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American Journal of Humanities and Social Sciences Research (AJHSSR) 2025
A J H S S R J o u r n a l P a g e | 326
American Journal of Humanities and Social Sciences Research (AJHSSR)
e-ISSN : 2378-703X
Volume-09, Issue-07, pp-326-334
www.ajhssr.com
Research Paper Open Access
The Effect of Compensation and Work Environment on Employee
Performance with Motivation as an Intervening Variable at
PT Transcoal Pacific Sangatta
Achmad Rafii1
, Irwansyah2
Faculty of Economics and Business, Mulawarman University, Indonesia
ABSTRACT : This study aims to analyze the effect of compensation and work environment on employee performance,
with motivation as an intervening variable, at PT Transcoal Pacific Sangatta. Employee performance in this company shows
a decline, triggered by compensation discrepancies and lack of system transparency, as well as a less conducive work
environment. Using a quantitative approach with a census sample of 55 employees of PT Transcoal Pacific Sangatta, data
were collected through a Likert scale questionnaire and analyzed using Partial Least Square - Structural Equation Modeling
(PLS-SEM) with SmartPLS 4. The results of the analysis show that compensation and work environment have a positive and
significant effect on employee performance. Compensation also has a positive and significant effect on work motivation.
However, the work environment has no significant effect on work motivation. Furthermore, work motivation has a positive
and significant effect on employee performance. This study also found that motivation significantly mediates the effect of
compensation on performance, but does not mediate the effect of work environment on performance. Managerial
implications indicate the importance of optimizing compensation and improving the work environment to increase employee
motivation and performance.
KEYWORDS : Compensation, Work Environment, Motivation, Performance
I. INTRODUCTION
The Employee performance is a crucial factor in the success of an organization, which is highly
dependent on the quality of human resources (Afiani, Surachim, & Masharyono, 2019). The existence of human
resources in a company plays an important role in carrying out company activities, so the potential of every
human resource in the company must be utilized as well as possible in order to be able to make an optimal
contribution to the company to achieve company goals.
Compensation is one of the important aspects for employees, because the amount of compensation is a
reflection on the size of the employee's own value. Conversely, the small amount of compensation can affect job
performance, motivation and job satisfaction of employees. If compensation is given appropriately and correctly
to employees, they will get job satisfaction and motivation to achieve organizational goals. In addition to
compensation factors, the environment in which employees work is no less important in improving employee
performance. According to Sutrisno (2016, 118) the work environment is the overall work facilities and
infrastructure around employees who are doing work that can affect the implementation of work.
PT Transcoal Pacific, a logistics and transhipment company, is facing the challenge of declining
employee performance. The data showed a decline in final employee scores from 9.2% in the period May 2022 -
April 2023 to 7.8% in the period May 2023 - April 2024. This decline was identified as stemming from
declining quantity and quality of work, as well as disciplinary issues such as tardiness and unauthorized
absences. This phenomenon is thought to be related to the mismatch of compensation with workload and
responsibilities, as well as the lack of transparency in the compensation system. In addition, a less conducive
work environment, such as inadequate facilities, differences in the condition of office desks and chairs, and
computer technical problems, also contributed to low employee motivation and performance.
For companies, performance research is very useful for assessing compensation, the work environment
can provide motivation to employees. One of the keys to success in an organization to achieve company goals is
the performance and productivity of its employees. And one way to increase employee productivity is to
establish fair and appropriate compensation to employees for their work achievements. But sometimes the
compensation provided by the company is still not fully able to improve employee performance. Therefore,
compensation must be adjusted to the results of employee work because the provision of appropriate
compensation is expected to increase employee job satisfaction followed by an increase in employee
performance. And motivation is expected to encourage employees to be willing and willing to mobilize their
abilities in the form of expertise or skills, energy and time to complete tasks and activities that are their
responsibility.
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Several studies have been conducted to determine the effect of compensation on performance,
however, there are still inconsistent results. Research from Purnama and Kempa (2016) , Wairooy (2017) proves
that compensation has a positive influence on employee performance. While research conducted by Riansari and
Sudiro (2012) states that compensation has no direct effect on employee performance. Meanwhile, research on
the effect of the work environment on performance has been conducted several times, with mixed results and
tends to be inconsistent. Research conducted by Rahim et al. (2017) , and Susanti and Mardika (2021) , states
that the work environment has a significant effect on performance. Meanwhile, research conducted by Arianto
(2013) , Aryono (2017) , and Dewi (2019) , suggests that the work environment has no significant effect on
performance. Research on the effect of motivation on performance still has inconsistent results, some
researchers state that motivation affects performance, but there are researchers who state that motivation has no
significant effect on performance. Research conducted by Rahim et al. , (2017) Susanti and Mardika (2021) ,
Aryono (2017) , Meutia et al. (2016) , states that motivation has a significant effect on performance. However,
different results are shown by research Paramarta and Astika (2020) , which states that motivation has no
significant effect on performance.
Previous research shows inconsistent results regarding the effect of compensation and work
environment on performance, as well as the role of motivation as mediation. Some studies found a positive and
significant effect. These inconsistencies, coupled with the specific conditions at PT Transcoal Pacific Sangatta,
encourage this research to examine more deeply the relationship between compensation, work environment,
motivation, and employee performance.
II.HEADING S
Performance is the level of achievement of a person in implementing programs, activities and policies
in achieving a goal, objective, vision and mission in an organization Putra (2017) Meanwhile, according to
Santosa et al in (Puspitasari and Dahlia 2020) , Performance is an achievement of work results in activities or
activities or programs that have been planned in advance in order to achieve the goals and objectives set by an
organization.
According to (Setyadi, 2021) motivation is a series of activities that explain the strength, direction, and
perseverance of a person in an effort to achieve the goals he wants to achieve, while according to (Soselisa &
Killay, 2020) work motivation is a process by which needs encourage a person to carry out a series of activities
that lead to the achievement of certain goals and organizational goals and to meet several needs.
