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The Role of Compensation As The role of

compensation
a Determinant of Performance
and Employee Work Satisfaction:
A Study at The PT Bank Rakyat 943
Indonesia (Persero) Tbk Received 23 June 2020
Revised 18 January 2021
7 June 2021
Rojikinnor, Abdul Juli Andi Gani, Choirul Saleh and Fadillah Amin 26 July 2021
4 September 2021
Department of Public Administration, Faculty of Administration, Accepted 10 September 2021
Brawijaya University, Malang, Indonesia

Abstract
Purpose – The purpose of the study is to conduct an in-depth study of employee performance in connection
with compensation, job satisfaction and the work environment of employees at the PT Bank Rakyat Indonesia
(Persero) Tbk.
Design/methodology/approach – This study was performed at the PT Bank Rakyat Indonesia (Persero)
Tbk, which operates in Indonesia, and included all employees of the different branch offices in Sumatera, Jawa,
Kalimantan, Sulawesi, Bali and Jayapura.
Findings – Compensation does not directly affect employee performance but working environment does
directly influence employee performance at the PT Bank Rakyat Indonesia (Persero) Tbk. There is the power of
compensation and working environment on job satisfaction and employee performance at the PT Bank Rakyat
Indonesia (Persero) Tbk.
Originality/value – The difference between this research and previous ones is the application of
compensation influence testing on employee job satisfaction and performance within one bank in Indonesia.
Keywords Bank, Employee performance, Job satisfaction, Compensation
Paper type Research paper

