The Effect of Compensation and Work Environment on Employee Performance with Motivation as an Intervening Variable at PT Transcoal Pacific Sangatta
The Effect of Compensation and Work Environment on Employee Performance with Motivation as an Intervening Variable at PT Transcoal Pacific Sangatta
ABSTRACT : This study aims to analyze the effect of compensation and work environment on employee performance,
with motivation as an intervening variable, at PT Transcoal Pacific Sangatta. Employee performance in this company shows
a decline, triggered by compensation discrepancies and lack of system transparency, as well as a less conducive work
environment. Using a quantitative approach with a census sample of 55 employees of PT Transcoal Pacific Sangatta, data
were collected through a Likert scale questionnaire and analyzed using Partial Least Square - Structural Equation Modeling
(PLS-SEM) with SmartPLS 4. The results of the analysis show that compensation and work environment have a positive and
significant effect on employee performance. Compensation also has a positive and significant effect on work motivation.
However, the work environment has no significant effect on work motivation. Furthermore, work motivation has a positive
and significant effect on employee performance. This study also found that motivation significantly mediates the effect of
compensation on performance, but does not mediate the effect of work environment on performance. Managerial
implications indicate the importance of optimizing compensation and improving the work environment to increase employee
motivation and performance.
KEYWORDS : Compensation, Work Environment, Motivation, Performance
I. INTRODUCTION
The Employee performance is a crucial factor in the success of an organization, which is highly
dependent on the quality of human resources (Afiani, Surachim, & Masharyono, 2019). The existence of human
resources in a company plays an important role in carrying out company activities, so the potential of every
human resource in the company must be utilized as well as possible in order to be able to make an optimal
contribution to the company to achieve company goals.
Compensation is one of the important aspects for employees, because the amount of compensation is a
reflection on the size of the employee's own value. Conversely, the small amount of compensation can affect job
performance, motivation and job satisfaction of employees. If compensation is given appropriately and correctly
to employees, they will get job satisfaction and motivation to achieve organizational goals. In addition to
compensation factors, the environment in which employees work is no less important in improving employee
performance. According to Sutrisno (2016, 118) the work environment is the overall work facilities and
infrastructure around employees who are doing work that can affect the implementation of work.
PT Transcoal Pacific, a logistics and transhipment company, is facing the challenge of declining
employee performance. The data showed a decline in final employee scores from 9.2% in the period May 2022 -
April 2023 to 7.8% in the period May 2023 - April 2024. This decline was identified as stemming from
declining quantity and quality of work, as well as disciplinary issues such as tardiness and unauthorized
absences. This phenomenon is thought to be related to the mismatch of compensation with workload and
responsibilities, as well as the lack of transparency in the compensation system. In addition, a less conducive
work environment, such as inadequate facilities, differences in the condition of office desks and chairs, and
computer technical problems, also contributed to low employee motivation and performance.
For companies, performance research is very useful for assessing compensation, the work environment
can provide motivation to employees. One of the keys to success in an organization to achieve company goals is
the performance and productivity of its employees. And one way to increase employee productivity is to
establish fair and appropriate compensation to employees for their work achievements. But sometimes the
compensation provided by the company is still not fully able to improve employee performance. Therefore,
compensation must be adjusted to the results of employee work because the provision of appropriate
compensation is expected to increase employee job satisfaction followed by an increase in employee
performance. And motivation is expected to encourage employees to be willing and willing to mobilize their
abilities in the form of expertise or skills, energy and time to complete tasks and activities that are their
responsibility.
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Several studies have been conducted to determine the effect of compensation on performance,
however, there are still inconsistent results. Research from Purnama and Kempa (2016) , Wairooy (2017) proves
that compensation has a positive influence on employee performance. While research conducted by Riansari and
Sudiro (2012) states that compensation has no direct effect on employee performance. Meanwhile, research on
the effect of the work environment on performance has been conducted several times, with mixed results and
tends to be inconsistent. Research conducted by Rahim et al. (2017) , and Susanti and Mardika (2021) , states
that the work environment has a significant effect on performance. Meanwhile, research conducted by Arianto
(2013) , Aryono (2017) , and Dewi (2019) , suggests that the work environment has no significant effect on
performance. Research on the effect of motivation on performance still has inconsistent results, some
researchers state that motivation affects performance, but there are researchers who state that motivation has no
significant effect on performance. Research conducted by Rahim et al. , (2017) Susanti and Mardika (2021) ,
Aryono (2017) , Meutia et al. (2016) , states that motivation has a significant effect on performance. However,
different results are shown by research Paramarta and Astika (2020) , which states that motivation has no
significant effect on performance.
