The Effect of Intrinsic Rewards and Extrinsic Rewards on
Performance with Job Satisfaction as Intervening Variables
Universitas Airlangga, Indonesia.
Email: [email protected]
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ARTICLE INFO |
ABSTRACT |
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Date received : 12
December 2020 Revision date : 05
February 2021 Date received : 01 March
2021 |
The world is facing a fast global
development. It requires businesses to be able to compete in any developments.
Companies need to be supported by the good Performance of the employees to
achieve the vision and mission of the organization. Rewards and Job
Satisfaction are two variables that can influence Performance. Rewards can be
either Intrinsic and Extrinsic. If both types of Rewards are high so as to
form high Job Satisfaction, then it can impact Performance improvement of
employees. Based on this, this research aims to analyze the influence of
Intrinsic Rewards and Extrinsic Rewards to Performance with Job Satisfaction
as an intervening variable. This research uses a quantitative approach. Data
collection techniques used by distributing questionnaires to 52 contract employees division of Corporate Customer Access
Network at PT. Telekomunikasi Indonesia, Tbk. Witel Jatim Surabaya. Sampling
techniques in this research using census method. Mechanical testing of the
data used in this research is SEM-PLS. Results of this research shows that
Intrinsic Rewards influence positively and significantly related to Performance,
while Extrinsic Rewards influemce negatively and not significantly related to
Performance. The next results shows that Job
Satisfaction can mediating partially the relationship of Intrinsic Rewards to
Performance and mediating fully the relationship of Extrinsic Rewards to
Performance |
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Keywords: Rewards Extrinsic Rewards Intrinsic Rewards Job Satisfaction Performance |
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Coresponden Author: Email: [email protected] Article
with open access under license |
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INTRODUCTION
The
company needs to be supported by good performance in achieving its vision and
mission. Performance is the type of work that has been completed. Performance
shows the level of achievement of a job (Byars, Lloyd. L. & Rue, n.d.).
Improved employee performance is indispensable for companies in running PR OSES
businesses. Employee performance has a positive direct relationship with
intrinsic rewards and extrinsic rewards. (Gohari dkk. 2013).
Rewarding
has been found to be one of the organization's key policies that can improve
staff performance and can improve organizational output (Ajila & Abiola,
2004)
(McCormick & J. Tifflin., 1979) and (Tuma & Pratt, J. M. (1982). Clinical child
psychology practice and training: A survey. \ldots of Clinical Child &
Adolescent Psychology, 137(August 2012), 37–41. http://doi.org/10.1037/a0022390
et al., 2002) classifies rewards
into two, namely intrinsic rewards and extrinsic rewards. Higher reward and
employee satisfaction within the organization play a major role in both the
promotion of employee job satisfaction and higher productivity within the
organization (Sarwar & Abugre, 2013), therefore, the need
to reward companies that can satisfy employees so as to encourage employees to
be more productive and perform better.
Job
satisfaction is one of the most important and significant variables in
organizational behavior and organizational performance. The higher the job
satisfaction, the more likely workers are to have a positive attitude towards
their work (Wang & Feng, 2003). Job
satisfaction is expected to be a factor that can improve employee performance
so that the company's productivity also increases.
Reward is one of the factors that can affect employee
performance, in addition to job satisfaction can also affect the performance of
employees in a company. Higher reward and employee satisfaction in work
organizations play a major role in both employee job satisfaction promotions
and higher productivity within the organization (Sarwar & Abugre, 2013). The
company must be able to manage employee rewards and satisfaction well in the
hope of improving employee performance so that the company's productivity
becomes better.
This
research was conducted on pt contract employees. Telecommunications Indonesia,
Tbk. Witel Jatim Surabaya corporate customer access network division. The
division receives 500 complaints every day. In addition, there are also
inconsistencies in the awarding of rewards in this case salaries and overtime
money which is feared to be the trigger for a decrease in the performance of
contract employees.
Intrinsic
Rewards dan Extrinsic Rewards
Rewards is one of the strategies used by Human
Resource Management to attract and retain appropriate employees and facilitate
them to improve their performance. Organizational rewards include all types of
rewards, both intrinsic and extrinsic, that are accepted as a result of work by
the organization (Byars, Lloyd. L. &
Rue, n.d.)