1. Introduction
The concept of company establishment is primarily based on the belief that a company has
the ability to achieve something individuals cannot (Gibson, 1996). Human resources (HR)
is one company element that plays a critical role in the achievements of a company when it
relies upon the actions of its staff. The focus on human factors does not imply that other
factors do not also play important roles because various elements are needed to support
and supplement different phases and synergies within a business. Hasibuan (2002) stated
that people have a dominant function when performing each activity because they act as
planner, actor and determinant of the realization of company goals. Goals cannot be
achieved without active roles of employees, even though a company might have
sophisticated tools at its disposal.
The purpose of employee performance appraisal is divided into two sections. This
research evaluation aimed to have managers observe employees’ performance records using
a descriptive rating, and the information gleaned was beneficial to them when making
promotion decisions, including demotion, termination and compensation. Second, the motive
of development was furthered when supervisors attempted to enhance their employees
overall performance for the future.
Journal of Economic and
Another important aspect for improving company performance is employee satisfaction. Administrative Sciences
Job satisfaction needs to be considered because it is a criterion for measuring the success of a Vol. 39 No. 4, 2023
pp. 943-956
company from within by the community of its members. Job satisfaction is completely private, © Emerald Publishing Limited
1026-4116
meaning that every individual has their own specific characteristics and perspectives, DOI 10.1108/JEAS-06-2020-0103
JEAS including opinions. Job satisfaction is a general individual attitude of an employee towards their
39,4 job based on work factors and is defined as the number of influences or positive feelings that an
employee has towards their job. When someone is said to have high job satisfaction, it means
they like, appreciate and feel happy with their job (Hutahayan, 2019).
Job satisfaction will be reflected in an employee’s attitudes and emotions. A satisfied
employee will be more eager to finish a job to the best of their ability while, conversely, a less
satisfied employee will have less enthusiasm, which can create feelings of boredom or
944 frustration and other negative consequences. A company, especially its personnel
department, should pay attention to its employee satisfaction levels and have a personnel
department capable of bridging company and employee needs (Hutahayan, 2019).
Factors that influence job satisfaction, or an employee’s positive or negative emotions, can
include (1) salary; (2) the work itself; (3) merchandising opportunities; (4) supervision; (5) work
groups and (6) working conditions (Luthans, 2006). To mediate the information gap of various
phenomena related to job satisfaction, studies should be conducted to discuss and
disseminate any problems. This study examined the influence of satisfaction factors on
employee performance as employee satisfaction affected employee performance.
Several studies have been conducted examining compensation in relation to employee
satisfaction and performance. For example, Odunlade (2012) investigated the relationship
between job satisfaction on the impact of compensation on performance, and Waskiewicz
(1999) examined the impact of compensation on job satisfaction in relation to performance.
Studies conducted by Brown (1993) and Christen (2006) showed the one-way influence of
performance on job satisfaction while McFarlane (2010) and Odunlade (2012) examined the
impact of one-way job satisfaction on performance. There is a research gap in the form of
testing the impact of compensation on job satisfaction and employee performance. There is
also a causality of two-way performance and job satisfaction that can be seen in research by
Brown (1993), McFarlane (2010), Christen (2006) and Odunlade (2012). In addition, the
difference between this research and previous ones is the application of compensation
influence testing on employee job satisfaction and employee performance in an
Indonesian bank.
Banks are an organization that perform a critical role in the economy of a country and are
classified as fast-growing. Based on Law No. 10 of 1998, a bank’s main function is to collect
funds and channel them back into the community in the form of credit or other means, and
they also play a significant role in the distribution and circulation of money. This very
important role ensures that the performance of banks in a country will have a major impact on
that country’s economy (Fernandes et al., 2014).
PT Bank Rakyat Indonesia (Persero) Tbk Bank Rakyat Indonesia (BRI) is one of the
biggest banks in Indonesia and is headquartered in Jakarta. BRI won an award for being one
of the best banking institutions in Indonesia with total assets of more than Rp30t out of the 20
banks that qualified by being above the growth industry and the 115 banks in total
considered for the award. In the 2018 Q3 financial performance report, BRI successfully
increased assets by 13.9% and grew revenue from Rp1.119t to Rp1.183t year-on-year. BRI
also managed to hold onto a significant increase in profits from Rp14.9t to Rp23.5t, a positive
growth of 14.6% year-on-year. Their success must be maintained and even improved
continuously to serve and facilitate customers so that BRI will keep developing, succeeding
and remain a trusted institution.
Employment is one of the important factors for achieving this because it determines the
growth and development of BRI’s business. BRI’s employment management refers to
national regulations and internationally praised practices, and it also has an employment
policy formulated with the Labor Union in a Collective Labor Agreement (CLA), which
applies for two years and has a maximum extension of one year. Between 2017 and 2019, the
CLA was valid. In addition, BRI regulates their employees’ rights and obligations through
internal policies, such as career development, compensation and benefits, performance The role of
management and industrial relations (Sumardi and Fernandes, 2018). compensation
Tough competition in the banking sector means it is imperative for employees to increase
work productivity and remain motivated through performance appraisals. In order to
improve employee performance, a company is required to play a role in producing reliable
and professional employees to achieve company goals in accordance with assigned duties
and responsibilities. For this reason, it needs to make an effort to solve any problems
immediately. One of the initial steps is to conduct an in-depth study of employee performance 945
to connect compensation and job satisfaction to employee work environment. Uncertainties
impact the industry environment (categorized as strictly regulated), and the overall
performance of an organization is largely decided by strategic orientation and innovation
levels (Fernandes and Solimun, 2017).

2. Literature review
2.1 Bank history
Banks are organizations (business entities) driven by HR to achieve trust-based goals and, as
such, require skilled and competent HR. The success of a company or organization is
determined by the empowerment of those who put their energy, creativity and enthusiasm
into it and play a critical role in its operational functions. HR should always be considered,
maintained and preserved as well as evolve within the organization, and professional
management and good corporate governance should be supported by high-risk awareness to
ensure business activity procedures are carried out in accordance with relevant rules.
A banks’ growth is very dependent on the customer service and the level of employee
commitment. One strategy developed to maintain competent employees is to create loyal and
devoted employees in an organization by offering them appropriate remuneration according
to policies and agreements. Employees will feel a commitment to their organization if it has
fulfilled all their needs, and government regulations represent a positive example of
organizational management (Limba et al., 2019).

