Employee Retention Through Satisfaction and Engagement from Career and Compensation Retensi Karyawan Melalui Kepuasan dan Keterlibatan dalam Karier dan KompensasiHamidSiti Nur Cholisasitinur@gmail.comMuisLidya Sherylidyasherymuis@umsida.ac.idIndonesiaIndonesia25102024
<bold id="bold-902b59cc4a016359416d0d1d606fe022">INTRODUCTION</bold>
In an organization, human resources are considered a vital asset for any business. In recent years, employee retention has become a major concern in human resource management, especially amid the increasingly competitive labor market dynamics. Organizations face significant challenges in retaining competent and high-performing employees, as their presence is crucial for operational continuity and organizational competitiveness [1], [2]. Employee retention is a critical aspect of human resource management, aiming to maintain the long-term presence of employees to ensure organizational stability [3]–[9]. According to Allen et al. [10], implementing robust retention strategies is crucial for organizations to maintain their best talent amid increasing competitive pressures. In this context, the present study addresses this managerial challenge by examining how organizational career development and compensation influence employee retention through the mediating roles of job satisfaction and organizational engagement. By integrating these variables, this research provides strategic insights for managers to design comprehensive talent retention programs that not only fulfill employees’ career aspirations but also strengthen their emotional and cognitive attachment to the organization.
Several factors have been identified as key elements in employee retention strategies, including organizational career development and compensation. Both factors have been demonstrated to strengthen employees’ involvement with their organization, which in turn fosters greater employee retention within the company [5], [11]–[14]. In addition, well-implemented organizational career development programs can create avenues for employees to advance and derive greater purpose from their work, thereby encouraging longer tenure [15]. Such initiatives not only reinforce employees’ commitment to the organization but also reduce the probability of turnover in the near term [6], [12]. Likewise, implementing an equitable and transparent compensation system is pivotal in boosting employee retention, acting as an essential mechanism for attracting and keeping talent within the organization [1], [6], [8], [9], [16]–[18].
Organizational career development and compensation are known to be important factors in shaping employee job satisfaction, which indirectly affects their decision to remain with the organization [11], [2], [19], [20], [21]. Therefore, it is important for organizations to ensure that their compensation systems and policies comply with prevailing laws and organizational regulations, such as minimum wage standards and other related policies [22].
Jena and Nayak [19] examined the relationship between organizational career development and employee outcomes, focusing on job satisfaction, organizational engagement, and retention, with both job satisfaction and organizational engagement positioned as mediating variables in their model. In developing the current research model, this study adds the compensation variable based on findings from prior research that links compensation to job satisfaction [20], [23], [11]; compensation to organizational engagement [24]; as well as compensation and employee retention [18], [25], [26]. This study incorporates the compensation variable to enhance the conceptual model and provide deeper insights into the factors influencing employee retention.
Although prior research has explored the topic made significant contributions, several research gaps remain to be clearly addressed. The study by Jena and Nayak [19] focused on the information technology sector in India, while Ashraf’s [11] study on compensation and job satisfaction was conducted in the private education sector in Bangladesh. These limited geographical and sectoral contexts raise questions about the generalizability of the findings beyond those settings, particularly in different industrial sectors in Indonesia. Moreover, most existing studies have primarily analyzed the direct impact of organizational career development and compensation on employee retention or considered a single mediating factor. Only a limited number of investigations have integrated both job satisfaction and organizational engagement as concurrent mediators within a unified research framework.
This study offers novelty by integrating organizational career development and compensation within a unified framework that simultaneously examines the mediating roles of job satisfaction and organizational engagement—an approach rarely explored in prior research. Unlike earlier studies that focused on specific industries or single mediating variables, this research is conducted in the Indonesian pharmaceutical manufacturing industry, providing fresh empirical evidence from a different geographical and sectoral context. The findings are expected to contribute both theoretically, by enriching the understanding of multi-path mediation in employee retention models, and practically, by guiding organizations in formulating comprehensive talent retention strategies tailored to dynamic and competitive industrial environments.