(Robbins & DeCenzo,
2002) also states that rewards are divided into two, namely
intrinsic rewards and extrinsic rewards. Intrinsic rewards according to (Robbins & DeCenzo,
2002) is a person's personal satisfaction gained from the
work itself. Extrinsic rewards are rewards that include money, promotions, and
benefits where rewards come from outside work and outside sources, especially
management (Robbins & DeCenzo,
2002).
According to (Robbins & DeCenzo,
2002)., intrinsic rewards and extrinsic rewards can be
measured by the following indicators:
1. Extrinsic rewards:
a. Salary
b. Annual bonus
c. Incentives
d. Overtime money
e. Protection program
f.
Wages
for time not working
g. Suitable office furniture
h. IT-based HR Services
i.
Appropriate
lunch hours
j.
Work
assignments
k. Appreciation
2. Intrinsic rewards:
a. Participate in decision making
b. Freedom and flexibility of work
c. Trust given by the company
d. ppropriate work
e. Opportunities to develop themselves
f. Diverse work activities.
Job Satisfaction
Job
satisfaction itself is an employee's general attitude towards work (Byars, Lloyd. L. & Rue, n.d.). Other opinions of (Yarmand et al., 2017) Locke
(dalam Abdullah dan Wan 2013) stated, job satisfaction as a pleasant or
positive emotional state resulting from an assessment of one's performance or
work experience. Job satisfaction is an emotional or affective reaction to
various aspects of an individual's work situation. This has been flagged as a
positive sentimental reaction resulting from employee job assessments (Kreitner
dan Kinicki 2012). Job satisfaction can be measured by Minnesota Satisfaction
Questionnaire (MSQ):
Performance
In an organizational context, performance is usually defined as the
extent to which members of an organization contribute to achieving
organizational goals. Employees are a key source of competitive advantage in
organization-oriented services (Stajkovic & Luthans, 1998). Performance is also the
level of fulfillment of tasks that make up the work of employees. This reflects
how well an employee meets the job requirements (Byars, Lloyd. L. & Rue, n.d.). Employee performance can
contribute to the long-term survival of a company (Ellinger et al., 2008). Performance can be measured
using six indicators from (Ellinger et al., 2008), I.e :
1. Get a positive response from customers.
2. Able to resolve complaints from customers.
3. Able to manage working time effectively.
4. Able to carry out standard service procedures
set by the company.
5. Able to meet customer's wishes
6. Complete work targets on time.
Relationships Between Variables
Intrinsic Rewards'
Relationship to Performance
Research
conducted by (Ajila & Abiola, 2004) with research title “Influence of Rewards on Workers Performance In an
Organization” stated that there is a significant relationship between intrinsic
rewards and employee performance.
Research conducted by Gohari dkk. (2013) with research title “The
Relationship Between Rewards and Employee Performance” found that all types of
rewards (including intrinsic rewards and extrinsic rewards) had a direct and
positive relationship to employee performance.
H1:
Intrinsic rewards have a significant impact on the performance of PT contract
employees. Telecommunications Indonesia, Tbk. Witel Jatim Surabaya CCAN
division.
Extrinsic Rewards' Relationship to Performance
Research
conducted by Gohari et al. (2013) with the title of research “The Relationship
Between Rewards and Employee Performance” found that extrinsic rewards in this
study had a direct relationship with employee performance. The main
organizational variable used to reward employees and strengthen performance is
salary. Promotions may relate to performance (Byars, Lloyd. L. & Rue, n.d.). Other research conducted by (Ajila & Abiola, 2004) with research title “Influence of Rewards on Workers Performance In an
Organization” states that there is a positive relationship between extrinsic
rewards and worker performance.
H2:
Extrinsic rewards have a significant impact on the performance of PT contract
employees. Telecommunications Indonesia, Tbk. Witel Jatim Surabaya CCAN
division.
Intrinsic Rewards' Relationship to Performance with Job
Satisfaction Mediation
Research
conducted by Gohari et al. (2013) with the title of research “The Relationship
Between Rewards and Employee Performance” Research conducted by Gohari et al.
