The Effect of Compensation on the Work Motivation of Palm Oil Factory Employees

Abstract

The compensation system as a part of the company’s concern must be properly regulated, so that it can be accepted by both parties, in this case, the company and employees. This study analyzes the influence of financial and non-financial compensation on the work motivation of factory employees, as well as examine the dominant factors that influence it. The research was conducted at Palm Oil Factory Balai Jaya District, Rokan Hilir Regency. Data were analyzed using multiple linear regression tests to see the effect of financial and non-financial compensation on employee motivation. Financial and non-financial compensation both significantly influence work motivation. This is supported by statistical evidence. The positive impact of financial compensation is demonstrated by a t-value (4.666) exceeding the critical t-table value (2.001) at a significance level of 0.000, which is well below the common threshold of 0.05. Similarly, non-financial compensation also demonstrates a positive effect, with a t-value (2.735) exceeding the critical value (2.001) and a significance level of 0.008, again significantly lower than 0.05. Furthermore, financial compensation appears to have a stronger influence on work motivation compared to non-financial compensation. This is evident from the standardized coefficients beta (β): the β value for financial compensation (X1) is 0.506, while the β value for non-financial compensation (X2) is 0.297. The higher absolute value of β indicates a stronger impact on the dependent variable (work motivation). Keywords: financial compensation, non-financial compensation, motivation