2.2 Variable theory

Compensation. Tua (2007) defined compensation as the entire remuneration received by an
employee in the form of money or otherwise, such as salaries, wages, bonuses, incentives and
different advantages, along with health insurance, vacation allowances, food allowances,
leave pay and others which affect the overall performance of labor in the organization.
Milkovich and Newman (2002) stated that compensation relates to all forms of tangible
financial services and benefits obtained by an employee as a component of a working
relationship.
The factors that must be considered by the organization in determining compensation are
that it (1) must be able to meet minimum needs; (2) must be able to bind; (3) must be able to
generate enthusiasm for work; (4) must be fair; (5) must not be static and (6) must consider
composition of compensation (Nitisemito, 1996).
The compensation given must be fair, acceptable, satisfactory, create working motivation,
have an award and be according to the needs of the employee. Compensation will provide
benefits to the company and its employees.
Jackson (2002) argued that everyone wants to be treated fairly in all aspects of
compensation, including basic salary, incentives and benefits. To give reasonable
compensation to employees, companies need to consider the concepts of feasibility and
fairness to create a pleasant working atmosphere and lead to high work motivation for
employees.
JEAS Compensation for employees is strongly influenced by factors inside and outside the
39,4 company. Simamora (1999) stated that one of the principles that needs to be considered when
designing and implementing a compensation system is the existence of justice. Justice can be
interpreted as a balance between the inputs of an individual into a job and the results obtained
from the job.
Job satisfaction. Job satisfaction is one of the important parts of HR management and
organizational behavior because job satisfaction can impact absenteeism, labor turnover,
946 morale, complaints and other vital personnel issues (Handoko, 2000). The reasons why high
job satisfaction is expected are because it relates to high-quality outcomes and signals a well-
managed organization. Job satisfaction is a measure of a sustainable human improvement
process. In addition, it is very important for each organization because it acts as an
organizational success measurement to meet the necessities of its members. Job satisfaction is
private, meaning it pertains to those directly affected according to individual characteristics
(Solimun and Fernandes, 2017).
Basically, job satisfaction is a form of employee attitude towards work based on individual
perception. Job satisfaction is intended to be an employee’s emotions about an organization
on matters both financial and nonfinancial. If job satisfaction is achieved, an employee’s
feelings will be positively reflected by their work and everything they face. Therefore,
employers and personnel departments should pay attention to employee satisfaction levels
within an organization.
Job factors that determine employee satisfaction according to Robbins (1996) are divided into
five parts: (1) the work itself is mentally challenging; (2) appropriate rewards; (3) open promotion
opportunities; (4) working environment and (5) support from coworkers and employer.
In general, expert opinions vary. Based on the explanations, the authors limited their
analysis of factors that influence job satisfaction to six proposed by Arnold and Fieldman: (1)
salary; (2) employment; (3) opportunities for promotion; (4) supervision; (5) working groups
and (6) working conditions.
In addition to the fairness between the employees, an organization needs to pay attention
to the element of feasibility when it comes to its payroll system. Feasibility can be compared
with wages in other organizations or could follow government regulations on minimum
wages or the standard price for minimum basic needs.
Employee performance. Sutrisno (2012) defined the work that someone has accomplished
from their behavior while carrying out work activities as employee performance. Bernandin
and Russell (1993) proposed several criteria when measuring employee performance:
(1) Quality to measure performance that is near the expected aims.
(2) Quantity is the produced numbers, such as the number of units produced.
(3) Cost effectiveness as to what extent the company or organization resources (human,
technology and material) are used.
(4) Need for supervisor to measure to what extent the employee can carry out a job
function without requiring supervisors.
(5) Interpersonal impact to measure to what extent the employee can maintain
cooperative relationships with other colleagues.
According to Mangkunegara and Prabu (2001), performance is “the quality and quantity of
an employee’s turnout when carrying out his/her tasks in accordance with the responsibility.”
Hasibuan (2002) defined performance as the results of work done by a person when
carrying out assigned tasks, primarily based on skills, experiences, sincerity and time.
Performance is a combination of three critical factors: (1) the capacity and interest of a worker;
(2) the capacity and recognition of the project of delegates and (3) the function and stage of The role of
motivation of a worker. The higher the factors, the greater the performance. According to compensation
Handoko (2000), performance is “an important process in a company to build employees.” It
can be concluded that performance is the quality and quantity of employees’ productivity
when carrying out their work in accordance with the time and responsibility.

