Effect of Compensation and Motivation On Employee Performance in Indonesia

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Effect of Compensation and Motivation on Employee Performance in

Indonesia

Compensation and Performance Management


Lecturer: Maria Jacinta Arquisola

Created By:

Aries Saputra (Student ID: 014201900078)


Hoky Theos (Student ID: 014201900045)

Faculty of Business Major Management

PRESIDENT UNIVERSITY

2021
In this highly-competitive world, how should organizations compensate highly-talented
employees in order to retain them?
Human Resource Management is a planning process, organizing, directing and
supervision of procurement activities, development, compensation, integration, maintenance,
and release of human resources in order achieved various individual, organizational goals and
society. Attracting and retaining highly talented employees and for consolidating competitive
advantage is an important issue for companies of all sizes around the world. Understanding
what attracts a talented potential employee to a company can provide important insights for
human resource managers. However, there is another important question in today's global
business world: can we use a standardized strategy to attract potential employees around the
world, or will we adapt our company branding according to cultural differences between
countries. Compensation has an important role for the company, because compensation
reflects the company's efforts to maintain and improve employee welfare. If the
compensation is inadequate, it can reduce work performance, work motivation, and employee
job satisfaction, and can even cause potential employees to leave the company. Based on the
results of this study, it can be concluded that the compensation in the company is financial
compensation paid directly, such as fixed wages, incentives, regional allowances, position
allowances, and credit allowances. Financial compensation paid indirectly, such as health
insurance, subsidized F contributions, paid leave assistance, and holiday allowances. As for
non-financial compensation such as promotion and sports facilities. Employee retention is a
critical issue as companies compete for talent in tough economic conditions. Employee
turnover costs are getting higher - as much as 2.5 times the employee's salary depending on
the role. And there are other "soft costs": decreased productivity, reduced engagement,
training costs and cultural impact. Rewards for organizations that focus on employee
retention are well worth the time and investment, according to the Society for Human
Resource Management (SHRM). Improved performance, better productivity, higher
employee morale, and better quality of work, not to mention a decrease in employee turnover,
are organizational benefits. The bottom line is that by focusing on employee retention,
organizations will retain talented, motivated employees who truly want to be part of the
company and who are focused on contributing to overall organizational success, according to
SHRM. 
Every agency today recognizes the need to manage compensation costs. The
challenge, however, is to also ensure employees are paid competitive wages. Finding sources
of salary information, conducting your own salary survey, or sharing information with a
group of competitors can help retain employees who may be leaving because they are
underpaid. Without accurate survey data, agency owners run the risk of overpaying or
underpaying employees. Many agencies have adapted pay outs for performance
compensation systems, which reward employees for achieving results related to the agency's
business goals. Agency compensation plans should link employee performance to overall
business goals. To reduce the costly annual merit plans, agency owners are looking for
creative ways to reward employees for contributing to the agency's success. In the transition
from traditional and performance-based service systems, two viable incentive options are
profit sharing and profit sharing. Profit sharing related to increased agency profitability.
Profit sharing is linked to increased operational efficiency and may be an interim measure for
long-term profit-sharing programs. No matter which option fits your agency's business plan
best, goals should be set so that employees can determine what they must do to achieve the
award. But employees also appreciate rewards that are not in the form of money. A survey
conducted by the Society of Human Resources Management showed that employees rated
attractive jobs, employer flexibility, feelings of appreciation, training, and opportunities for
advancement as the main factors influencing their decision to change jobs. In smaller
agencies, promotion opportunities may be fewer, but there should always be new skills to
learn and opportunities for job satisfaction. Setting milestones for education and developing
performance-based criteria can increase employment and help reduce turnover. Higher level
positions, such as the Senior CSR position, can also be used to reward performance that
exceeds normal expectations. Higher-level skills or additional job assignments should be the
criteria for promoting a person to a senior position. If the CSR is an agency automation
specialist, for example, or could take part-time responsibilities for auditing or quality
training, you could create a career path that may not exist. Offering perks can also be a cost-
effective way to attract and retain employees. For example, casual wear, flexible start times,
rest periods (weekdays, floating holidays, or summer hours), job sharing, or using part-time
positions give agencies a strong advantage in the job market.
 