Previous research shows inconsistent results regarding the effect of compensation and work
environment on performance, as well as the role of motivation as mediation. Some studies found a positive and
significant effect. These inconsistencies, coupled with the specific conditions at PT Transcoal Pacific Sangatta,
encourage this research to examine more deeply the relationship between compensation, work environment,
motivation, and employee performance.
II.HEADING S
Performance is the level of achievement of a person in implementing programs, activities and policies
in achieving a goal, objective, vision and mission in an organization Putra (2017) Meanwhile, according to
Santosa et al in (Puspitasari and Dahlia 2020) , Performance is an achievement of work results in activities or
activities or programs that have been planned in advance in order to achieve the goals and objectives set by an
organization.
According to (Setyadi, 2021) motivation is a series of activities that explain the strength, direction, and
perseverance of a person in an effort to achieve the goals he wants to achieve, while according to (Soselisa &
Killay, 2020) work motivation is a process by which needs encourage a person to carry out a series of activities
that lead to the achievement of certain goals and organizational goals and to meet several needs.
Sedarmayanti (2019) states that the work environment is broadly divided into 2 (two), namely the
physical and non-physical work environment. The physical work environment is all conditions that can affect
employees either directly or indirectly. While the non-physical work environment is all conditions related to
work relationships both with superiors and work relationships with subordinates.
compensation is all income in the form of money, direct or indirect goods received by employees in
return for services provided to the company Hasibuan (2017) while according to Marwansyah (2016),
compensation is a direct or indirect reward or reward, financial or non-financial, which is fair and appropriate to
employees, in return or their contribution / service to the achievement of company goals.
Based on the literature review and previous research, the hypothesis of this study is:
•H1: Compensation has a positive and significant effect on employee performance.
•H2: Work environment has a positive and significant effect on employee performance.
•H3: Compensation has a positive and significant effect on employee motivation.
•H4: Work environment has a positive and significant effect on employee motivation.
•H5: Work motivation has a positive and significant effect on employee performance.
•H6: Compensation has a positive and significant effect on employee performance through work motivation.
•H7:Work environment has a positive and significant effect on employee performance through work motivation.
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III. RESEARCH METHODS
This study uses a quantitative approach with an explanatory design, which aims to explain the causal
relationship between variables (Sugiyono, 2018). The research population is all employees of PT Transcoal
Pacific Sangatta, totaling 55 people. The sampling method used is census (total sampling), where the entire
population is sampled, considering the population size is less than 100 (Laili, 2017)
Primary data were collected using a closed questionnaire with a Likert scale (1 = Strongly Disagree, 5
= Strongly Agree). The operational definitions and variable indicators are as follows:
• Performance (Y): Respondents' perception of work results (quantity, quality, timeliness, attendance, ability
to complete work).
• Motivation (Z): Respondents' perceptions of work motivation (advancement opportunities, security,
responsibility, achievement recognition, self-actualization).
• Work Environment (X2): Respondents' perceptions of the physical (buildings, equipment, facilities) and
non-physical (coworker relations, superior-subordinate relations) conditions in the workplace.
• Compensation (X1): Respondents' perceptions of direct (salary, incentives) and indirect (benefits,
insurance, facilities) rewards.
Data analysis was conducted using Partial Least Square - Structural Equation Modeling (PLS-SEM)
with SmartPLS 4 software. Evaluation of the measurement model (outer model) involves convergent (outer
loading > 0.7, AVE > 0.5) and discriminant (cross-loading) validity tests, as well as reliability tests (Composite
Reliability > 0.7, Cronbach's Alpha > 0.6). Evaluation of the structural model (inner model) is done by looking
at the R-square, Q-square (predictive relevance), and Effect size (f-square) values. Hypothesis testing is done
using the bootstrapping method with t-test (t-statistic > 1.96, p-value < 0.05).