3. Conceptual framework 947

Based on the background of the problem, the conceptual framework is formulated as follows.
The conceptual model in Figure 1 is formed based on previous research. Igalens and
Roussel (1999) suggested that flexible pay and benefits can improve the job satisfaction of an
employee. The interaction between compensation and job satisfaction is built on the
perception of satisfaction with fixed pay levels, flexible pay levels, benefit levels and
administration of compensation given by a company to its employees.
Compensation given fairly and properly in accordance with employee performance is very
influential on the level of employee job satisfaction. The control of the implementation of this
compensation system is mediated by performance appraisal to maintain the stability of
employee motivation in achieving optimal performance.
It can be concluded that an employee satisfied with the amount of compensation they
receive will produce an optimal performance and have an impact on efficient business
practices, which will make employees have a good level of job satisfaction. On the other hand,
employees with low compensation levels will have low levels of job satisfaction. Therefore,
the hypotheses are as follows:
H1. Compensation has a direct effect on job satisfaction. The higher the compensation
score, the higher the job satisfaction.
H2. Compensation has a direct effect on employee performance. The higher the
compensation score, the higher the employee performance.
Performance is divided into two parts: role performance is the performance that influences
job satisfaction, and extra-role performance is consequently affected by job satisfaction.
Brown (1993) and Christen (2006) investigated the effect of performance on job satisfaction
while McFarlane (2010) and Odunlade (2012) investigated the impact of job satisfaction on
performance. Whether job satisfaction is influenced or influences all performances depends
on which performance has become the variable (MacKenzie, 1998); employees give their best
to the organization if they receive the best from the organization. By looking at the
description, two further hypotheses can be proposed:

Job Satisfaction
(Y1)

Compensation
(X1)

Employee Figure 1.
Performance Research
(Y2) concept model
JEAS H3. Job satisfaction has a direct effect on employee performance. The higher the job
39,4 satisfaction score, the better the individual performance.
H4. Employee performance has a direct effect on job satisfaction. The higher the
employee performance score, the better the employee job satisfaction.
Based on hypotheses 1, 2, 3 and 4, it can be stated that there are relationships between
compensation, job satisfaction and employee performance. Therefore, the next two
948 hypotheses are as follows:
H5. Compensation has an indirect effect on increasing employee performance mediated
by job satisfaction.
H6. Compensation has an indirect effect on increasing job satisfaction mediated by
employee performance.

4. Methods
The purpose of the research was to provide an explanation for the causal relationship among
the variables studied through empirical hypothesis testing. This study was carried out at BRI
in Indonesia. The population of this research were all employees of branch offices in
Sumatera, Jawa, Kalimantan, Sulawesi, Bali and Jayapura.
The sample was collected using proportional random sampling from six locations
throughout Indonesia. Considering the area is wide, the sampling technique was adjusted so
sampling was based on the island as a sub-population. The sample of this study was 212
employees. This amount met the minimum sample requirements using the generalized
structural component analysis (GSCA) method.
Data were obtained directly from the respondents or the first source in the field, in this case
questionnaires that were distributed to respondents. The measurement of the independent
variables included qualitative ordinal data and used a five-level scale. According to Sugiyono
(2000), a Likert scale or five-level scale is used to measure attitudes, critiques and perceptions
of a person or organization. The answers of every instrument using a five-level scale had a
very positive to very negative gradation.
Before carrying out an analysis, the research instrument was tested for its validity and
reliability. Validity is to what extent the instrument can measure data properly, in other
words, whether the measuring instrument truly measures what is needed. This validity
test was used to test the instrument, so it could provide results suitable for purpose.
Reliability is a measure that shows to what extent the measurement results remain
consistent when measured several times with the same instrument and an index that
shows to what extent the instrument can be trusted or is reliable (Fernandes and
Solimun, 2017).
The inferential statistical method used in research is the GSCA. The reason for using
GSCA was that the causal relationship formulated in this study used a two-way causality
model (alternating) and the measurement of formative and reflective variables
(Solimun, 2012).