(2013) with the title of the study found that all types of rewards (intrinsic
and extrinsic) have a direct and positive relationship to employee performance.
The organization's rewards system often has a significant impact on employee
job satisfaction levels. For many years, generally managers believed that a
satisfied employee was always a good employee. In other words, if management
can keep all employees happy, good performance will automatically follow (Byars, Lloyd. L. & Rue, n.d.).
H3:
Intrinsic rewards affect performance by mediating job satisfaction in PT
contract employees. Telecommunications Indonesia, Tbk. Witel Jatim Surabaya
CCAN division.
Extrinsic Rewards' Relationship to Performance with Job
Satisfaction Mediation
Research conducted by (Tuma, J. M., & Pratt, J. M. (1982). Clinical
child psychology practice and training: A survey. \ldots of Clinical Child
& Adolescent Psychology, 137(August 2012) et al., 2002) Gohari dkk. (2013) with research title “The Relationship Between Rewards
and Employee Performance” the study title found that extrinsic rewards in this
study had a direct relationship with employee performance. The organization's
rewards system often has a significant impact on employee job satisfaction
levels. For many years, generally managers believed that a satisfied employee
was always a good employee. In other words, if management can keep all
employees happy, good performance will automatically follow (Byars, Lloyd. L. & Rue, n.d.).
H4:
Extrinsic rewards affect performance by mediating job satisfaction in PT contract
employees. Telecommunications Indonesia, Tbk. Witel Jatim Surabaya CCAN
division.
Conceptual Framework

Figure
2.1
Conceptual
Framework of Research
METHOD
Research Methods and Approaches
The approach used in this study is a
quantitative approach. Quantitative approach focuses on testing hypotheses, the
data used must be measurable, and will produce generalized conclusions. This
study used data collection method with questionnaire dissemination technique to
52 PT contract employees. Telecommunications Indonesia, Tbk. Witel Jatim
Surabaya CCAN division. Sampling techniques by census. This research approach
is based on theory and hypothesis, which is followed by drawing up conceptual
frameworks and then identifying variables, creating operational definitions,
collecting population and sample data and conducting analysis. This study used
PLS (Partial Least Square) and Sobel test analysis techniques to test the
effects of mediation.
Variable Operational
Measurement and Definition
Intrinsic Rewards
The object of this research consists
of principal transformational leadership (X1), which includes the dimensions of
Charismatic (Idealized influence), Intellectual Stimulation, Individual
consideration, and Inspirational motivation so that the X1 variable consists of
14 indicators; Teacher Work Culture (X2) includes dimensions of aspects of
loyalty, discipline, commitment, leadership, aspects of work performance so
that the variable X2 consists of 24 indicators. Teacher Performance (Y)
includes Education and Teaching dimensions, Conducting research and Knowledge
Development by teachers, Community Service, Professional Attitude so that the Y
variable consists of 28 indicators.
Extrinsic Rewards
Measurement
and Definition of Variable OperationsExtrinsic rewards can be defined as
financial and nonfinancial awards received by employees either directly or
indirectly. Extrinsic rewards at PT. Telecommunications Indonesia, Tbk. Witel
Jatim Surabaya CCAN division measured with seven out of 11 indicators of (Robbins & DeCenzo, 2002).
Job Satisfaction
Job
satisfaction can be defined as an employee's emotional attitude towards a job.
Job satisfaction at PT. Telecommunications Indonesia, Tbk. Witel Jatim Surabaya
CCAN division is measured with 20 indicators of Minnesota Satisfaction
Questionnaire (MSQ).
Performance
PerformanceA
employee performance can be defined as the result of work in accordance with
the company's provisions. Employee performance at PT. Telecommunications
Indonesia, Tbk. Witel Jatim Surabaya CCAN division is measured by six
indicators of (Ellinger et al., 2008)
RESULTS AND DISCUSSION
.