Sedarmayanti (2019) states that the work environment is broadly divided into 2 (two), namely the
physical and non-physical work environment. The physical work environment is all conditions that can affect
employees either directly or indirectly. While the non-physical work environment is all conditions related to
work relationships both with superiors and work relationships with subordinates.
compensation is all income in the form of money, direct or indirect goods received by employees in
return for services provided to the company Hasibuan (2017) while according to Marwansyah (2016),
compensation is a direct or indirect reward or reward, financial or non-financial, which is fair and appropriate to
employees, in return or their contribution / service to the achievement of company goals.
Relationship between Variables
Effect of Compensation on Employee Performance
One way to improve performance cannot be separated from compensation. Compensation is one of the
important elements in employee performance. In general, compensation is something that employees receive in
return for their work. Compensation in financial form is important for employees, because with this
compensation they can fulfill their needs directly, especially their physiological needs. Non-financial forms are
also very important for employees, especially for their career development. Based on research conducted by
Meutia et al. (2016) , compensation has a positive and significant effect on performance. in contrast to research
conducted by Firmdanari (2014) states that there is no influence between compensation on employee
performance.
Effect of Work Environment on Employee Performance
A poor work environment can demand more labor and time and does not support the design of an
efficient work system. The work environment has a very close relationship with employee performance, the
achievement motive that employees need to have must be grown from within themselves will form a personal
strength and if the work environment situation also supports it, achieving performance will be easier. Based on
research conducted by Mudayana and Suryoko (2016) , states that there is a positive and significant influence
between the work environment on employee performance. This contradicts the results of research conducted by
Hanafi and Yohana (2017) which shows that the work environment has no effect on employee performance.
American Journal of Humanities and Social Sciences Research (AJHSSR) 2025
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The Effect of Compensation on Motivation
Organizations empower compensation to motivate their employees. Therefore, if the needs of
employees have been met by providing the right compensation, employees will be motivated to do their work
optimally. Based on research conducted by Meutia et al. (2016) , compensation has a positive and significant
effect on motivation. This contradicts the results of research conducted by Firmdanari (2014) which shows that
there is no positive influence between compensation on motivation.
Effect of Work Environment on Motivation
Good work environment conditions will provide work motivation for employees in completing their
workload. The work environment will be able to influence the work motivation of its employees in a work
environment, therefore employees will feel more appropriate at work and be encouraged to do many things
according to their duties and responsibilities within the company. Based on research conducted by Cdanradewi
and Dewi (2019) , the work environment has a positive and significant effect on work motivation. This
contradicts the results of research conducted by Abdurrahman (2015) which shows that there is no positive
influence between the work environment on motivation.
Effect of Motivation on Performance
Motivation is something that needs to be developed in employees in order to strengthen efforts in
achieving the company's expected goals. Motivation and work ability are special basic requirements for humans
that affect employee performance. Employee motivation will have a good impact on employee performance,
with employee motivation at work, employees can be maximized in carrying out their duties and responsibilities
in the company. Based on research conducted by Wahyuni (2019) which states in his research that motivation
has a significant effect on performance.
The Effect of Compensation on Performance through Motivation
Compensation that is not in accordance with the burden borne by employees, can reduce the level of
work motivation. The impact that occurs when work motivation decreases, will affect the decline in employee
performance. Based on research conducted by Cdanradewi and Dewi (2019) , motivation mediates the influence
between compensation on performance.
The Effect of Work Environment on Performance through Motivation
A good and conducive work environment will make people feel comfortable at work. Based on
research conducted by Sari and Aziz (2019) , motivation mediates the influence between the work environment
on performance.
Conceptual research framework
Figure 1 Conceptual study framework
Based on the literature review and previous research, the hypothesis of this study is:
•H1: Compensation has a positive and significant effect on employee performance.
•H2: Work environment has a positive and significant effect on employee performance.
•H3: Compensation has a positive and significant effect on employee motivation.
•H4: Work environment has a positive and significant effect on employee motivation.
•H5: Work motivation has a positive and significant effect on employee performance.
•H6: Compensation has a positive and significant effect on employee performance through work motivation.
•H7:Work environment has a positive and significant effect on employee performance through work motivation.
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III. RESEARCH METHODS
This study uses a quantitative approach with an explanatory design, which aims to explain the causal
relationship between variables (Sugiyono, 2018). The research population is all employees of PT Transcoal
Pacific Sangatta, totaling 55 people. The sampling method used is census (total sampling), where the entire
population is sampled, considering the population size is less than 100 (Laili, 2017)
Primary data were collected using a closed questionnaire with a Likert scale (1 = Strongly Disagree, 5
= Strongly Agree). The operational definitions and variable indicators are as follows:
• Performance (Y): Respondents' perception of work results (quantity, quality, timeliness, attendance, ability
to complete work).
• Motivation (Z): Respondents' perceptions of work motivation (advancement opportunities, security,
responsibility, achievement recognition, self-actualization).
• Work Environment (X2): Respondents' perceptions of the physical (buildings, equipment, facilities) and
non-physical (coworker relations, superior-subordinate relations) conditions in the workplace.
• Compensation (X1): Respondents' perceptions of direct (salary, incentives) and indirect (benefits,
insurance, facilities) rewards.
Data analysis was conducted using Partial Least Square - Structural Equation Modeling (PLS-SEM)
with SmartPLS 4 software. Evaluation of the measurement model (outer model) involves convergent (outer
loading > 0.7, AVE > 0.5) and discriminant (cross-loading) validity tests, as well as reliability tests (Composite
Reliability > 0.7, Cronbach's Alpha > 0.6). Evaluation of the structural model (inner model) is done by looking
at the R-square, Q-square (predictive relevance), and Effect size (f-square) values. Hypothesis testing is done
using the bootstrapping method with t-test (t-statistic > 1.96, p-value < 0.05).
IV.RESULTS AND DISCUSSION
Convergent Validity Test
In this study, a factor loading limit of 0.60 will be used. To assess the results of the convergent validity
test, it can be seen from the factor loading value which is reflected in the outer loading results as in Table 1
below.
