The Effect of Compensation System and Transformational Leadership on Employee Performance Mediated by Employee Engagement at PT Power Acetindo Selaras

Abstract

This study aims to analyze the effect of the compensation system and transformational leadership on employee performance, with employee engagement as a mediating variable in the Marketing Division of PT Power Asetindo Selaras. This research is motivated by the decline in total auction results despite an increase in auction activities and units sold, indicating suboptimal employee effectiveness and productivity. A quantitative method with an explanatory approach was employed. The population consisted of all 51 employees in the Marketing Division, using a census or saturated sampling method. Data were collected through an online Likert-scale questionnaire. Data analysis was conducted using Structural Equation Modeling (SEM) with the Partial Least Squares (PLS) approach through SmartPLS version 4.1.1.6. The analysis included the measurement model (outer model), structural model (inner model), and hypothesis testing. The results show that compensation system has no significant effect on employee performance, while transformational leadership has a positive and significant effect. Both compensation system and transformational leadership positively and significantly affect employee engagement. Employee engagement also positively and significantly affects employee performance. Furthermore, employee engagement fully mediates compensation system and partially mediates transformational leadership effects on performance.