaires and the scale used to measure respon-
dents' answers is a Likert scale (5) points, where (5)
is interpreted as "strongly agree" and (1) "strongly
disagree". The analytical method used in this research
is Structural Equation Modeling (SEM) with Partial
Least Square (PLS) approach using smartPLS 3.0.
The data analysis stages of this research are:
Evaluation of the Measurement Model (Outer
Model). The outer model or measurement model
defines how each block of indicators is related to
its latent variable. The coefficients used for reflec-
tive relationship patterns are called outer loadings
(Ghozali 2014). Outer models in this study are reflec-
tive. The outer model criteria are Cronbach's Alpha >
0.60, Composite Reliability > 0.70, Loading Factor >
0.70, and AVE > 0.50 (Urbach and Ahlemann 2010).
Evaluation of the Structural Model (Inner
Model). The PLS inner model illustrates the
Volume 27, Number 1
relationship between latent variables based on theory.
The inner model shows the relationship between latent
variables. Inner Model criteria based on Urbach and
Ahlemann (2010) are R2 > 0.670 (substantial), R2 >
0.333 (moderate) and R2 > 0.190 (weak).
Goodness of Fit Evaluation. Goodness of fit is
measured based on the value of R2 (R-square) on
the dependent variable as well as in the regression
method. The R2 value indicates the overall predictive
power of the model with R2 criteria > 0.10 or > 10%.
Goodness of fit can also be used to calculate Stone-
Geisser Q2 values. Q2 values greater than 0 (zero)
indicate that the model prediction is relevant, where
the Q2 value less than 0 (zero) indicates the model
prediction is less relevant (Ghozali 2014).
Hypothesis Testing (Bootstrapping). The
implementation of this method does not require the
assumption of a normal distribution and does not
require a large sample size. Testing can be done by
t-statistics. It is said to be significant when the t-value
is above the t-table (t-value is more than t-table)
(t-table 1.980 at 5% error rate). If the test results of
the model are significant, it means that there is an
influence between latent variables (Ghozali 2014).
The exogenous variable in this study is employer
branding which defined as a long-term strategy tar-
geted to manage the awareness and perceptions of
employees, prospective employees, and stakehold-
ers relating to corporate branding (Backhaus 2016),
this variable is measured by five indicators accord-
ing to Burawat (2015) consisted of employment
(which describes job characteristics performed by
contractual employees), development and application
(which describes contractual employee development
programs provided by the company and how they
implement the development that has been obtained),
organizational reputation (which describes the repu-
tation of the company and the products marketed,
as well as the activities carried out by the company
on the community and environment), economic
(which describes tangible motivation such as salary
and facilities offered by the company to contractual
employees), and senior management (which describes
the relationship between senior management and con-
tractual employees).
The first endogenous variable in this study is
employee engagement which defined as an individ-
ual engagement and satisfaction and enthusiasm for
work (Saks 2006), this variable is measured by two
indicators according to Saks (2006), organizational
engagement (which describes contractual employ-
ee’s positive behavior towards the organization and
act as ambassadors for the employer brand) and job
engagement (which describes contractual employ-
ee’s positive behavior of contract employees towards
work and enthusiasm in executing their duties and
responsibilities). The second endogenous variable
is discretionary effort which defined as the quantity
 HARDY, AFRIANTY, PRASETYA, THE EFFECT OF EMPLOYER BRANDING
of time and intensity per unit of time that employees
allocate to work beyond what is needed or expected
by the company (Entwistle 2001), this variable is
measured by two dimensions according to Entwistle
(2001). in-role discretionary effort (which describes
contractual employee’s effort in fulfilling minimum
requirement given by organization) and extra-role
discretionary effort (which describes contractual
employee’s effort in exceeding minimum requirement
Table 1. Outer Loading Convergent Validity.
item loading factor value was higher than 0.7 which
are valid and each indicator are appropriate to be used
as a measurement tool for the construct of the vari-
able under study are employer branding, employee
engagement and discretionary effort, the results of
convergent validity are presented in Table 1.
Composite reliability value on each construct
17
given by organization).
Evaluation of Measurement Model (Outer Model)
Convergent validity aims to evaluate the results
of the validity test values of each latent variable
with its indicators. Rule of thumb evaluation of the
measurement model in the PLS-SEM equation the
loading factor value is expected to be higher than 0.7
(Ghozali 2014). The results showed that the overall
variable also has good reliability, it can be seen
that the composite reliability value on the employer
branding was 0.951, employee engagement was 0.947
and discretionary effort was 0.897 which mean to
have high reliability because it has a value > 0.70.