In response to the gaps found in previous literature, the present research investigates the extent to which career development initiatives and compensation policies influence employees’ intention to remain with the organization. This examination places particular emphasis on the indirect pathways, where job satisfaction and organizational engagement function as key mediating elements linking the independent and dependent variables. Such an approach is anticipated to provide an academic contribution to the advancement of human resource management theory while also delivering practical insights for organizations in formulating more effective retention strategies. The research framework for this study is presented as follows:
In this research, the author employs a methodological approach adapted from earlier studies that serve as the primary references. For the variable organizational career development, the author adapted 10 modified items from a study by Sturges et al. [69] as cited in Jena and Nayak [19]. For the compensation variable, 5 modified items were adapted from Hassan's study [16]. Regarding job satisfaction, the author used 10 modified items from a study by Macdonald and MacIntyre [70], also cited in Jena and Nayak [19]. For organizational engagement, 6 modified items were adapted from the study by Saks [37] in Jena and Nayak [19]. Lastly, for the employee retention variable, 11 modified items were adapted from Hassan's study [16]. In total, 42 items were used across all five variables. Respondents provided their assessments using a five-point Likert-type scale, where the lowest value of 1 denoted “strongly disagree” and the highest value of 5 represented “strongly agree” [71]. The study’s target population comprised millennial employees in the pharmaceutical manufacturing industry in Jakarta, encompassing both male and female participants across different organizational levels, namely operators, staff, supervisors, and managers. A convenience sampling technique, categorized as non-probability sampling, was applied. The number of respondents was determined by multiplying the total questionnaire items (42) by a factor of 5, yielding a sample size of 210 participants [65]. The process of gathering data took place across a three-month period, extending from January through April 2025, using an online survey in which questionnaires were distributed via Google Forms. The questionnaires were distributed to employees from several pharmaceutical manufacturing companies in Jakarta, including PT Mega Esa Farma, PT Bison, PT Pharos Indonesia, PT Harsen Laboratories, and PT Ikapharmindo Putramas. Employing a quantitative method, this study adopted the Structural Equation Modeling (SEM) approach as the primary method for data analysis. Data were processed with SPSS and SmartPLS version 4.0, complemented by descriptive statistics to outline the sample’s characteristics [72]. Validity and reliability assessments were conducted through factor analysis in SPSS. The assessment of validity was based on the Kaiser-Meyer-Olkin (KMO) statistic and the Measure of Sampling Adequacy (MSA), both of which were required to have values above 0.5. Reliability, on the other hand, was determined through Cronbach’s alpha, where coefficients of 0.7 or greater were considered to reflect an acceptable level of internal consistency [66]. Following the initial testing in SPSS, the data were subsequently analyzed in SmartPLS 4.0 to test the research hypotheses using t-test (t-value) analysis. The use of Partial Least Squares SEM (PLS-SEM) was chosen over covariance-based SEM because the research model involves multiple constructs with complex mediation pathways, a relatively modest sample size, and the aim of maximizing variance explanation (predictive relevance) rather than solely confirming an existing theoretical model.
<bold id="bold-fd6571e0174883f801693c7f50ee77d1">RESULT AND DISCUSSION</bold>
A. Result
The respondents in this study were male and female members of the millennial generation (aged 29–44 years in 2025) working in the pharmaceutical manufacturing industry in Jakarta. Their educational backgrounds ranged from high school/vocational school (SMA/SMK) to postgraduate (Master’s) degrees. The respondents consisted of 53.8% male and 46.2% female employees, with job positions distributed as follows: staff (56.4%), supervisors (21.8%), operators (12.7%), and managers (9.1%). Regarding educational background, most respondents possessed a bachelor’s degree (51.4%), followed by vocational school (15.9%), diploma (14.5%), master’s degree (10.5%), and pharmacist professional degree (7.7%). The respondents' work experience was distributed as follows: 1–5 years (42.7%), 5–10 years (40%), 11–15 years (14.5%), and more than 15 years (2.8%). Monthly income levels were as follows: less than IDR 7,000,000 (40.9%), IDR 7,000,001–15,000,000 (49.5%), and above IDR 15,000,000 (9.5%).