5. Results and discussion

5.1 Validity and reliability test for research instrument
To test the validity of the instrument, the Pearson correlation analysis tool among items with
total items was used. If the correlation value was above 0.30, it could be concluded that the
item was valid. Conversely, if the correlation value was below 0.30, it could be concluded that
the item was invalid and eligible for exclusion. To test the reliability of the instrument, the
Cronbach’s alpha analysis was used. If the Cronbach’s alpha coefficient was above 0.60, it The role of
could be concluded that the instrument was reliable, while if the Cronbach’s alpha coefficient compensation
value was below 0.60, it could be concluded that the instrument was not reliable.
The results of the validity and reliability test of the instruments for each variable are
provided in the Table 1
Research instrument testing was conducted at the trial sample 30 times. The results of
the validity and reliability test are seen in Table 1, and all question items (33 questions)
were valid (correlation above 0.3) and reliable (Cronbach’s alpha above 0.6). As can be seen 949
in the Table 1, the value of Cronbach’s alpha coefficient for all variables was above 0.60, so
the compensation (X1), work environment (X2), job satisfaction (Y1) and employee
performance (Y2) were reliable. Therefore, it can be concluded that the instrument
(questionnaire) was valid and reliable so the data could be used to answer research
objectives.

5.2 Goodness of fit model

To measure the goodness of fit model, the Q-square predictive relevance value was used to
measure the observation value generated and its parameter estimation by predictive-
relevance (Q2). The R2 values of each endogenous variable are as follows:
(1) R2 of Y1 R2 was 0.558 or 55.8%. This implied that 55.8% of the value of job
satisfaction (Y1) was influenced by X1 and Y2, while 44.2% was influenced by other
factors not included in this study.
(2) R2 of Y2 was 0.584 or 58.4%. This implied that 58.4% of Y2 was influenced by X1 and
Y1, while 41.6% was influenced by other factors not included in this study.
Predictive relevance value was obtained by the formula:



Q2 ¼ 1  1  R12 1  R22
Q2 ¼ 1  ð1  0:558Þð1  0:584Þ
Q2 ¼ 0:816

The results of the calculation showed a predictive relevance value of 0.816 or 81.6%, so that
the feasible model had a relevant predictive value. Predictive relevance value of 81.6%
indicated that the diversity of data explained by the model was 81.6%, or, in other words, the
information contained in the data can be explained by the model, while the 18.4% was
explained through other variables (which have not been contained in the model) and errors.
These results concluded that the GSCA model was quite good because it explained 81.6% of
the information as a whole so was feasible to be interpreted.

5.3 Linearity assumption

The next stage was the linearity assumption test. In the GSCA analysis, there was one
assumption that should be fulfilled, namely the linearity assumption, which called for a
relationship between linear variables. The assumption of linearity used the curve fit, meaning
the relationship between variables was linear if it met one of the following two possibilities:
(1) a significant linear model (linear model <0.05) or (2) a nonsignificant linear model and all
nonsignificant models (significance linear model >0.05, and significance models exclude
linear >0.05). The test results are shown in Table 2
It can be seen that all significant linear models were <0.05, so the linearity assumptions
were fulfilled. For this reason, goodness of fit and assumptions testing were fulfilled, and the
model was feasible to use as a research hypothesis testing.
JEAS Cronbach’s
39,4 Variable Indicator Item Correlation alpha