According to Ghozali (2014), research instruments
are reliable if the value of the reliability coefficient
18 BISNIS & BIROKRASI: Jurnal Ilmu Administrasi dan Organisasi, January 2020
Table 2. Cronbach’s Alpha, rho_A, Composite Reliability and AVE.
or Cronbach’s alpha is greater than 0.60. The reli-
ability test results in this study indicate that the entire
research instrument has a value > 0.60 and concluded
as a reliable instrument, the results of the calculation
of variables and indicators reliability are presented
in Table 2.
RESULT AND DISCUSSION
Evaluation of Structural Model (Inner Model).
According to Ghozali (2014) when using PLS-
SEM inferential statistical test termed the structural
model (Inner Model) seen through the R-square value
(R2) with a value higher than 0.67 indicates strong
influence, higher than 0.33 indicates moderate influ-
ence and higher than 0.19 indicates weak influence.
Based on table 3 it can be seen that employee engage-
ment has an R-square value of 0.626 which gives
an indication of moderate influence, in other words,
employee engagement variable can be influenced by
employer branding of 62.6% and the rest of 37.4%
can be influenced by other variables that not examined
in this study. Discretionary effort has an R-square
Table 3. R-Square
value of 0.537 which gives an indication of moder-
ate influence in other words the discretionary effort
can be influenced by the employer branding variable
and employee engagement of 53.7% and 46.3% can
be influenced by other variables that not examined in
this study. The results of the R-Square calculation are
presented in Table 3.
Goodness of Fit
In PLS-SEM model, the overall goodness of fit
Volume 27, Number 1
assessment is known from the value of Q2 (predic-
tive relevance). Goodness of fit testing of the model
is done by using the coefficient of total determina-
tion, where the test results can explain how much
the formed path model can represent the observed
data. Based on Table 3 regarding R-square value,
the predictive relevance can be calculated as follows:
Q2 = 1 – (1 – R12) x (1 – R22)
Q2 = 1 – (1 – 0,626) x (1 – 0,537)
Q2 = 1 – (0,374 x 0,463)
Q2 = 1 – 0,173
Q2 = 0,827
Based on the results of the calculation of Q2 values,
it can be seen that the Q2 value of 0.827 which means
that the diversity of data from the designed structural
equation model can be explained by 82.7% and the
remaining 17.3% are explained by other factors out-
side the research model which means the structural
model in this study can be stated to have a good pre-
dictive relevance because the Q2 has a value with a
range of 0 < Q2 < 1, where the closer the Q2 value
to 1 means the better the model.
Hypothesis Testing (Bootstrapping)
The main aim of PLS-SEM is to explain the hypoth-
esized relationships between the latent variables of
interest. In other words, to determine whether the
model fits the data. PLS-SEM focuses on maximizing
the explained variance in the endogenous variables
(Hair et al. 2019). As such, the structural model is
assessed for its predictive capabilities by determin-
ing how well the model predicts the endogenous
variables. After the reliability of each latent variable
was confirmed, the estimated path coefficients were
assessed to determine the strength and significance
of the various hypothesized relationships. To assess
 HARDY, AFRIANTY, PRASETYA, THE EFFECT OF EMPLOYER BRANDING
the statistical significance of the path coefficients, the
bootstrapping procedure was used to compute the p
values. A significance level of 5% (p < .05) was used
as a guideline in this study. Table 4 shows whether
the path coefficients of the main effects were signifi-
cant or not as indicated by the p-values. Based on the
hypothesis test results, it can be described as follows:
H1: There is a significant positive effect of employer
branding on employee engagement.
H1 test results show the path coefficient value of
the employer branding variable towards employee
engagement is 0.791 with a t-test value of 16.182
and a p-value of 0,000. The value of t-count shows
a value greater than t-table that is equal to 1.960 and
the p-value value indicates a value of less than 0.05.
These results indicate employer branding has a posi-
tive and significant effect on employee engagement
which means that the first hypothesis proposed in this
study was accepted.
H2: There is a significant positive effect of employer
branding on discretionary effort.