SPSS software was utilized in this study to perform pretest validity and reliability assessments. Subsequently, the relationships among the five study variables—Organizational Career Development, Compensation, Job Satisfaction, Organizational Engagement, and Employee Retention—were analyzed using SmartPLS version 4. The same software was also utilized to conduct the validity and reliability assessments. The initial stage for testing validity and reliability involved convergent validity, which assesses the validity of each variable indicator based on its outer loading value, with the requirement that the loading factor must exceed 0.70 [66].
All indicators for the Organizational Career Development, Compensation, and Job Satisfaction variables were found to be valid. For the Organizational Engagement variable, five out of six items were valid. For the Employee Retention variable, six out of eleven items were valid. Based on the pretest analysis, out of the original 42 questionnaire items, 36 items were declared valid and subsequently used in the main survey. This study obtained a total of 221 valid respondents. To ensure that each construct in the model was clearly differentiated, the study conducted discriminant validity testing. To assess discriminant validity, the analysis contrasted the Average Variance Extracted (AVE) of each construct with its correlation coefficients to other constructs in the framework. Consistent with the Fornell–Larcker guideline, the assessment confirmed that the square root of a construct’s AVE exceeded its correlation values with all other constructs in the model and that the AVE reached the minimum acceptable value of 0.5 [66]. The results showed that all constructs fulfilled these requirements, indicating that the model possessed satisfactory discriminant validity.
Reliability testing was carried out to evaluate whether the indicators used in the study consistently measured their respective constructs and whether they formed a coherent and reliable scale.
Reliability Analysis Results for Research Variables
The results revealed that, for every construct in the model, both the Cronbach’s Alpha coefficient and the Composite Reliability measure were well above the minimum threshold of 0.70, indicating strong internal consistency. Such Composite Reliability values signify that the variables possess acceptable reliability, showing that the measurement indicators consistently capture the intended constructs. Likewise, Cronbach’s Alpha values exceeding 0.70 verify that the data meet the reliability standards established in this research. Overall, these outcomes confirm that the variables in the study have high reliability. To further assess the research model, an inner model evaluation was carried out to examine the structural model’s validity and determine how well the proposed framework matched the empirical data. In this study, the coefficient of determination (R²) was applied to evaluate how effectively the exogenous constructs account for the variance observed in the endogenous constructs. Based on common interpretive guidelines, values near 0.67 reflect high predictive accuracy, those around 0.33 indicate a moderate level, and values close to 0.19 suggest low predictive capability [66].
R-Square Test Results
As shown in Table 2, the R² value for job satisfaction is 0.904, for employee retention is 0.894, and for organizational engagement is 0.888, all of which are classified as strong. This suggests that the models for job satisfaction, organizational engagement, and employee retention demonstrate good predictive power. Hypothesis testing was evaluated based on the path coefficient values, which provide an indication of the direction of the relationships between variables—whether they are positive or negative. The assessment of the hypotheses utilized two main standards, Specifically, the criteria for significance required a p-value less than 0.05 and a t-statistic exceeding 1.96 [66]. The strength and significance of the relationships between the independent and dependent variables were evaluated by analyzing the obtained t-values. According to the 5% significance level table, an effect is considered significant if the t-value exceeds 1.967 (= TINV(0.05,50)). In addition, a hypothesis is considered accepted when the p-value for a given variable is below 0.05, signifying a statistically significant relationship.