Introduction
1.1 Background

We are in the midst of a work revolution, globalization and a revival of automation


paired with the next generation of computers that want a more personalized and intuitive
brand experience prompting companies to rethink their approach to talent management and
acquisition. To that end, every company has some form of program designed to nurture their
talents, as these high-performing individuals have a huge impact on business profits.
Before we start with the steps to identify, attract, and retain the best talent, we must
get to know the word Top Talent. While the best talent is generally contemplated by the
organization, the individuals who score the highest or the improvement in their performance
appraisals, there is no single definition of the best talent, except perhaps the individual who
exhibits the traits most valuable to society. organization, may vary according to business
needs such as the most important company analytical skills or to some perhaps innovation
and creativity. It is very important for organizations to identify the top talents of their
organization. As study shows high performers are 400% more productive than average. The
study also revealed that inequality increases with the complexity of the job. In highly
complex jobs, high-performing workers are an extraordinarily productive 800%. Here are
some of the ways that Spark Hire mentions identifying the perfect candidate, Look at the
previous roles and responsibilities of individuals as some organizations raised their posts to
make them desirable and attract talent. Second, evaluate their behavior with others because
interpersonal skills are most important for guiding and motivating others. Third, they
mentioned past initiatives taken by individuals. So, precisely to identify the best talent,
capture the traits required according to the business needs and include them in the Job
Description and Performance Appraisal for the role. But we also have to consult with
managers and colleagues; there may be situations where the candidate employee is not
identified by the performance appraisal process.

Once we have identified the organization's best talent, it is important to implement the
program effectively.
1)  Start asking questions to get employee insights
2)  Create more job opportunities
3)  Vary the learning experience
4)  Provide regular feedback
In the current era of globalization, the problem of customer satisfaction will never be
separated from the business world. With customer satisfaction, a company can foster good
relationships with its customers so that long-term partnerships can be established that can
maintain company profits. But there is also something that needs to be considered in fostering
good relations in a company, namely employee satisfaction. Creating a good and healthy
company condition and maintaining employee commitment, then employee satisfaction is an
important aspect of the company organization, compensation has an important meaning
because compensation reflects the organization's efforts to maintain and improve the welfare
of its employees. Experience shows that inadequate compensation can reduce work
performance, work motivation, and employee job satisfaction, and can even cause potential
employees to leave the organization. Each company has its own policy in terms of providing
compensation in accordance with the conditions / capabilities of the company. There are
several ways companies provide compensation, namely the performance appraisal system,
because compensation is closely related to employee performance in doing their job. As for
the economic impact due to the COVID-19 pandemic, the business sector is increasingly 'hit'.
In the run-up to Eid, a number of companies actually imposed layoffs (PHK) and leave
outside the company’s responsibility. Many companies are also unable to pay the holiday
allowance (THR) for their employees. Budihardjo Iduansjah, Chairman of the Association of
Indonesian Shopping Center Tenants (Hippindo), said that the company's cash was only able
to last until at least next June. Many businesses are no longer operating at all, such as
cinemas, salons and children's playgrounds. A number of companies are still retaining their
employees amidst the impact of the Covid-19 pandemic. Meanwhile the decision to do
layoffs tends to be the last step taken for its workforce. There have been various efforts by
companies to maintain their workforce even though the company's activities have been
severely affected by the pandemic.
As PT Garuda Indonesia (Persero) Tbk. (GIAA), which is one of the companies
severely affected by the spread of the corona virus (Covid-19) outbreak, which has infected
more than 23.3 million people worldwide as of Sunday, August 23, 2020. One of the negative
impacts of the outbreak from Wuhan, China, in the company, is a reduction in production
capacity for both domestic and international routes as a result of the decline in the fever
market. To maintain and improve financial performance in these bad conditions, the company
has made various efforts, both from a financial and operational side. One of them is making
operational optimization efforts in order to align supply with market demand through several
initiatives. These steps include negotiating with the lessor for a lease holiday, extending the
aircraft lease period to reduce rental costs per month, seeking financing from inside and
outside banks or other loans, and negotiating the company's future obligations with third
party. In addition, the company also carries out a cost efficiency program while still
prioritizing aviation safety and security and employees and services, and holding intensive
discussions with the Government as the Company's Shareholders to obtain the necessary
support. From the operational aspect, the company, which more than 80% of its revenue
depends on revenue from passengers, has made efforts to optimize the frequency and capacity
of flights for both domestic and international flights.
In addition, optimizing cargo services and actively supporting government efforts,
especially those related to handling Covid-19 through the transportation of humanitarian aid,
PPE, medicines, medical devices. The company has also made efforts to optimize aircraft
charter services for the evacuation of Indonesian citizens who are abroad as well as assisting
the process of repatriating foreigners to return to their respective countries and charter
services for cargo transportation, as well as delaying the arrival of aircraft in 2020. As for PT
Garuda Indonesia Tbk. (Persero) terminated contracts for around 700 employees due to
financial difficulties during the pandemic Covid-19. The President Director of Garuda
Indonesia, Irfaniaputra, emphasized that the policy being enforced is the early settlement of
the employee contract period with the status of contract labor. This policy took effect on
November 1, 2020 for at least 700 employees with contract labor status who since May 2020
have undergone an policy unpaid leave, due to the reduced demand for flight services during
the pandemic through early contract completion, Garuda Indonesia ensures that it will full-fill
all employee rights. affected in accordance with applicable regulations, including prepayment
of the Company's obligations for the remaining employee contract period.
This policy was a difficult decision that had to be taken after making various rescue
efforts to ensure the sustainability of the company amidst the challenges of the impact of the
Covid-19 pandemic, the interests of employees were the top priority put forward by the
company. When other airlines start implementing employee reduction policies, he said, the
company also continues to optimize strategic steps to ensure performance improvements for
the benefit of employees and the company's business future. However, at this point, this
tough decision must be taken in the midst of this situation which is still full of uncertainty.
Garuda also expressed its gratitude to the employees affected by the policy for their
dedication and contribution to the company. This pandemic condition has a long-term impact
on the company's performance where the company's condition has not shown significant
improvement until now. However, by believing that all steps and efforts for improvement
will continue to be carried out in the future, it can support Garuda Indonesia's performance
recovery efforts so that it can survive the crisis during the pandemic and also become a
strengthening foundation for the Company's sustainability in the future.