H2 test results show the path coefficient value
of the employer branding variable to discretionary
effort is 0.174 with a t-value of 1.266 and a p-value of
0.206. The value of t-count shows a value smaller than
t-table that is equal to 1.960 and the value of p-value
indicates a value of more than 0.05. These results
indicate that employer branding has a non-significant
positive effect on discretionary effort which means
that the second hypothesis proposed in this study was
rejected.
H3: There is a significant positive effect of employee
engagement on discretionary effort.
The results of the H3 test show the path coefficient
value of the employee engagement to discretionary
effort of 0.863 with a t-value of 6.881 and a p-value
of 0.000. The value of t-count shows a value greater
than t-table that is equal to 1.960 and the p-value
value indicates a value of less than 0.05. These results
indicate that employee engagement has a positive
and significant effect on discretionary effort which
means that the third hypothesis proposed in this study
is accepted.
H4: There is a positive and significant influence of
employer branding on discretionary effort through
employee engagement mediation.
The influence of employer branding on discretion-
ary effort through employee engagement shows the
results of the indirect path coefficient of 0.682 with the
t-test value of 5.433 and p-value of 0,000. The t-value
indicates a value greater than t-table (1,960) and the
Table 4. Results of Hypothesis Testing
19
p-value indicates a value of less than 0.05 which
means that employee engagement has a significant
effect in mediating the effect of employer branding
on discretionary effort, thus, the fourth hypothesis is
accepted.
The next discussion is to present the answers
for each established research hypotheses. The first
hypothesis in this study is related to the influence of
employer branding on employee engagement shows
that there is a significant positive effect. These results
are in line with previous studies by Macleod and
Clarke (2009) and Burawat (2015). This research is
also in line with the findings of Drizin (2005) who
found that the most significant drivers of employee
engagement were job satisfaction, company reputa-
tion, and effectiveness of senior leadership, while
the study of Sanborn, Malhotra, and Atchison (2011)
revealed that the top three drivers of engagement
were career opportunities, alignment of employer
branding and recognition of employee’s performance
or achievement. Although previous studies used a
sample of permanent employee and this study used a
sample of contractual employees, the results showed
the same tendency that employer branding had a sig-
nificant positive effect on employee engagement.
Drawing on expectancy theory initiated by Vroom
(1964), it can be explained that employer branding
expected by employees consists of exciting work
tasks, high-value work experience, excellent career
development, community, feelings of friendship and
family, good company reputation, company values,
above-average compensation, supportive and atten-
tive supervisor. Also, these employees compare the
employer branding they expected with the employer
branding they actually felt, and when employees
feel the employer branding of the company is in line
with their expectations, the results are more positive
which leads to higher performance and engagement
(Macleod and Clarke 2009). On the other hand, when
employees find that employer branding is less than
they expected, they will feel pressured and cannot
work optimally. The results of this study indicate
that the highest dimension of employer branding in
SOE Commercial Banks, according to contractual
employees are the economic dimension, followed
by employment, organizational reputation, senior
management, and the lowest is development and
application. The results of this study also showed that
contractual employees at SOE Commercial Banks are
more engaged to the organization rather than their job.
Second hypothesis in this study shows that
employer branding has a positive but no significant
effect on discretionary effort. The results of this study
are contradictory with previous studies conducted
by Hewitt (2012), Burawat (2015), Buyanjargal and
Sandagdorj (2017) which found significant effect of
employer branding on discretionary effort. In addi-
tion, Cushen (2009) conducted a six-month study
with a research sample of 75 companies directors
and managers in Ireland and found that brand logic
was transferred from customer value to employee
20 BISNIS & BIROKRASI: Jurnal Ilmu Administrasi dan Organisasi, January 2020
value through additional functional work and dis-
cretionary effort. Research by Hewitt (2012) was
conducted on 165 organizations and 74,000 employ-
ees in Australia and New Zealand and concluded
that best employers not only build good places to
work but also create conditions for their employees
to exceed and encourage discretionary effort. The
results of second hypothesis indicate that there is a
significance difference with previous research in the
effect of employer branding on discretionary effort
based on employee work status. This contradiction
might be caused by differentiation in the application
of employer branding dimensions (i.e. employment,
development and application) toward permanent and
contractual employees. For instance, considering the
nature of contractual employees which have lesser
diversity of workload and a shorter year of service
compared to permanent employees, an organization
might spend less investment and variety in develop-
ment program for contractual employees, recently a
research by Guan and Frenkel (2019) conducted in
Chinese manufacturing firms, found that employee’s
in-role task performance and extra-role performance
are significantly affected by training program pro-
vided by organizations.