Figure 1
Outer Model Path
Diagram Before Elimination
Table 1
Outer Models (Weights
or Loadings) Before Elimination
|
Variabel |
Indikator |
Nilai Convergent Validity |
Description |
|
Intrinsic Rewards |
Intrinsik 1 |
0.745950 |
Valid |
|
Intrinsik 2 |
0.714384 |
Valid |
|
|
Intrinsik 3 |
0.916034 |
Valid |
|
|
Intrinsik 4 |
0.787279 |
Valid |
|
|
Intrinsik 5 |
0.768945 |
Valid |
|
Extrinsic Rewards |
Ekstrinsik 1 |
0.812037 |
Valid |
|
Ekstrinsik 2 |
0.773522 |
Valid |
|
|
Ekstrinsik 3 |
0.893604 |
Valid |
|
|
Ekstrinsik 4 |
0.747117 |
Valid |
|
|
Ekstrinsik 5 |
0.652145 |
Valid |
|
|
Ekstrinsik 6 |
0.776445 |
Valid |
|
|
Ekstrinsik 7 |
0.812715 |
Valid |
|
|
Job Satisfaction |
KK 1 |
0.763019 |
Valid |
|
KK 2 |
0.959157 |
Valid |
|
|
KK 3 |
0.723991 |
Valid |
|
|
KK 4 |
0.705073 |
Valid |
Source: Data processing by PLS, 2016.
In Table 4.1 above can be seen the results of data
processing using PLS. Based on these results, there are three invalid
indicators that have loading values below 0.5 namely KK7, KK8, and KK19.
Because there are invalid indicators, the three indicators are eliminated and
reprocessed with the data that has been eliminated.

Source: Data processing by PLS, 2016.
Figure 2
Source: Data processing by PLS, 2016.
Figure 2 (Weights or Loadings) After Elimination
|
Variabel |
Indicators |
Nilai Convergent Validity |
Description |
|
Intrinsic Rewards |
Intrinsik 1 |
0.745183 |
Valid |
|
Intrinsik 2 |
0.714317 |
Valid |
|
|
Intrinsik 3 |
0.915892 |
Valid |
|
|
Intrinsik 4 |
0.787763 |
Valid |
|
|
Intrinsik 5 |
0.769318 |
Valid |
|
|
Extrinsic Rewards |
Ekstrinsik 1 |
0.813586 |
Valid |
|
Ekstrinsik 2 |
0.774347 |
Valid |
|
|
Ekstrinsik 3 |
0.894532 |
Valid |
|
|
Ekstrinsik 4 |
0.746350 |
Valid |
|
|
Ekstrinsik 5 |
0.650014 |
Valid |
|
|
Ekstrinsik 6 |
0.775414 |
Valid |
|
|
Ekstrinsik 7 |
0.812822 |
Valid |
|
|
Job Satisfaction |
KK 1 |
0.764304 |
Valid |
|
KK 2 |
0.960198 |
Valid |
|
|
KK 3 |
0.718379 |
Valid |
|
|
KK 4 |
0.702362 |
Valid |
|
|
KK 5 |
0.916297 |
Valid |
|
|
KK 6 |
0.911889 |
Valid |
|
|
KK 9 |
0.864777 |
Valid |
|
Variabel |
Indicators |
Nilai Convergent Validity |
Description |
|
Job Satisfaction |
KK 10 |
0.894948 |
Valid |
|
KK 11 |
0.548519 |
Valid |
|
|
KK 12 |
0.500134 |
Valid |
|
|
KK 13 |
0.612037 |
Valid |
|
|
KK 14 |
0.941312 |
Valid |
|
|
KK 15 |
0.933606 |
Valid |
|
|
KK 16 |
0.969945 |
Valid |
|
|
KK 17 |
0.969945 |
Valid |
|
|
KK 18 |
0.722475 |
Valid |
|
|
KK 20 |
0.672063 |
Valid |
|
|
Performance |
Kinerja 1 |
0.841166 |
Valid |
|
Kinerja 2 |
0.854066 |
Valid |
|
|
Kinerja 3 |
0.886481 |
Valid |
|
|
Kinerja 4 |
0.660732 |
Valid |
|
|
Kinerja 5 |
0.798685 |
Valid |
|
|
Kinerja 6 |
0.870287 |
Valid |
Source: Data processing by PLS, 2016.