1.2 Objectives
In accordance with the subject matter that has been described, the research objectives to be
achieved in this study are: 
1. To find out what compensation is for talented employees
2. To find out what is the effect of compensation on employees who have high
abilities
3. To explore problems that exist in Indonesia among companies experiencing The
case of layoffs
4. To determine the effect of the impact of compensation on employees with good
performance
5. To analyze the work results of employees during this pandemic era
6. To determine the effect of compensation on employees at PT GARUDA
INDONESIA
7. To determine the effect of motivation on employee performance at PT GARUDA
INDONESIA
8. To find out how the influence of the work environment on employee performance
at PT GARUDA INDONESIA
9. To determine the effect of motivation and work environment of employees on
employee performance at PT GARUDA INDONESIA

Discussion
2.1 Case and Arguments
Covid-19 or what is commonly referred to as the corona virus disease is an infectious
disease caused by a recently discovered virus, namely the coronavirus. To reduce the spread
of this virus, WHO suggests several things, one of which is to carry out physical distancing
and self-quarantine (www.who.int). In Indonesia itself, since the issuance of Presidential
Decree No.12 of 2020 concerning the Determination of Non-Natural Disasters of Corona
Virus Diseases 2019 (Covid19) as National Disasters. Many areas previously designated as
areas with red status implemented a Large-Scale Social Restriction (PSBB) system as in the
DKI Jakarta area which issued Governor Regulation Number 33 of 2020 concerning the
Implementation of Large-Scale Social Restrictions in the Context of Handling Corona Virus
Disease (COVID-19). in the Province of the Special Capital Region of Jakarta. With the
large-scale social restrictions that occur in strategic economic areas, of course it will not only
have an impact on the social sector, but also affect the economic sector in Indonesia. This
situation certainly forces entrepreneurs to look for other efforts to reduce losses caused by the
impact of the spread of this pandemic, one of which is to terminate employment, but in times
of crisis caused by the Covid-19 pandemic, of course, layoffs will automatically become
news. very bad. Layoffs themselves according to law. No. 13 of 2003 Article 1 Number 25 is
defined as the termination of a work relationship due to certain reasons that result in the
termination of rights and obligations between workers/labor. and entrepreneurs. The work
agreement in Article 61 Paragraph (1) of the Law. No. 13 of 2003 can end with several
conditions, namely, the worker dies; the termination of the work agreement that has been
agreed upon by the worker and the previous employer; there is a court decision and / or
decision or determination of an industrial relations dispute settlement institution that has
permanent legal force regarding dismissal; or the existence of certain circumstances or events
which 'Is: Bulletin of Law and Justice, Vol. 4, No. 1 (2020) - 216 - stated in work
agreements, company regulations, or collective working agreements that can lead to the
termination of the employment relationship. 
However, between companies and employees have a close relationship in which the
company and employees need each other. Companies certainly need employees to achieve
their main goals. Meanwhile, employees need companies to help meet their needs as living
things such as housing needs, food needs, and so on. Every employee who works for a
company has goals and objectives. The purpose of employees working in a company is to
full-fill their needs. While the goal of employees in general is to expect performance rewards
in the form of compensation. Compensation is anything that employees receive in return for
their work. Because basically working people also want to earn money to meet their daily
needs, for this reason an employee begins to appreciate hard work and shows more loyalty to
the company and that's why the company rewards employees' work performance by
providing compensation.
The current international market conditions and situations are characterized by a very
competitive situation with a high level of competition, especially for routes that are
considered profitable and are starting to develop such as the Asia Pacific region. This
situation and environmental conditions that provide both opportunities and threats require
airlines to carry out an effective and efficient strategy as a breakthrough and self-
improvement effort so that they have the ability to excel in competition. In the whole process
of strategy formulation and implementation, the ability of human resources is highly
demanded because it is a trigger and mover element. Another thing that is no less important
in generating competitive advantage is maintaining the uniqueness, meaning how far the
company can offer a different product or service so that it is not easily imitated by
