Financial and Non-Financial Compensation on Employee Performance: The Moderating Role of Job Satisfaction

Abstract

This research is conducted to analyze how financial and non-financial compensation affect employee performance, with particular attention given to the role of job satisfaction as a moderating variable. The study takes place at KPP Pratama offices in Malang, Indonesia, where performance demands are relatively high in public sector environment. Data were collected using quantitative approach through census sampling technique, involving all permanent employees in both North and South Malang offices. The analysis method used in this study is Partial Least Square – Structural Equation Modeling (PLS-SEM). The findings show that financial compensation still become the most dominant factor in influencing performance, while non-financial compensation also provide positive contribution although in smaller magnitude. Interestingly, job satisfaction does not directly influence performance, but it strengthen the relationship between compensation and employee output. This condition indicates that satisfaction plays more important role as conditional variable rather than independent driver. Therefore, organizations need to consider not only financial rewards but also psychological aspects in managing employee performance.