The results
of reprocessing data are in Table 2 above. Based on the table, it can be seen
that all indicators have met the loading value limit which is above 0.5. So it
can be said that the collected data is all valid and has a good convergent
validity.
Table 3
Composite
Reliability
|
Variabel |
Composite Reliability |
Description |
|
Intrinsic Rewards |
0.917240 |
Reliabel |
|
Extrinsic Rewards |
0.891444 |
Reliabel |
|
Job
Satisfaction |
0.969985 |
Reliabel |
|
Performance |
0.925374 |
Reliabel |
Source:
Data processing by PLS, 2016.
Based
on Table 3, it can be seen that all constructs have a composite reliability
value of more than 0.7, so it can be said that all constructs are reliable.
Table
4
Path
Coefficients
|
|
Original Sample |
T-Statistics |
Description |
|
Intrinsic Rewards -> Performance |
0.638257 |
4.913653 |
Significant |
|
Extrinsic Rewards -> Performance |
-0.063545 |
0.529539 |
No Significant |
|
Intrinsic Rewards -> Job Satisfaction |
0.627242 |
6.905195 |
Significant |
|
Extrinsic Rewards -> Job Satisfaction |
0.266864 |
2.144272 |
Significant |
|
Job Satisfaction -> Performance |
0.288747 |
2.168696 |
Significant |
Source: Data
processing by PLS, 2016
Based on Table 4.4 it can be concluded that intrinsic
rewards have a positive and significant influence on performance, with a
parameter coefficient value of 0.63 and a significance value of 4.91 greater
than the critical limit value of 1.96. Based on these results it can be
concluded that hypothesis 1 is accepted. Furthermore, extrinsic rewards have a
negative but insignificant effect on performance, with a parameter coefficient
value of -0.063 and a significance value of 0.52 smaller than the critical
limit of 1.96. This, suggests that hypothesis 2 is rejected.
Intrinsic rewards have a positive and significant influence
on job satisfaction, with a parameter coefficient value of 0.62 and a
significance value of 6.9 which is greater than the critical limit of 1.96.
Extrinsic rewards have a positive and significant influence on job
satisfaction, with a parameter coefficient value of 0.26 and a significance
value of 2.14 greater than the critical limit of 1.96. Furthermore, job
satisfaction has a positive and significant influence on performance, with a
parameter coefficient value of 0.28 and a significance value of 2.16 which is
greater than the critical limit of 1.96. Based on these results it can be
concluded that hypothesis 3 is accepted. Furthermore, it can also be concluded
that hypothesis 4 is accepted.
Influence Intrinsic Rewards (X1) to Performance (Y)
Based on the results of research that has been done,
shows that intrinsic rewards have a positive and significant effect on
performance. Thus the hypothesis that states intrinsic rewards have a
significant effect on performance is acceptable. All types of rewards (intrinsic
and extrinsic) have a positive direct relationship to employee performance.
Intrinsic rewards have a higher influence on employee performance than
extrinsic rewards (Gohari dkk. 2013).
Intrinsic rewards are intangible rewards from companies
inherent in employees. Awards such as providing freedom and flexibility /
flexibility to employees while working can improve the ability of ccan contract
employees in terms of managing their working time effectively. Employees also
participate in decision making related to technical problems in the work so
that they are able to resolve complaints from customers. The results showed
that PT. Telecommunications Indonesia, Tbk. Witel Jatim Surabaya has
implemented intrinsic rewards well to contract employees, especially in the
CCAN division so as to improve their performance.
Influence Extrinsic Rewards (X2) to Performance (Y)
Based on the results of research that has been done, it
is known that extrinsic rewards have a negative but insignificant influence on
performance. Thus the hypothesis that extrinsic rewards have a significant
effect on performance is rejected. The results showed that extrinsic rewards
were unable to improve performance directly with insignificant relationships.
Different results from research conducted by Gohari (2013), showed that there
is a positive direct relationship between extrinsic rewards to performance.
Gohari also stated that the influence of extrinsic rewards on performance is
less than the influence of inrinsic rewards on performance.
Extrinsic rewards are financial and nonfinancial awards
given by the company to employees either directly or indirectly. The results of
this study showed that the provision of extrinsic rewards conducted by PT.