Table 1. Convergent Validity Test Results Using Outer Loading
Compensation (X1) Work Environment (X2) Motivation (Z) Performance (Z)
X1.1 0,899
X1.2 0,834
X1.3 0,894
X1.4 0,821
X2.1 0,938
X2.2 0,848
X2.3 0,936
X2.4 0,820
X2.5 0,923
Z1 0,788
Z2 0,849
Z3 0,761
Z4 0,839
Z5 0,717
Y1 0,901
Y2 0,843
Y3 0,910
Y4 0,812
Y5 0,776
Source: SmartPLS 4.2025
Based on Table 1, the results of the data processing above show that the outer model value meets the
requirements so that it shows good discriminate validity because the correlation value of each indicator shows a
value above 0.7. The indicator that has a dominant influence on compensation is indicator X 1.1with the highest
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loading factor value when compared to other indicators, which is 0.899. The indicator that provides the
dominant influence on the work environment is indicator X 2.1with the highest loading factor value when
compared to other indicators, which is 0.938. The indicator that provides the dominant influence on motivation
is indicator Z 2with the highest loading factor value when compared to other indicators, which is 0.849. The
indicator that provides the dominant influence on performance is indicator Y 3with the highest loading factor
value when compared to other indicators, which is 0.910.
In addition, outer loading to see construct validity, other convergent validity test results can also be
reported which are reflected in the AVE (average variance extracted) value, where the limit value is 0.50. The
following is the AVE value in this research model.
Table 2 Average Variance Exstracted (AVE)
Variabel Nilai AVE Description
Compensation 0,744 Valid
Work Environment 0,800 Valid
Motivation 0,628 Valid
Performance 0,722 Valid
Source: SmartPLS 4.2025
Based on table 2, it is known that the four variables above are variables that have an AVE value greater
than 0.5. So that in this study it is considered that discriminant validity on Average Variance Extracted (AVE) is
valid.
The reliability test used for Cronbach's alpha must be greater than 0.6 and composite reliability must be
greater than 0.7, the results of which can be seen in Table 3 below.
Table 3 Reliability Consistency Test Results
Cronbach's alpha Composite reliability (rho_a)
Compensation 0,886 0,897
Work Environment 0,937 0,946
Motivation 0,861 0,892
Performance 0,903 0,910
Source: SmartPLS 4 output, 2025.
According to Table 3, the Cronbach's alpha value is greater than 0.6, which means that the construction
can be said to be reliable as an instrument to measure its variables, while the composite reliability (rho_a) is
greater than 0.7, which indicates the consistency of the measuring instruments used is uniform or similar.
Model Model Goodness of Fit Check
Testing the suitability of the model can be seen from the R-squared value of the model. Based on data
with SmartPLS 4 Professional, the resulting R-squared value is shown in Table 4.
Table 4 R-square values
Variabel Nilai R-square
Motivation 0.783
Performance 0.908
Source: SmartPLS 4.2025
Based on Table 4 on the calculation of R-square, the research data conducted can be explained in the
motivation construct (Z) produces an R-square value of 0.783, which means that the compensation variable (X1)
and the work environment (X2) are able to explain the motivation relationship (Z) with a percentage of 78.3%
and the remaining 21.7% is explained by other variables not contained in the study. Meanwhile, the performance
construct (Y) produces an R-square of 0.908, which means that the Compensation variable (X1) and the work
environment (X2) and motivation (Z) are able to explain the performance relationship (Y) with a percentage of
90.8% and the remaining 9.2% is explained by other variables not contained in the study. Q2 predictive
relevance for structural models can be calculated as follows:
Q2 = 1 - (1 - R 21) ( 1 - R 22 )
Q2 = 1 - ( 1 - 0.783) (1 - 0,908)
Q2 = 1 - (0.125)
Q2 = 0,875
Hypothesis Testing
Direct Hypothesized Effect
After the measurement requirements are met, it is continued again with the Bootstrapping method with
SmartPLS 3. The following are the results of direct hypothesis testing as shown in Table 5 below.
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Table 5. Path Coefficient Test Results and Direct Hypothesis Testing
Original
sample (O)
Sample
mean
(M)
Stdanard
deviation
(STDEV)
T statistics
(|O/STDEV|)
P
values
Keterangan
Compensation (X1)
-> Performance (Y)
0.426 0.402 0.116 3.665 0.000
H1 Accepted (Positive
dan Significant)
Work Environment
(X2) ->
Performance (Y)
0.232 0.222 0.104 2.230 0.028
H2 Accepted (Positive
dan Significant)
Compensation (X1)
-> Motivation (Z)
0.659 0.665 0.137 4.804 0.000
H3 Accepted (Positive
dan Significant)
Work Environment
(X2) -> Motivation
(Z)
0.255 0.253 0.145 1.755 0.082
H4 Rejected (Positive
dan Unsignificant)
Motivation (Z) ->
Performance (Y)
0.344 0.381 0.140 2.463 0.015
H5 Accepted (Positive
dan Significant)
Source: SmartPLS 4, 2025.
Hypothesis testing results Table 5
• H1: Compensation -> Performance (Accepted). T-statistic = 3.665 (>1.96), p-value = 0.000 (<0.05).
Compensation has a positive and significant effect on performance.
• H2: Work Environment -> Performance (Accepted). T-statistic = 2.230 (>1.96), p-value = 0.028
(<0.05). The work environment has a positive and significant effect on performance.
• H3: Compensation -> Motivation (Accepted). T-statistic = 4.804 (>1.96), p-value = 0.000 (<0.05).
Compensation has a positive and significant effect on work motivation.
• H4: Work Environment -> Motivation (Rejected). T-statistic = 1.755 (<1.96), p-value = 0.082 (>0.05).
Work environment has a positive but insignificant effect on work motivation.
• H5: Motivation -> Performance (Accepted). T-statistic = 2.463 (>1.96), p-value = 0.015 (<0.05). Work
motivation has a positive and significant effect on performance.