Compensation (X1) Wage and Suitability of salary with work (effort 0.482 0.706
salary devoted)
The difference in salary among 0.476
department has been as expected
950 Incentive The bonus given by the company is 0.652
proportional to the time for overtime
Allowance Suitability of allowance with 0.543
expectation
Social security of workers 0.551
Accident insurance for workers 0.641
Facility Employees have the opportunity to 0.490
attend education and training (training)
Employees have the opportunity to 0.552
follow an increase in education levels
The company pays attention to meet 0.519
employee needs and facilities
Job satisfaction Work The work is really interesting 0.550 0.703
(Y1) Employees have the opportunity to 0.545
work independently
Salary The allowance obtained is quite a lot 0.470
Companies pay better than competitors 0.481
Promotion Employees have equal opportunities 0.591
for promotion
When doing a good job, you will be 0.686
promoted
Supervisor Supervisor gives support 0.468
Supervisor has high work motivation 0.470
Partner When asking a colleague to do a job, the 0.491
job is completed
Enjoy working with friends 0.469
Employee Timeliness of Being able to finish work on time 0.547 0.721
performance (Y2) work Discipline of time both departing and 0.467
returning home
Willing to do overtime to complete the 0.530
work that the time of completion has
been determined
Quantity or Completing work targets set by 0.479
work superiors
The number of additional tasks from 0.522
the boss
The number of jobs that become a 0.520
burden so as not to accumulate
Quality of Responsible for every task 0.487
work Working meticulously 0.580
Working hard 0.501
Trying to minimize the number of 0.460
errors in work
Table 1. Suitability of the implementation of 0.557
The result of research tasks with standard operating
instrument test procedures
5.4 Hypothesis testing result The role of
The structural model in the GSCA was used for hypothesis testing each path that was compensation
designed. The results of the analysis are summarized in the Table 3. It also presents a
structural model of direct influence by involving path coefficient values, the value of critical
ratio (CR) and the p-value for every indicator. The relationship was significant if the CR value
was 1.96 and the p-value was <0.05.
The results of the structural model testing are presented in the following figure:
From Figure 2, it can be described the results of the test were as follows: 951
(1) A direct influence of X1 on Y1 yielded the coefficient value of 0.304, CR of 3.31 and a
p-value of 0.001. Because the value of CR > 1.96 and the p-value < 0.05, it can be
concluded there was a significant direct effect of X1 on Y1. A positive path coefficient
indicated that the relationship between those two variables was positive. This implied
the higher the X1, the higher the Y1.
(2) Testing of the direct effect of X1 on Y2 produced the coefficient value of 0.103, CR of
1.10 and the p-value of 0.271. Because of the value of CR < 1.96 and the p-value > 0.05,
it can be concluded that there was no significant direct effect of X1 on Y2. The size of
Y2 would not be affected, regardless of the amount of X1.

The relationship among variables Linear model significance Description

Compensation → Job satisfaction p ≤ 0.001 Linear

Employee performance → Job satisfaction p ≤ 0.001 Linear Table 2.
Compensation → Employee performance p ≤ 0.001 Linear The results of linearity
Work satisfaction → Employee performance p ≤ 0.001 Linear assumption test

Relationship Path coefficient CR p-value

Compensation → Work satisfaction 0.304 3.310 0.001 Table 3.

Compensation → Employee performance 0.103 1.100 0.271 Structural model result
Work satisfaction → Employee performance 0.456 4.030 0.000 hypothesis testing of
Employee performance → Work satisfaction 0.485 5.160 0.000 direct influence

Job Satisfaction
(Y1)
04
0.3
0.456

0.485

Compensation
(X1)