Discussion
Figure The results of this study confirm that compensation and work environment are important factors
that directly affect employee performance at PT Transcoal Pacific Sangatta. This finding is consistent with
previous research (Meutia et al., 2016; Candradewi & Dewi, 2019; Mudayana & Suryoko, 2016; Nurjiasih &
Sudarnaya, 2023). Adequate compensation provides peace of mind and encourages collaboration, while a
conducive work environment, although not directly involved in the production process, contributes to
employees' work effectiveness and sense of security.
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Furthermore, compensation was found to significantly increase employee work motivation. This
indicates that appropriate rewards can stimulate employee enthusiasm to work optimally, in line with research
by Meutia et al. (2016) and Mudayana & Suryoko (2016). However, an interesting finding is that work
environment does not have a significant effect on work motivation. Although employees' perceptions of the
work environment tend to be high, this does not necessarily increase their motivation. This can be explained by
several factors revealed in the interviews, such as the outdated condition of the building (owned by PT Kaltim
Prima Coal) and transportation facilities that have not been fully enjoyed by employees. In addition, employees
may be in a "comfort zone" and thus lack the intrinsic drive to achieve a common goal, even though the working
environment is considered good. This finding is different from several studies that state the positive effect of
work environment on motivation, but in line with the research of Astuti (2020) and Sabilalo et al. (2020) which
showed no significant effect.
Work motivation itself is proven to have a positive and significant influence on employee performance.
This supports the view that strong intrinsic and extrinsic motivation will encourage employees to maximize their
efforts and responsibilities, which ultimately improves performance (Dewi & Wibowo, 2020; Rivaldo &
Ratnasari, 2020; Wahyuni, 2019).
In the mediation role, motivation is proven to mediate the effect of compensation on performance. This
means that good compensation increases motivation, which then effectively drives performance improvement.
This indicates that compensation not only has a direct impact but also indirectly through increased employee
motivation.
In contrast, motivation does not mediate the effect of work environment on performance. Although
work environment has a direct effect on performance, this effect is not mediated by motivation. This reinforces
the finding that employee motivation at PT Transcoal Pacific Sangatta is less responsive to work environment
conditions, perhaps because employees prioritize their basic duties and responsibilities regardless of
environmental conditions, or because there are other factors that are more dominant in shaping motivation than
the work environment.
V.CONCLUSION
Conclusion
1. Compensation has a positive and significant effect on employee performance at PT Transcoal Pacific
Sangatta. This indicates that the better the Compensation applied at PT.Transcoal Pacific Sangatta will also
improve employee performance.
2. The work environment has a positive and significant effect on employee performance at PT Transcoal
Pacific Sangatta. This indicates that the better the work environment received by employees of
PT.Transcoal Pacific Sangatta, the better the employee performance.
3. Compensation has a positive and significant effect on employee work motivation at PT Transcoal Pacific
Sangatta. This indicates that the better the Compensation applied at PT.Transcoal Pacific Sangatta will also
increase the work motivation of its employees.
4. The work environment has a positive and insignificant effect on employee motivation at PT Transcoal
Pacific Sangatta. This indicates that if the work environment obtained by employees at PT.Transcoal
Pacific Sangatta is not good, it will reduce employee motivation.
5. Work motivation has a positive and significant effect on employee performance at PT Transcoal Pacific
Sangatta. This indicates that the higher the motivation of PT.Transcoal Pacific Sangatta employees in
working, the higher their performance.
6. Compensation has a positive and significant effect on performance on employees at PT Transcoal Pacific
Sangatta through work motivation, this indicates that to increase motivation and improve employee
performance at PT Transcoal Pacific is through compensation.
7. The work environment has a positive but insignificant effect on performance on employees at PT
Transcoal Pacific Sangatta through work motivation, this indicates that if the work environment obtained
by employees at PT Transcoal Pacific Sangatta is not good, it will reduce work motivation which has an
impact on employee performance.
Advice
1. PT Transcoal Pacific Sangatta is expected to improve compensation and work environment together. The
relationship between leaders and employees must be well established supported by providing good
compensation and work motivation to employees is expected to improve employee performance.
2. For further research if it is going to conduct research related to the title above, it is expected to add other
variables or moderation / mediation variables. in this study the authors only examined the effect of
compensation and work environment on performance with motivation as an intervening variable.
theoretically there are many other factors that can affect employee performance. So it is necessary to
conduct further research on factors that affect employee performance that are not examined by the author.