participants. In the aviation service industry this element of human resources has been
recognized as a unique element that is highly preferred because it has high resistance to
imitation. This competitive advantage in terms of human resources is one of the goals of
employee development at PT Garuda Indonesia. The fundamental question of why someone
is interested in working or staying in a company is influenced by how far the company can
meet the needs of its employees in terms of income as a reward for contributing their work to
the company. Nowadays reward is a very important component in human resource
management. Rewards are not only needed as a tool to maintain and retain employees but
also as a motor of motivation and work ethic of employees and play a major role in shaping a
positive image of society. Based on the foregoing, the knowledge of how far PT Garuda
Indonesia has met the needs and expectations of its employees as well as how far the
employees' perceptions of the benefits are given and how the level of equity in the provision
of rewards with the level of need, the balance between the benefits of one group of
employees with others and conditions of remuneration in the labor market, especially similar
companies, are valuable inputs for PT Garuda Indonesia in terms of managing its human
resources, especially for the preparation of the current compensation strategy.
The phenomenon of compensation seen in PT Garuda Indonesia (Persero) shows that
the application of compensation has not been well realized. The problem can be seen from the
high workload, where PT Garuda Indonesia has now taken over the operational management
of Sriwijaya Air and NAM Air. This is realized in the form of Joint Operation (KSO)
conducted by PT Citilink Indonesia with PT Sriwijaya Air and PT NAM Air. Therefore, the
Garuda Indonesia group is currently launching a "One Gate Facility" service for ticket sales
transactions for Garuda Indonesia, Citilink, Sriwijaya Air and Nam Air flights at the Garuda
Indonesia Makassar Branch Office sales office. However, based on data obtained from
employees of PT Garuda Indonesia, the application was not matched by compensation
according to employee needs. This can be shown from the gap that the standard of salaries
and employee benefits is not evenly distributed and does not refer to work professionalism
standards. In addition, providing work incentives to employees is not based on work results,
but is adjusted according to working hours, which causes employees to be less enthusiastic
about carrying out their work. In carrying out their duties, employees need the support of the
organization where they work. This support greatly affects the level of employee
performance. Conversely, if the compensation system and the organization's working climate
are bad, employee performance will decline. Other internal organizational factors such as
organizational strategy, support of resources needed to carry out work, and management and
compensation systems. Therefore, organizational management must create a conducive
internal organizational environment so that it can support and increase employee
productivity. 
Apart from the gap in standard salaries and work incentives that are not in accordance
with the professional abilities of employees, the compensation that is still low according to
employees is the provision of unfair work benefits, mainly in the form of work insurance, as
well as transportation and meals. This also includes giving severance pay to employees who
resign or have ended their term of office, where the severance pay is not in accordance with
the desired achievements and expectations. As a result of compensation that is not in
accordance with what is expected by employees, employee performance decreases. This can
be seen from employees who are not able to provide services in accordance with the
achievement of work goals, do not perform well in carrying out their work, do not achieve
targets and work realization, and employee welfare receives less attention from management.
and there are various kinds of studies that show that there is a significant influence between
work motivation on employee performance. Motivation is very important for companies to
pay attention to if they want each employee to make a positive contribution to the
achievement of company goals. employees who have high motivation are organizational
assets that are very important to achieve maximum work results consistently. the influence of
motivation can improve employee performance. With high motivation, employees will work
for the company to be more active in carrying out their work. Conversely, with low work
motivation, employees do not have the enthusiasm to work, give up easily, and have
difficulty completing their work. Work motivation is not only how we motivate someone
interpersonal, but work motivation is an activity carried out by companies systematically.
This study aims to analyze the influence of compensation and motivation on employee
performance at PT Garuda Indonesia.