0.1
03
Figure 2.
Employee
Structural model
Performance result: Hypothesis
(Y2) testing of direct
influence
Note(s): Dotted lines indicate a non-significant relationship
JEAS (3) Testing of the direct effect of Y1 on Y2 generated the coefficient value of 0.456, a CR of
39,4 4.03 and a p-value of 0.000. Because the value of CR > 1.96 and p-value < 0.05, it can be
concluded there was a significant direct effect of Y1 on Y2. A positive path coefficient
indicated the relationship between the two variables was positive, implying the
higher the Y1, the higher the Y2.
(4) A direct effect testing of Y2 on Y1 got the path coefficient value of 0.485, CR of 5.16
952 and p-value of 0.000. Because the value of CR > 1.96 and p-value < 0.05, it can be
concluded there was a significant direct effect of Y2 on Y1. A positive path coefficient
indicated that the relationship between the two variables was positive, implying that
the higher the Y2, the higher the Y1.
Therefore, from the four hypotheses, only hypothesis 2 was not accepted.
The Table 4 presents the structural model of indirect influence involving the path
coefficient value. The indirect effect was obtained from the direct influence product. The
hypothesis of the indirect influence was significant if the direct influence was significant too.
The results of the testing are as follows:
(5) Testing of the indirect effect of X1 on Y2 mediated by Y1 produced an indirect effect
coefficient of 0.304 3 0.456 by 0.139. Because both coefficients showed direct
influence of X1 on Y1 and Y1 on Y2, which are significant (results in Tables 2, 3 and 4),
it could be concluded that there was a significant indirect effect of X1 on Y2 mediated
by Y1. A positive path coefficient indicated the relationship between the two
variables was positive, implying that the higher the X1, the higher the Y1 and Y2.
(6) The coefficient of the indirect effect of X1 on Y1 mediated by Y2 was 0.049. Because
both coefficients of direct influence of X1 on Y2 on Y2 were significant (results in
Table 4), it could be concluded there was no significant indirect effect of X1 on Y1
mediated by Y2. This means Y2 was not an intermediary between the influence of X1
on Y1.
Consequently, hypothesis 6 could not be accepted.

5.5 Discussion
5.5.1 The influence of compensation on work satisfaction. The results of the analysis showed
that compensation had a direct effect on job satisfaction of employees at BRI. This indicated
that the higher the wages and salaries, incentives, benefits and facilities, the higher the job
satisfaction. The compensation did not have an indirect effect on work satisfaction mediated
by employee performance in BRI, which means employee satisfaction was not influenced by
the size of compensation.
The results of hypothesis 1 showed there was a direct effect of compensation on job
satisfaction. However, the indirect effect of compensation on job satisfaction mediated by
employee performance had no significant results. The results showed employee performance
does not affect the influence of compensation on job satisfaction. This showed that the higher
the wages and salaries, incentives, benefits and facilities, the higher the job satisfaction.