In third hypothesis, the result shows that employee
engagement has a significant positive effect on discre-
tionary effort. The results of this study are in line with
the results of previous studies conducted by Kahn
(1990), Robertson-Smith and Markwick (2009), Seijts
and Crim (2006), Kunerth and Mosley (2011), Hughes
and Rog (2008) and Beattie and Smith (2010). Several
other studies also support that discretionary effort is an
outcome of employee engagement (Kular et al. 2008).
Global study by Sanborn, Malhotra, and Atchison
(2011) revealed that engaged employees give dis-
cretionary effort, while Shuck, Reio Jr, and Rocco
(2011) supports that the level of job engagement and
organizational engagement is highly correlated with
discretionary effort. In addition, Vijay Anand et al.
(2016) confirms that there is a positive relationship
between employee engagement variables and discre-
tionary effort. The results of this study indicate that
contractual employees at state-owned commercial
banks tend to be higher in carrying out their extra-
role discretionary efforts compared to their in-role
discretionary efforts. This is very good because con-
tractual employees not only put effort into working
to avoid being fired by the company, but contractual
employees give an extra effort in their work. This
result assumes that contractual employees put extra
effort into their work because when their contractual
period has expired, the company can extend their
contract period or the company can appoint them to
become permanent employees.
Lastly, employee engagement successfully medi-
ates the effect of employer branding on discretionary
effort significantly. The results of this study are sup-
ported by research from Burawat (2015) which shows
the same results. The role of employee engagement
in mediating the effect of employer branding on
Volume 27, Number 1
discretionary effort is interesting because second
hypothesis in this study show positive direct effect
of employer branding on discretionary effort but
not significant. With the engagement of contractual
employees to the company, the effect of employer
branding on discretionary effort becomes signifi-
cantly positive. This needs to be considered by the
SOE Commercial Banks, when company wants its
contractual employees to give an extra-effort, the
first step that must be taken is to increase contractual
employee’s engagement first.
CONCLUSION
This study proves that employer branding has a
positive significant effect on employee engagement
along with acceptance of first hypothesis, positively
insignificant on discretionary effort along with rejec-
tion on second hypothesis, and employee engagement
has a positive significant effect on discretionary effort
along with acceptance of third hypothesis. However,
the employee engagement managed to mediate the
effect of employer branding on discretionary effort
to be significantly positive along with acceptance of
fourth hypothesis. The results indicate that the impact
of employer branding toward permanent employ-
ees and contractual employees, especially at SOE
Commercial Banks cannot be equated because there
is a difference result with the previous studies which
used permanent employees as its sample. The role of
employee engagement becomes essentials because it
increases the significance level of employer branding
on contractual employee’s engagement, indicating
SOE Commercial Banks should increase contrac-
tual employee’s engagement level before expecting
an enhancement on discretionary effort through
employer branding strategy.
Considering the practical implication, the
results show that the economy is the most essential
dimension for contractual employees, followed by
employment, organizational reputation, senior man-
agement, and lastly development and application.
Therefore, the authors suggest that SOE Commercial
Banks to emphasize its employer branding on the
economic dimensions which include competitive
salary, facilities and high-value of contract offering
such as quarterly development program to enhance
contractual employee’s skills and ability that would
lead to possibility for them to be hired as a permanent
employee.
Several limitations are inseparable from this
research, first, respondents in this study were limited
to contractual employees without involving employ-
ees with permanent or outsourcing status. Second,
this research was only conducted in the category of
Commercial Banks with the type of State-Owned
Enterprises without involving Banks in other par-
ticular sectors (for example, Investment Banks,
Export Banks and Sharia Banks) as well as Banks
with private ownership types. Third, this study uses
a multi-dimensional construct on each variable. This
 HARDY, AFRIANTY, PRASETYA, THE EFFECT OF EMPLOYER BRANDING
research reveal that studies on employer branding,
employee engagement, discretionary effort can be
applied to the context of contractual employees and
for better generalization of the results, the authors rec-
ommend that future studies to considers conducting
research at different industries and using permanent
employees or outsource employee as the research
samples in the context of employer branding and
exploring variables which are not discussed in this
study.
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