Indirect Hypothesis Effect
After the measurement requirements are met, it is continued again with the Bootstrapping method with
SmartPLS 3. The following are the results of indirect hypothesis testing as shown in Table 6 below.
Table 6 Path Coefficient and Indirect Hypothesis Testing
Original
sample
(O)
Sample
mean
(M)
Stdanard
deviation
(STDEV)
T statistics
(|O/STDEV|)
P values Description
Compensation (X1) ->
Motivation (Z) -> Performance
(Y)
0.227 0.249 0.097 2.341 0.021
H6 Accepted Positive
dan Significant)
Work Environment (X2) ->
Motivation (Z) -> Performance
(Y)
0.088 0.100 0.075 1.169 0.245
H4 Rejected (Positive
dan Unsignificant)
Source: SmartPLS 4.2025
Hypothesis testing results Table 6:
• H6: Compensation -> Motivation -> Performance (Accepted). T-statistic = 2.341 (>1.96), p-value = 0.021
(<0.05). Compensation has a positive and significant effect on employee performance through work
motivation.
• H7: Work Environment -> Motivation -> Performance (Rejected). T-statistic = 1.169 (<1.96), p-value =
0.245 (>0.05). Work environment has a positive but insignificant effect on employee performance through
work motivation
Discussion
Figure The results of this study confirm that compensation and work environment are important factors
that directly affect employee performance at PT Transcoal Pacific Sangatta. This finding is consistent with
previous research (Meutia et al., 2016; Candradewi & Dewi, 2019; Mudayana & Suryoko, 2016; Nurjiasih &
Sudarnaya, 2023). Adequate compensation provides peace of mind and encourages collaboration, while a
conducive work environment, although not directly involved in the production process, contributes to
employees' work effectiveness and sense of security.
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Furthermore, compensation was found to significantly increase employee work motivation. This
indicates that appropriate rewards can stimulate employee enthusiasm to work optimally, in line with research
by Meutia et al. (2016) and Mudayana & Suryoko (2016). However, an interesting finding is that work
environment does not have a significant effect on work motivation. Although employees' perceptions of the
work environment tend to be high, this does not necessarily increase their motivation. This can be explained by
several factors revealed in the interviews, such as the outdated condition of the building (owned by PT Kaltim
Prima Coal) and transportation facilities that have not been fully enjoyed by employees. In addition, employees
may be in a "comfort zone" and thus lack the intrinsic drive to achieve a common goal, even though the working
environment is considered good. This finding is different from several studies that state the positive effect of
work environment on motivation, but in line with the research of Astuti (2020) and Sabilalo et al. (2020) which
showed no significant effect.
Work motivation itself is proven to have a positive and significant influence on employee performance.
This supports the view that strong intrinsic and extrinsic motivation will encourage employees to maximize their
efforts and responsibilities, which ultimately improves performance (Dewi & Wibowo, 2020; Rivaldo &
Ratnasari, 2020; Wahyuni, 2019).
In the mediation role, motivation is proven to mediate the effect of compensation on performance. This
means that good compensation increases motivation, which then effectively drives performance improvement.
This indicates that compensation not only has a direct impact but also indirectly through increased employee
motivation.
In contrast, motivation does not mediate the effect of work environment on performance. Although
work environment has a direct effect on performance, this effect is not mediated by motivation. This reinforces
the finding that employee motivation at PT Transcoal Pacific Sangatta is less responsive to work environment
conditions, perhaps because employees prioritize their basic duties and responsibilities regardless of
environmental conditions, or because there are other factors that are more dominant in shaping motivation than
the work environment.
V.CONCLUSION
Conclusion
1. Compensation has a positive and significant effect on employee performance at PT Transcoal Pacific
Sangatta. This indicates that the better the Compensation applied at PT.Transcoal Pacific Sangatta will also
improve employee performance.
2. The work environment has a positive and significant effect on employee performance at PT Transcoal
Pacific Sangatta. This indicates that the better the work environment received by employees of
PT.Transcoal Pacific Sangatta, the better the employee performance.
3. Compensation has a positive and significant effect on employee work motivation at PT Transcoal Pacific
Sangatta. This indicates that the better the Compensation applied at PT.Transcoal Pacific Sangatta will also
increase the work motivation of its employees.
4. The work environment has a positive and insignificant effect on employee motivation at PT Transcoal
Pacific Sangatta. This indicates that if the work environment obtained by employees at PT.Transcoal
Pacific Sangatta is not good, it will reduce employee motivation.
5. Work motivation has a positive and significant effect on employee performance at PT Transcoal Pacific
Sangatta. This indicates that the higher the motivation of PT.Transcoal Pacific Sangatta employees in
working, the higher their performance.
6. Compensation has a positive and significant effect on performance on employees at PT Transcoal Pacific
Sangatta through work motivation, this indicates that to increase motivation and improve employee
performance at PT Transcoal Pacific is through compensation.
7. The work environment has a positive but insignificant effect on performance on employees at PT
Transcoal Pacific Sangatta through work motivation, this indicates that if the work environment obtained
by employees at PT Transcoal Pacific Sangatta is not good, it will reduce work motivation which has an
impact on employee performance.
Advice
1. PT Transcoal Pacific Sangatta is expected to improve compensation and work environment together. The
relationship between leaders and employees must be well established supported by providing good
compensation and work motivation to employees is expected to improve employee performance.
2. For further research if it is going to conduct research related to the title above, it is expected to add other
variables or moderation / mediation variables. in this study the authors only examined the effect of
compensation and work environment on performance with motivation as an intervening variable.
theoretically there are many other factors that can affect employee performance. So it is necessary to
conduct further research on factors that affect employee performance that are not examined by the author.
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Lingkungan Kerja Terhadap Kinerja Karyawan Pada PT. Indah Permai Singaraja, Jurnal Daya Saing,
9(2), 2023, 343–54. doi:10.35446/dayasaing.v9i2.1091.