Relationship Path coefficient Description

Table 4.
Structural model Compensation to employee performance mediated by job 0.304 3 0.456 5 0.139 Significant
result: Hypothesis satisfaction
testing of indirect Compensation to work satisfaction mediated by employee 0.102 3 0.485 5 0.049 Nonsignificant
influence performance
The results of this study are in line with Odunlade’s (2012) study, which showed that The role of
compensation will increase job satisfaction. However, the results of this study were slightly compensation
contrary to Waskiewic’s (1999) study, which showed an indirect influence of compensation on
job satisfaction mediated by employee performance.
Job satisfaction is one critical aspects of HR management and organizational behavior
because job satisfaction can affect absenteeism, labor turnover, morale, complaints and other
vital personnel issues (Handoko, 2000). High job satisfaction was predicted due to the fact it
was related to positive results and an indication of a well-controlled organization as well as a 953
measure of a sustainable human development process. In addition, job satisfaction is
important for every organization because it is a criterion for measuring organizational
success to fulfill the desires of its members. Job satisfaction is something that is private,
meaning it is individual and unique to each member.
This study showed high job satisfaction depended on the size of compensation. Sigit
(2003) argued that compensation was any form of praise given to employees for the sacrifices
they have made. Employee sacrifice can be in the form of performance services, costs and
hard work spent to achieve certain goals set by the company. However, Handoko (1995)
argued that compensation was everything employees received as a reward for their work.
The influence of compensation on job satisfaction requires wisdom from the boss or
management about the necessity of taking into account the improvement of work
compensation involving the suitability of wages and salaries, incentives, benefits and
facilities with employee performance. This could increase satisfaction with the work itself,
salary, opportunity or promotion, supervisors and coworkers of BRI.
5.5.2 The influence of compensation on employee performance. The results of the analysis
showed that compensation did not directly affect employee performance. This means the size
of compensation would not directly affect the employee performance in BRI. The
compensation had an indirect effect on employee performance mediated by job satisfaction
of BRI employees, which showed that the higher the wages and salaries, incentives, benefits
and facilities, the higher the job satisfaction.
The results of hypothesis 2 displayed there is no direct effect of compensation on
employee performance. However, the results of the indirect effect of compensation on
employee performance mediated by job satisfaction was significant. These results showed
that job satisfaction was really needed to intervene in the influence of compensation on
employee performance. This showed that the higher the wages and salaries, incentives,
benefits and facilities, the higher the job satisfaction.
The results of this study were not consistent with the Waskiewic’s study (1999), which
showed that compensation will directly improve employee performance. However, the results
of this study are in line with research by Odunlade (2012), which showed the influence of
compensation on job satisfaction and job satisfaction on employee performance.
Simamora (1995) defined employee performance as the extent to which employees attain
job requirements. Byars and Rue defined performance as the degree of instruction of tasks
that govern one’s work. Thus, performance is the willingness of a person or institution of
people to carry out activities or improve them according to their responsibilities with
expected results.
This study showed that high performance depended on the size of compensation. Sigit
(2003) argued that compensation is any form of praise given through a company to its
employees for their sacrifices when accomplishing their tasks. Employee sacrifice could be in
the form of performance services, costs and hard work spent to achieve certain goals set by
the company. Whereas Handoko (1995) argued that compensation was everything that
employees receive as a reward for their work, the influence of compensation on employee
performance requires managerial wisdom f when taking into account the improvement of
work compensation involving the suitability of employee wages and salaries, incentives,
JEAS benefits and facilities. This led to the timeliness of work, the quantity of work and the quality
39,4 of work of the employees of BRI.
5.5.3 The reciprocal effects between job satisfaction and employee performance. The results
of the analysis showed job satisfaction directly affected employee performance in BRI and
stated that the higher the job itself, salary, opportunity or promotion, supervisors and
coworkers, the better the employee performance. Employee performance directly affected
employee satisfaction in BRI, which illustrated that the better the timeliness of work and the
954 quantity and quality of work, the higher the job satisfaction.
The test results of hypotheses 3 and 4 showed there is a direct reciprocal influence of job
satisfaction on employee performance. The better the job satisfaction, the better the employee
performance as well as the better the employee performance, the better the job satisfaction.
The results of this study reinforced research conducted by Odunlade (2012), Christen
(2006) and McFarlane (2010), which showed a positive influence of job satisfaction on
employee performance. At the same time, it confirmed studies by Waskiewic (1999), Razak
(2008) and Brown (1993) that stated there was an improvement in job satisfaction caused by
employee performance. The results of this study were an affirmation of existing research as it
combined results obtained by the six researchers above.
Basically, there was not only the effects of job satisfaction on employee performance, but
there was also the influence of employee performance on job satisfaction. The better the job
satisfaction of employees, the better the employee performance and vice versa. Thus, it was
necessary to improve employee performance and job satisfaction. For this reason, it was
essential to improve the suitability of wages and salaries, incentives, benefits and employee
facilities, as well as the creation of a work environment to create job satisfaction and employee
performance. The high level of job satisfaction could be seen from the high satisfaction with
the job itself, its salary, future opportunities or promotions, and working with supervisors
and colleagues. The high employee performance could be understood by observing the
timeliness of work, quantity of work and quality of work.

6. Conclusion
Based on the results of the analysis and the discussion about the effects of compensation and
work environment on job satisfaction and employee performance in BRI, it was concluded
that compensation does not directly impact employee performance. This means that, no
matter how high compensation is, it would not directly affect employee performance in BRI.
Working environment directly influenced employee performance in BRI, which showed that
the higher the physical working environment and nonphysical working environment, the
higher the employee performance. The conclusion indicated there may be an influence of
compensation and working environment on job satisfaction and employee performance in
BRI. The management of BRI should improve employee performance by taking into account
an increase of compensation, which includes the suitability of wages and salaries, incentives,
benefits and facilities with employee performance and create a better working environment.
The results of this study provided functions to add and develop knowledge by applying
theories according to the actual problems in the field related to the concept of compensation,
work ability and working environment, and performance, in addition to reference material
for future researchers to study and examine similar issues, especially within the banking
sector.

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Corresponding author
Rojikinnor can be contacted at: rojikinnor67@student.ub.ac.id

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