Telecommunications Indonesia, Tbk. Witel Jatim Surabaya such as incentives
based on employee performance and overtime payments in accordance with the
provisions are not able to improve employee performance directly. This can
happen because of the frequent delay in providing overtime money as well as
incentivizing contract employees, especially in ccan divisions that are
considered by employees to be quite low.
Effect of Intrinsic Rewards (X1) on Performance (Y) through Job
Satisfaction (Z)
Based on the results of research that has been processed,
intrinsic rewards have a positive and significant influence on job
satisfaction, as well as the relationship between job satisfaction to
performance that also has a positive and significant influence. The results
showed that the three hypotheses that states intrinsic rewards affect
performance by mediating job satisfaction are acceptable. The relationship of
these three variables is partial mediation, because intrinsic rewards can
affect performance both directly and by mediation of job satisfaction. The organization's
rewards system often has a significant impact on employee job satisfaction
levels. For many years, generally managers believed that a satisfied employee
was always a good employee. In other words, if management can keep all
employees happy, good performance will automatically follow (Byars, Lloyd. L. &
Rue, n.d.).
The results of the study showed that intrinsic rewards
that have been given by PT. Telecommunications Indonesia, Tbk. Witel Jatim
Surabaya to contract employees in ccan division can improve employee job
satisfaction. The high employee satisfaction towards intrinsic rewards received
has an impact on improving the performance of the employee itself. The higher
the job satisfaction, the more likely workers are to have a positive attitude
towards their work (Wang & Feng, 2003). Employee performance can contribute to the long-term
survival of a company (Ellinger et al., 2008).
Effect of Extrinsic Rewards (X2) on Performance (Y) through Job
Satisfaction (Z)
Based on the results of research that has been conducted,
extrinsic rewards have a positive and significant influence on job
satisfaction, as well as job satisfaction that also has a positive and
significant influence on performance. The results showed that the four
hypotheses that extrinsic rewards affect performance by mediating job
satisfaction are acceptable.
Extrinsic rewards relationship to performance with job
satisfaction mediation is full mediation. Job satisfaction is able to mediate
in full (full mediation) the relationship between extrinsic rewards and
performance, because extrinsic rewards have a negative and insignificant
influence on performance. It shows that the need for variable job satisfaction
as a mediator in extrinsic rewards relationship with performance. The higher
the job satisfaction, the more likely workers are to have a positive attitude
towards their work (Wang & Feng, 2003).
The acceptance of the fourth hypothesis, can be the
reason for the importance of ccan division contract employees at PT.
Telekomunikasi Indonesia Tbk. Witel Jatim Surabaya is satisfied with the
extrinsic rewards given by the company so that it can affect their performance.
Smith et al. (Sarwar & Abugre,
2013) states "the most accepted and common aspects of job
satisfaction are satisfaction with wages, promotional opportunities,
co-workers, supervision, and the job itself". Higher reward and employee
satisfaction in the organization play a major role both in the promotion of
employee job satisfaction and higher productivity within the organization
paying attention to the extrinsic rewards given to employees so that employees
feel satisfied so as to influence their performance.
CONCLUSION
Based on the results of data processing using Partial
Least Square (PLS) analysis, it can be concluded as follows:
1. The first hypothesis stating that Intrinsic Rewards have
a significant effect on Performance is accepted.
2. The second hypothesis that Extrinsic Rewards has a
significant effect on Performance is rejected.
3. A third hypothesis states that Intrinsic Rewards affect
Performance by mediation accepted Job Satisfaction.
Intrinsic Rewards have a
positive and significant influence on Job Satisfaction, and Job Satisfaction
has a positive and significant influence on Performance. It can be concluded
that Job Satisfaction is able to partially mediate the effect of Intrinsic
Rewards on Performance.
4. The fourth hypothesis states that Extrinsic Rewards
affect Performance by mediation accepted Job Satisfaction.
Extrinsic Rewards have a
positive and significant influence on Job Satisfaction, as well as
job Satisfaction has a
positive and significant impact on Performance. Can be retrieved
conclusion that Job
Satisfaction is able to full mediation effect of Extrinsic Rewards on Performance
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