[16] Paramarta, W. A., dan I. P. P. Astika, Motivasi Sebagai Mediasi Pengaruh Pelatihan Dan Lingkungan
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Management Management Journal, 12(6), 2016, 4960–68. doi:10.35335/enrichment.v12i6.1157.
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The Effect of Compensation and Work Environment on Employee Performance with Motivation as an Intervening Variable at PT Transcoal Pacific Sangatta

  • 1. American Journal of Humanities and Social Sciences Research (AJHSSR) 2025 A J H S S R J o u r n a l P a g e | 326 American Journal of Humanities and Social Sciences Research (AJHSSR) e-ISSN : 2378-703X Volume-09, Issue-07, pp-326-334 www.ajhssr.com Research Paper Open Access The Effect of Compensation and Work Environment on Employee Performance with Motivation as an Intervening Variable at PT Transcoal Pacific Sangatta Achmad Rafii1 , Irwansyah2 Faculty of Economics and Business, Mulawarman University, Indonesia ABSTRACT : This study aims to analyze the effect of compensation and work environment on employee performance, with motivation as an intervening variable, at PT Transcoal Pacific Sangatta. Employee performance in this company shows a decline, triggered by compensation discrepancies and lack of system transparency, as well as a less conducive work environment. Using a quantitative approach with a census sample of 55 employees of PT Transcoal Pacific Sangatta, data were collected through a Likert scale questionnaire and analyzed using Partial Least Square - Structural Equation Modeling (PLS-SEM) with SmartPLS 4. The results of the analysis show that compensation and work environment have a positive and significant effect on employee performance. Compensation also has a positive and significant effect on work motivation. However, the work environment has no significant effect on work motivation. Furthermore, work motivation has a positive and significant effect on employee performance. This study also found that motivation significantly mediates the effect of compensation on performance, but does not mediate the effect of work environment on performance. Managerial implications indicate the importance of optimizing compensation and improving the work environment to increase employee motivation and performance. KEYWORDS : Compensation, Work Environment, Motivation, Performance I. INTRODUCTION The Employee performance is a crucial factor in the success of an organization, which is highly dependent on the quality of human resources (Afiani, Surachim, & Masharyono, 2019). The existence of human resources in a company plays an important role in carrying out company activities, so the potential of every human resource in the company must be utilized as well as possible in order to be able to make an optimal contribution to the company to achieve company goals. Compensation is one of the important aspects for employees, because the amount of compensation is a reflection on the size of the employee's own value. Conversely, the small amount of compensation can affect job performance, motivation and job satisfaction of employees. If compensation is given appropriately and correctly to employees, they will get job satisfaction and motivation to achieve organizational goals. In addition to compensation factors, the environment in which employees work is no less important in improving employee performance. According to Sutrisno (2016, 118) the work environment is the overall work facilities and infrastructure around employees who are doing work that can affect the implementation of work. PT Transcoal Pacific, a logistics and transhipment company, is facing the challenge of declining employee performance. The data showed a decline in final employee scores from 9.2% in the period May 2022 - April 2023 to 7.8% in the period May 2023 - April 2024. This decline was identified as stemming from declining quantity and quality of work, as well as disciplinary issues such as tardiness and unauthorized absences. This phenomenon is thought to be related to the mismatch of compensation with workload and responsibilities, as well as the lack of transparency in the compensation system. In addition, a less conducive work environment, such as inadequate facilities, differences in the condition of office desks and chairs, and computer technical problems, also contributed to low employee motivation and performance. For companies, performance research is very useful for assessing compensation, the work environment can provide motivation to employees. One of the keys to success in an organization to achieve company goals is the performance and productivity of its employees. And one way to increase employee productivity is to establish fair and appropriate compensation to employees for their work achievements. But sometimes the compensation provided by the company is still not fully able to improve employee performance. Therefore, compensation must be adjusted to the results of employee work because the provision of appropriate compensation is expected to increase employee job satisfaction followed by an increase in employee performance. And motivation is expected to encourage employees to be willing and willing to mobilize their abilities in the form of expertise or skills, energy and time to complete tasks and activities that are their responsibility.
  • 2. American Journal of Humanities and Social Sciences Research (AJHSSR) 2025 A J H S S R J o u r n a l P a g e | 327 Several studies have been conducted to determine the effect of compensation on performance, however, there are still inconsistent results. Research from Purnama and Kempa (2016) , Wairooy (2017) proves that compensation has a positive influence on employee performance. While research conducted by Riansari and Sudiro (2012) states that compensation has no direct effect on employee performance. Meanwhile, research on the effect of the work environment on performance has been conducted several times, with mixed results and tends to be inconsistent. Research conducted by Rahim et al. (2017) , and Susanti and Mardika (2021) , states that the work environment has a significant effect on performance. Meanwhile, research conducted by Arianto (2013) , Aryono (2017) , and Dewi (2019) , suggests that the work environment has no significant effect on performance. Research on the effect of motivation on performance still has inconsistent results, some researchers state that motivation affects performance, but there are researchers who state that motivation has no significant effect on performance. Research conducted by Rahim et al. , (2017) Susanti and Mardika (2021) , Aryono (2017) , Meutia et al. (2016) , states that motivation has a significant effect on performance. However, different results are shown by research Paramarta and Astika (2020) , which states that motivation has no significant effect on performance. Previous research shows inconsistent results regarding the effect of compensation and work environment on performance, as well as the role