Output Results
Hypothesis Testing Results
As shown in the table, six hypotheses satisfied the established benchmarks, reflected by t-test scores above 1.96 and p-values less than 0.05, confirming their acceptance. In contrast, three hypotheses did not reach these limits, having t-test scores under 1.96 and p-values over 0.05, leading to their rejection.
B. Discussion
The first hypothesis test reveals that organizational career development does not positively influence employee retention in the pharmaceutical manufacturing industry in Jakarta. This result contrasts with the findings of Agtia et al. [27], who reported a significant impact of career development on employee retention. Jena and Nayak [19] also argued that providing organizational career development opportunities to employees can enhance retention within an organization. However, in the context of the pharmaceutical manufacturing industry, the results obtained from this investigation indicate inconsistency with those of previous research. This may be due to the fact that, although the organization may have career development policies, their implementation is not perceived as tangible, consistent, or aligned with employee needs. The lack of commitment and concrete support from the company for employee career advancement causes organizational career development to have no positive impact on retention, thereby reducing employees’ desire to stay. From a managerial perspective, this finding signals the need for HR leaders to audit existing career programs, identify execution gaps, and ensure alignment with employees’ career aspirations through mentoring, structured progression paths, and measurable outcomes.
The analysis for the second hypothesis revealed that opportunities for career advancement within the organization contribute meaningfully and positively to employees’ job satisfaction levels. Such a finding corroborates the evidence presented in the work of Dewi and Nurhayati [18], Diana et al. [19], and Agtia et al. [16], who found that career development positively impacts employee satisfaction. In this context, the finding is strengthened by demographic data showing that 42.7% of employees had 1 to 5 years of work experience, indicating that early- to mid-career employees are more sensitive to career development programs and perceive tangible benefits, thus enhancing their satisfaction with work. Therefore, well-implemented career development strategies directly contribute to job satisfaction, particularly for those in the early stages of career building. For managers, this means prioritizing structured onboarding, training, and promotion systems to sustain satisfaction levels and prevent early attrition.
In testing the third hypothesis, the analysis showed no statistically meaningful improvement in organizational engagement attributable to career development initiatives. The computed t-statistic was 1.383, which falls short of the critical value of 1.96, while the probability level was 0.167—above the 0.05 cutoff for significance. This result contrasts with previous studies that consistently found career development to be a key factor in enhancing engagement. Jena and Nayak [17] highlighted that internal career development increases organizational engagement, and Juhdi et al. [20] added that career development impacts not only engagement but also mediates retention and commitment. Thus, this inconsistency may stem from weak implementation of contextual, personalized, and adaptive career strategies. Broader literature suggests that organizational career development is a strategic need for millennials, who demand clear career direction and continuous learning [21]. Meeting these expectations is believed to enhance organizational engagement, fostering emotional ties and long-term loyalty. Nutov and Hazzan [22] emphasized that engagement can be cultivated through systematic efforts to identify and integrate employee needs into organizational structure and policy. Hence, this study underlines that the existence of career development policies alone is insufficient to foster engagement without quality and relevant implementation. In practice, managers should move beyond policy creation to active monitoring, employee feedback loops, and individualized career mapping to strengthen engagement levels.
The evaluation of the fourth hypothesis indicates that remuneration policies exert a statistically significant and favorable influence on employees’ job satisfaction. In the context of pharmaceutical manufacturing companies, equitable and well-structured compensation packages appear to meaningfully enhance satisfaction levels. These results are consistent with the findings of Ashraf [23], who also identified a strong positive association between compensation and job satisfaction. Consequently, compensation emerges as a pivotal factor in fostering constructive perceptions among employees, boosting their motivation, strengthening loyalty, and improving overall performance. Managerially, this underscores the importance of regularly benchmarking pay structures against industry standards and integrating performance-based incentives to sustain high satisfaction levels.
