The Influence of Compensation and Work Discipline on Employee Performance with Job Satisfaction as a Mediating Variable

Abstract

Research Background: Despite intense competition for Indonesian civil service roles, public employees are often associated with negative stigmas regarding their actual work performance. Introduction / Main Objective: This study investigates the direct and indirect effects of compensation and work discipline on employee performance, with job satisfaction acting as a mediating variable. Method: Focusing on the Malang City and Malang Regency Religious Courts, the research utilized a saturated sample of 88 employees. Data collected through questionnaires and interviews were analyzed using Partial Least Squares (PLS) and the Sobel Test for mediation. Results/Findings: Direct path analysis indicates that compensation, work discipline, and job satisfaction all have positive and significant direct impacts on employee performance (all p-values ≤ 0.001). Additionally, compensation and work discipline positively and significantly influence job satisfaction. Crucially, the Sobel Test confirmed that job satisfaction serves as a significant mediating variable, indirectly facilitating the positive influence of both compensation (p=0.000) and work discipline (p=0.000) on employee performance. Conclusion: Higher compensation and robust work discipline directly improve employee performance and job satisfaction. Because job satisfaction functions as a vital psychological bridge, organizations must design compensation and discipline structures that foster genuine satisfaction to successfully optimize employee outputs.