of motivation as mediation. Some studies found a positive and significant effect. These inconsistencies, coupled with the specific conditions at PT Transcoal Pacific Sangatta, encourage this research to examine more deeply the relationship between compensation, work environment, motivation, and employee performance. II.HEADING S Performance is the level of achievement of a person in implementing programs, activities and policies in achieving a goal, objective, vision and mission in an organization Putra (2017) Meanwhile, according to Santosa et al in (Puspitasari and Dahlia 2020) , Performance is an achievement of work results in activities or activities or programs that have been planned in advance in order to achieve the goals and objectives set by an organization. According to (Setyadi, 2021) motivation is a series of activities that explain the strength, direction, and perseverance of a person in an effort to achieve the goals he wants to achieve, while according to (Soselisa & Killay, 2020) work motivation is a process by which needs encourage a person to carry out a series of activities that lead to the achievement of certain goals and organizational goals and to meet several needs. Sedarmayanti (2019) states that the work environment is broadly divided into 2 (two), namely the physical and non-physical work environment. The physical work environment is all conditions that can affect employees either directly or indirectly. While the non-physical work environment is all conditions related to work relationships both with superiors and work relationships with subordinates. compensation is all income in the form of money, direct or indirect goods received by employees in return for services provided to the company Hasibuan (2017) while according to Marwansyah (2016), compensation is a direct or indirect reward or reward, financial or non-financial, which is fair and appropriate to employees, in return or their contribution / service to the achievement of company goals. Relationship between Variables Effect of Compensation on Employee Performance One way to improve performance cannot be separated from compensation. Compensation is one of the important elements in employee performance. In general, compensation is something that employees receive in return for their work. Compensation in financial form is important for employees, because with this compensation they can fulfill their needs directly, especially their physiological needs. Non-financial forms are also very important for employees, especially for their career development. Based on research conducted by Meutia et al. (2016) , compensation has a positive and significant effect on performance. in contrast to research conducted by Firmdanari (2014) states that there is no influence between compensation on employee performance. Effect of Work Environment on Employee Performance A poor work environment can demand more labor and time and does not support the design of an efficient work system. The work environment has a very close relationship with employee performance, the achievement motive that employees need to have must be grown from within themselves will form a personal strength and if the work environment situation also supports it, achieving performance will be easier. Based on research conducted by Mudayana and Suryoko (2016) , states that there is a positive and significant influence between the work environment on employee performance. This contradicts the results of research conducted by Hanafi and Yohana (2017) which shows that the work environment has no effect on employee performance.
  • 3. American Journal of Humanities and Social Sciences Research (AJHSSR) 2025 A J H S S R J o u r n a l P a g e | 328 The Effect of Compensation on Motivation Organizations empower compensation to motivate their employees. Therefore, if the needs of employees have been met by providing the right compensation, employees will be motivated to do their work optimally. Based on research conducted by Meutia et al. (2016) , compensation has a positive and significant effect on motivation. This contradicts the results of research conducted by Firmdanari (2014) which shows that there is no positive influence between compensation on motivation. Effect of Work Environment on Motivation Good work environment conditions will provide work motivation for employees in completing their workload. The work environment will be able to influence the work motivation of its employees in a work environment, therefore employees will feel more appropriate at work and be encouraged to do many things according to their duties and responsibilities within the company. Based on research conducted by Cdanradewi and Dewi (2019) , the work environment has a positive and significant effect on work motivation. This contradicts the results of research conducted by Abdurrahman (2015) which shows that there is no positive influence between the work environment on motivation. Effect of Motivation on Performance Motivation is something that needs to be developed in employees in order to strengthen efforts in achieving the company's expected goals. Motivation and work ability are special basic requirements for humans that affect employee performance. Employee motivation will have a good impact on employee performance, with employee motivation at work, employees can be maximized in carrying out their duties and responsibilities in the company. Based on research conducted by Wahyuni (2019) which states in his research that motivation has a significant effect on performance. The Effect of Compensation on Performance through Motivation Compensation that is not in accordance with the burden borne by employees, can reduce the level of work motivation. The impact that occurs when work motivation decreases, will affect the decline in employee performance. Based on research conducted by Cdanradewi and Dewi (2019) , motivation mediates the influence between compensation on performance. The Effect of Work Environment on Performance through Motivation A good and conducive work environment will make people feel comfortable at work. Based on research conducted by Sari and Aziz (2019) , motivation mediates the influence between the work environment on performance. Conceptual research framework Figure 1 Conceptual study framework Based on the literature review and previous research, the hypothesis of this study is: •H1: Compensation has a positive and significant effect on employee performance. •H2: Work environment has a positive and significant effect on employee performance. •H3: Compensation has a positive and significant effect on employee motivation. •H4: Work environment has a positive and significant effect on employee motivation. •H5: Work motivation has a positive and significant effect on employee performance. •H6: Compensation has a positive and significant effect on employee performance through work motivation. •H7:Work environment has a positive and significant effect on employee performance through work motivation.
