Compensation, Employee Engagement, and Employee Retention: Empirical Evidence from the Indonesian Service Sector
DOI:
https://doi.org/10.59890/ijgsr.v4i6.274Keywords:
Compensation, Employee Engagement, Employee Retention, Social Exchange Theory, Self-Determination Theory, Indonesia, Service SectorAbstract
Purpose. This study investigates the independent and relative effects of compensation and employee engagement on employee retention among permanent service-sector employees in Southeast Sulawesi, Indonesia. Design/Methodology/Approach. A quantitative cross-sectional survey was administered to N = 60 permanent employees selected via purposive sampling. Data were collected using validated Likert-scale questionnaires and analysed using multiple linear regression (SPSS 27), preceded by classical assumption tests. Findings. Both predictors were positive and significant: compensation (β = .312, t = 3.14, p < .001) and employee engagement (β = .519, t = 5.27, p < .001). Employee engagement was the dominant predictor. The model explained 64.7% of variance in retention (R² = .647, F(2,57) = 52.29, p < .001). All OLS preconditions were satisfied. Research Limitations. The cross-sectional design limits causal inference; common method bias from self-report is possible; the sample is restricted to one Indonesian province and service-sector organisations. Practical Implications. Organisations should implement performance-linked, equitable compensation alongside systematic engagement interventions (meaningful work, recognition, career development). The two levers are complementary: neither alone achieves optimal retention outcomes
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