Annals of Human Resource Management Research
Vol. 6 No. 2 (2026): June

The Role of Compensation in Improving Employee Performance

Kosasih Kosasih (Universitas Sangga Buana, Bandung, Indonesia)
Lie Anto (Universitas Sangga Buana, Bandung, Indonesia)
Antonius Kurniawan (Universitas Sangga Buana, Bandung, Indonesia)
Ageng Prasetia (Universitas Sangga Buana, Bandung, Indonesia)
Erniaty Beddu (Universitas Sangga Buana, Bandung, Indonesia)



Article Info

Publish Date
05 Jun 2026

Abstract

Purpose: This study aims to empirically examine the effects of work environment, work experience, and education level on employee performance, as well as to analyze the mediating role of compensation in Indonesian State-Owned Enterprises (SOEs). Research Methodology: A quantitative approach using Structural Equation Modeling-Partial Least Squares (SEM-PLS) was employed, with a sample of 110 employees working in SOEs, each with at least five years of work experience. Data were collected using a structured questionnaire on a 5-point Likert scale. Results: The study found that the work environment, work experience, and education level significantly impacted employee performance. However, compensation did not directly affect the performance. Compensation only mediated the relationship between work experience and performance, not between the work environment and education level. Conclusions: The work environment, work experience, and education level significantly affect employee performance in SOEs. Compensation was found to mediate the relationship between work experience and performance, but not for the work environment or education level. These results suggest that a conducive work environment, relevant work experience, and education can enhance performance. Compensation can serve as an additional motivator for high-performing employees to engage in CWB. Limitations: This study is limited to employees in State-Owned Enterprises and uses a cross-sectional design, which may restrict the generalizability of the findings. Future research should include other sectors and additional variables. Contributions: This study contributes to the HRM literature by clarifying the inconsistent role of compensation and highlighting the importance of experiential and environmental factors in enhancing employee performance.

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Journal Info

Abbrev

ahrmr

Publisher

Subject

Decision Sciences, Operations Research & Management Economics, Econometrics & Finance Social Sciences

Description

Annals of Human Resource Management Research (AHRMR) is an international, peer-reviewed, and scholarly journal which publishes high-quality research to answer important and interesting questions, develop or test theory, replicate prior studies, explore interesting phenomena, review and synthesize ...