  • 4. American Journal of Humanities and Social Sciences Research (AJHSSR) 2025 A J H S S R J o u r n a l P a g e | 329 III. RESEARCH METHODS This study uses a quantitative approach with an explanatory design, which aims to explain the causal relationship between variables (Sugiyono, 2018). The research population is all employees of PT Transcoal Pacific Sangatta, totaling 55 people. The sampling method used is census (total sampling), where the entire population is sampled, considering the population size is less than 100 (Laili, 2017) Primary data were collected using a closed questionnaire with a Likert scale (1 = Strongly Disagree, 5 = Strongly Agree). The operational definitions and variable indicators are as follows: • Performance (Y): Respondents' perception of work results (quantity, quality, timeliness, attendance, ability to complete work). • Motivation (Z): Respondents' perceptions of work motivation (advancement opportunities, security, responsibility, achievement recognition, self-actualization). • Work Environment (X2): Respondents' perceptions of the physical (buildings, equipment, facilities) and non-physical (coworker relations, superior-subordinate relations) conditions in the workplace. • Compensation (X1): Respondents' perceptions of direct (salary, incentives) and indirect (benefits, insurance, facilities) rewards. Data analysis was conducted using Partial Least Square - Structural Equation Modeling (PLS-SEM) with SmartPLS 4 software. Evaluation of the measurement model (outer model) involves convergent (outer loading > 0.7, AVE > 0.5) and discriminant (cross-loading) validity tests, as well as reliability tests (Composite Reliability > 0.7, Cronbach's Alpha > 0.6). Evaluation of the structural model (inner model) is done by looking at the R-square, Q-square (predictive relevance), and Effect size (f-square) values. Hypothesis testing is done using the bootstrapping method with t-test (t-statistic > 1.96, p-value < 0.05). IV.RESULTS AND DISCUSSION Convergent Validity Test In this study, a factor loading limit of 0.60 will be used. To assess the results of the convergent validity test, it can be seen from the factor loading value which is reflected in the outer loading results as in Table 1 below. Table 1. Convergent Validity Test Results Using Outer Loading Compensation (X1) Work Environment (X2) Motivation (Z) Performance (Z) X1.1 0,899 X1.2 0,834 X1.3 0,894 X1.4 0,821 X2.1 0,938 X2.2 0,848 X2.3 0,936 X2.4 0,820 X2.5 0,923 Z1 0,788 Z2 0,849 Z3 0,761 Z4 0,839 Z5 0,717 Y1 0,901 Y2 0,843 Y3 0,910 Y4 0,812 Y5 0,776 Source: SmartPLS 4.2025 Based on Table 1, the results of the data processing above show that the outer model value meets the requirements so that it shows good discriminate validity because the correlation value of each indicator shows a value above 0.7. The indicator that has a dominant influence on compensation is indicator X 1.1with the highest
  • 5. American Journal of Humanities and Social Sciences Research (AJHSSR) 2025 A J H S S R J o u r n a l P a g e | 330 loading factor value when compared to other indicators, which is 0.899. The indicator that provides the dominant influence on the work environment is indicator X 2.1with the highest loading factor value when compared to other indicators, which is 0.938. The indicator that provides the dominant influence on motivation is indicator Z 2with the highest loading factor value when compared to other indicators, which is 0.849. The indicator that provides the dominant influence on performance is indicator Y 3with the highest loading factor value when compared to other indicators, which is 0.910. In addition, outer loading to see construct validity, other convergent validity test results can also be reported which are reflected in the AVE (average variance extracted) value, where the limit value is 0.50. The following is the AVE value in this research model. Table 2 Average Variance Exstracted (AVE) Variabel Nilai AVE Description Compensation 0,744 Valid Work Environment 0,800 Valid Motivation 0,628 Valid Performance 0,722 Valid Source: SmartPLS 4.2025 Based on table 2, it is known that the four variables above are variables that have an AVE value greater than 0.5. So that in this study it is considered that discriminant validity on Average Variance Extracted (AVE) is valid. The reliability test used for Cronbach's alpha must be greater than 0.6 and composite reliability must be greater than 0.7, the results of which can be seen in Table 3 below. Table 3 Reliability Consistency Test Results Cronbach's alpha Composite reliability (rho_a) Compensation 0,886 0,897 Work Environment 0,937 0,946 Motivation 0,861 0,892 Performance 0,903 0,910 Source: SmartPLS 4 output, 2025. According to Table 3, the Cronbach's alpha value is greater than 0.6, which means that the construction can be said to be reliable as an instrument to measure its variables, while the composite reliability (rho_a) is greater than 0.7, which indicates the consistency of the measuring instruments used is uniform or similar. Model Model Goodness of Fit Check Testing the suitability of the model can be seen from the R-squared value of the model. Based on data with SmartPLS 4 Professional, the resulting R-squared value is shown in Table 4. Table 4 R-square values Variabel Nilai R-square Motivation 0.783 Performance 0.908 Source: SmartPLS 4.2025 Based on Table 4 on the calculation of R-square, the research data conducted can be explained in the motivation construct (Z) produces an R-square value of 0.783, which means that the compensation variable (X1) and the work environment (X2) are able to explain the motivation relationship (Z) with a percentage of 78.3% and the remaining 21.7% is explained by other variables not contained in the study. Meanwhile, the performance construct (Y) produces an R-square of 0.908, which means that the Compensation variable (X1) and the work environment (X2) and motivation (Z) are able to explain the performance relationship (Y) with a percentage of 90.8% and the remaining 9.2% is explained by other variables not contained in the study. Q2 predictive relevance for structural models can be calculated as follows: Q2 = 1 - (1 - R 21) ( 1 - R 22 ) Q2 = 1 - ( 1 - 0.783) (1 - 0,908) Q2 = 1 - (0.125) Q2 = 0,875 Hypothesis Testing Direct Hypothesized Effect After the measurement requirements are met, it is continued again with the Bootstrapping method with SmartPLS 3. The following are the results of direct hypothesis testing as shown in Table 5 below.