Conclusions
Defined benefit pension plans are pension plans that determine the amount of pension
benefits to be provided, usually based on one or more factors such as age, years of service or
compensation. The defined benefit pension plan obligation recognized in the consolidated
statements of financial position is the present value of the defined benefit obligation at the
consolidated statement of financial position date less the fair value of plan assets. The defined
benefit obligation is calculated annually by independent actuaries using the projected-unit-
credit method. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using the interest rate on government bonds in
the currency of the consideration to be paid and the maturity date of approximately the same
as the obligation. Compensation has an important role for the company, because
compensation reflects the company's efforts to maintain and improve employee welfare. If
the compensation is inadequate, it can reduce work performance, work motivation, and
employee job satisfaction, and can even cause potential employees to leave the company.
Based on the results of this study, it can be concluded that the compensation in the company
is financial compensation paid directly, such as fixed wages, incentives, regional allowances,
position allowances, and credit allowances. Creating a good and healthy company condition
and maintaining employee commitment, then employee satisfaction is an important aspect of
the company organization, compensation has an important meaning because compensation
reflects the organization's efforts to maintain and improve the welfare of its employees.
Experience shows that inadequate compensation can reduce work performance, work
motivation, and employee job satisfaction, and can even cause potential employees to leave
the organization. Each company has its own policy in terms of providing compensation in
accordance with the conditions / capabilities of the company. There are several ways
companies provide compensation, namely the performance appraisal system, because
compensation is closely related to employee performance in doing their job.
The phenomenon of compensation seen in PT Garuda Indonesia (Persero) shows that
the application of compensation has not been well realized. The problem can be seen from the
high workload, where PT Garuda Indonesia has now taken over the operational management
of Sriwijaya Air and NAM Air. This is realized in the form of Joint Operation (KSO)
conducted by PT Citilink Indonesia with PT Sriwijaya Air and PT NAM Air. Based on the
research results, it is known that compensation has a positive and significant effect on
employee performance, meaning that the effect of compensation on employees is due to the
amount of compensation given to employees. While Compensation through motivation has a
positive but insignificant effect on the performance of employees of PT Garuda Indonesia
(Persero), it means that it is true that giving motivation without reciprocity from the company
in the form of incentives and bonuses, as well as promotion to employees who excel and
other benefits do not affect employee performance. Employee placement has a positive effect
on performance employee. Al this means that the more appropriate the background of an
employee's work interests and talents, the performance of an employee will also increase.
Responsibility and timeliness at work has a major influence on employee performance.
Compensation is anything that employees receive in return for their work. Because basically
working people also want to earn money to meet their daily needs, for this reason an
employee begins to appreciate hard work and shows more loyalty to the company and that's
why the company rewards employees' work performance by providing compensation.

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