Analysis of the fifth hypothesis reveals that remuneration practices significantly and positively influence the level of organizational engagement. When employees receive equitable compensation, they tend to perceive themselves as appreciated and acknowledged, which in turn strengthens their connection and commitment to the organization. This supports previous studies by Maisoni et al. [24], Juhdi et al. [20], and Tessema et al. [25], all of which confirmed a positive relationship between compensation and engagement. Hence, compensation is a critical factor in enhancing engagement, as it reflects appreciation of employee contributions to organizational goals. In managerial terms, transparent pay policies, recognition programs, and timely bonuses can be leveraged to further reinforce engagement.
The sixth hypothesis test indicates that job satisfaction positively influences organizational engagement. Employees with high job satisfaction are more likely to be actively involved in their organizations. This finding aligns with Van et al. [26], who stated that job satisfaction positively affects organizational engagement. Greater engagement, driven by satisfaction, shapes attitudes and involvement in work. From a management standpoint, ensuring consistent job satisfaction through career growth, fair treatment, and supportive leadership is essential to sustaining engagement over time.
Results from the seventh hypothesis assessment show that higher levels of job satisfaction contribute positively to employees’ willingness to remain with their organization. This finding supports the conclusions of Moshabi et al. [60], who also reported a favorable relationship between job satisfaction and the intention to stay within a company. It also supports earlier research showing that job satisfaction significantly contributes to retaining employees [23]. Practically, managers should treat job satisfaction metrics as early warning indicators, allowing proactive interventions to prevent turnover.
The eighth hypothesis test revealed a positive relationship between organizational engagement and employee retention. This supports the perspective of Bhatnagar [66], who noted that engagement plays a crucial role in retaining employees. In essence, when employees are more engaged with their organization, their likelihood of staying for an extended period increases. This suggests that HR leaders should invest in engagement-focused initiatives such as team-building programs, leadership accessibility, and open communication platforms to foster long-term retention.
The ninth hypothesis test reveals that compensation does not significantly affect employee retention, in contrast to the findings of Allen et al. [10], who reported a favorable correlation between them. Within the scope of this study, benefits of a non-monetary nature—such as paid leave—were found to have negligible influence on employees’ commitment to stay, indicating that such perks alone are not sufficient to drive retention. For managers, this implies that retention strategies should combine financial and non-financial rewards with other critical factors, such as career progression and engagement initiatives, to achieve a lasting impact.
The findings reveal that organizational career development and compensation positively influence job satisfaction, with compensation also showing a significant impact on organizational engagement. In addition, job satisfaction was found to enhance organizational engagement, and both factors were shown to directly contribute to higher employee retention. On the other hand, neither organizational career development nor compensation directly affected employee retention; instead, their impact was mediated through job satisfaction and organizational engagement. These results highlight that strengthening job satisfaction and organizational engagement should be a central focus of organizational strategies to effectively retain employees. Overall, all research objectives have been successfully achieved, and the study contributes theoretically by enriching the understanding of multi-path mediation in employee retention models, while offering practical guidance for organizations in designing integrated career development and compensation strategies to improve retention outcomes. Therefore, companies should develop well-structured career development programs, including regular training, mentoring systems, performance evaluations, and individualized career planning to strengthen employees' positive perceptions of organizational commitment. Conversely, a fair, transparent, and competitive compensation system, both in financial forms (salary, benefits, bonuses) and non-financial forms (recognition, awards), is key to increasing employee satisfaction and loyalty. This research is subject to several limitations, such as its cross-sectional design, the restriction of the sample to a single industry, as well as the reliance on self-reported measures, which carries the potential for response bias. Hence, it is suggested that subsequent investigations employ a longitudinal design to observe the long-term relationships between variables, expand the sample across multiple industries for greater generalizability, and combine quantitative methods with qualitative approaches such as interviews or in-depth observations. Additionally, future studies may consider the use of additional moderating or mediating variables to enrich the understanding of the mechanisms affecting employee retention. With further research development and appropriate managerial implementation, organizations are expected to create a more conducive, adaptive work environment capable of retaining high-quality employees in the long term.