  • 6. American Journal of Humanities and Social Sciences Research (AJHSSR) 2025 A J H S S R J o u r n a l P a g e | 331 Table 5. Path Coefficient Test Results and Direct Hypothesis Testing Original sample (O) Sample mean (M) Stdanard deviation (STDEV) T statistics (|O/STDEV|) P values Keterangan Compensation (X1) -> Performance (Y) 0.426 0.402 0.116 3.665 0.000 H1 Accepted (Positive dan Significant) Work Environment (X2) -> Performance (Y) 0.232 0.222 0.104 2.230 0.028 H2 Accepted (Positive dan Significant) Compensation (X1) -> Motivation (Z) 0.659 0.665 0.137 4.804 0.000 H3 Accepted (Positive dan Significant) Work Environment (X2) -> Motivation (Z) 0.255 0.253 0.145 1.755 0.082 H4 Rejected (Positive dan Unsignificant) Motivation (Z) -> Performance (Y) 0.344 0.381 0.140 2.463 0.015 H5 Accepted (Positive dan Significant) Source: SmartPLS 4, 2025. Hypothesis testing results Table 5 • H1: Compensation -> Performance (Accepted). T-statistic = 3.665 (>1.96), p-value = 0.000 (<0.05). Compensation has a positive and significant effect on performance. • H2: Work Environment -> Performance (Accepted). T-statistic = 2.230 (>1.96), p-value = 0.028 (<0.05). The work environment has a positive and significant effect on performance. • H3: Compensation -> Motivation (Accepted). T-statistic = 4.804 (>1.96), p-value = 0.000 (<0.05). Compensation has a positive and significant effect on work motivation. • H4: Work Environment -> Motivation (Rejected). T-statistic = 1.755 (<1.96), p-value = 0.082 (>0.05). Work environment has a positive but insignificant effect on work motivation. • H5: Motivation -> Performance (Accepted). T-statistic = 2.463 (>1.96), p-value = 0.015 (<0.05). Work motivation has a positive and significant effect on performance. Indirect Hypothesis Effect After the measurement requirements are met, it is continued again with the Bootstrapping method with SmartPLS 3. The following are the results of indirect hypothesis testing as shown in Table 6 below. Table 6 Path Coefficient and Indirect Hypothesis Testing Original sample (O) Sample mean (M) Stdanard deviation (STDEV) T statistics (|O/STDEV|) P values Description Compensation (X1) -> Motivation (Z) -> Performance (Y) 0.227 0.249 0.097 2.341 0.021 H6 Accepted Positive dan Significant) Work Environment (X2) -> Motivation (Z) -> Performance (Y) 0.088 0.100 0.075 1.169 0.245 H4 Rejected (Positive dan Unsignificant) Source: SmartPLS 4.2025 Hypothesis testing results Table 6: • H6: Compensation -> Motivation -> Performance (Accepted). T-statistic = 2.341 (>1.96), p-value = 0.021 (<0.05). Compensation has a positive and significant effect on employee performance through work motivation. • H7: Work Environment -> Motivation -> Performance (Rejected). T-statistic = 1.169 (<1.96), p-value = 0.245 (>0.05). Work environment has a positive but insignificant effect on employee performance through work motivation Discussion Figure The results of this study confirm that compensation and work environment are important factors that directly affect employee performance at PT Transcoal Pacific Sangatta. This finding is consistent with previous research (Meutia et al., 2016; Candradewi & Dewi, 2019; Mudayana & Suryoko, 2016; Nurjiasih & Sudarnaya, 2023). Adequate compensation provides peace of mind and encourages collaboration, while a conducive work environment, although not directly involved in the production process, contributes to employees' work effectiveness and sense of security.
  • 7. American Journal of Humanities and Social Sciences Research (AJHSSR) 2025 A J H S S R J o u r n a l P a g e | 332 Furthermore, compensation was found to significantly increase employee work motivation. This indicates that appropriate rewards can stimulate employee enthusiasm to work optimally, in line with research by Meutia et al. (2016) and Mudayana & Suryoko (2016). However, an interesting finding is that work environment does not have a significant effect on work motivation. Although employees' perceptions of the work environment tend to be high, this does not necessarily increase their motivation. This can be explained by several factors revealed in the interviews, such as the outdated condition of the building (owned by PT Kaltim Prima Coal) and transportation facilities that have not been fully enjoyed by employees. In addition, employees may be in a "comfort zone" and thus lack the intrinsic drive to achieve a common goal, even though the working environment is considered good. This finding is different from several studies that state the positive effect of work environment on motivation, but in line with the research of Astuti (2020) and Sabilalo et al. (2020) which showed no significant effect. Work motivation itself is proven to have a positive and significant influence on employee performance. This supports the view that strong intrinsic and extrinsic motivation will encourage employees to maximize their efforts and responsibilities, which ultimately improves performance (Dewi & Wibowo, 2020; Rivaldo & Ratnasari, 2020; Wahyuni, 2019). In the mediation role, motivation is proven to mediate the effect of compensation on performance. This means that good compensation increases motivation, which then effectively drives performance improvement. This indicates that compensation not only has a direct impact but also indirectly through increased employee motivation. In contrast, motivation does not mediate the effect of work environment on performance. Although work environment has a direct effect on performance, this effect is not mediated by motivation. This reinforces the finding that employee motivation at PT Transcoal Pacific Sangatta is less responsive to work environment conditions, perhaps because employees prioritize their basic duties and responsibilities regardless of environmental conditions, or because there are other factors that are more dominant in shaping motivation than the work environment. V.CONCLUSION Conclusion 1. Compensation has a positive and significant effect on employee performance at PT Transcoal Pacific Sangatta. This indicates that the better the Compensation applied at PT.Transcoal Pacific Sangatta will also improve employee performance. 2. The work environment has a positive and significant effect on employee performance at PT Transcoal Pacific Sangatta. This indicates that the better the work environment received by employees of PT.Transcoal Pacific Sangatta, the better the employee performance. 3. Compensation has a positive and significant effect on employee work motivation at PT Transcoal Pacific Sangatta. This indicates that the better the Compensation applied at PT.Transcoal Pacific Sangatta will also increase the work motivation of its employees. 4. The work environment has a positive and insignificant effect on employee motivation at PT Transcoal Pacific Sangatta. This indicates that if the work environment obtained by employees at PT.Transcoal Pacific Sangatta is not good, it will reduce employee motivation. 5. Work motivation has a positive and significant effect on employee performance at PT Transcoal Pacific Sangatta. This indicates that the higher the motivation of PT.Transcoal Pacific Sangatta employees in working, the higher their performance. 6. Compensation has a positive and significant effect on performance on employees at PT Transcoal Pacific Sangatta through work motivation, this indicates that to increase motivation and improve employee performance at PT Transcoal Pacific is through compensation. 7. The work environment has a positive but insignificant effect on performance on employees at PT Transcoal Pacific Sangatta through work motivation, this indicates that if the work environment obtained by employees at PT Transcoal Pacific Sangatta is not good, it will reduce work motivation which has an impact on employee performance. Advice 1. PT Transcoal Pacific Sangatta is expected to improve compensation and work environment together. The relationship between leaders and employees must be well established supported by providing good compensation and work motivation to employees is expected to improve employee performance. 2. For further research if it is going to conduct research related to the title above, it is expected to add other variables or moderation / mediation variables. in this study the authors only examined the effect of compensation and work environment on performance with motivation as an intervening variable. theoretically there are many other factors that can affect employee performance. So it is necessary to conduct further research on factors that affect employee performance that are not examined by the author.
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