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The Role of Compensation and Loyalty to Employee Turnover Intention
1*AgathaRinta Suhardi, 2Sari Dewi Oktari
Faculty of Economics and Business Universitas Widyatama, Indonesia
Email : 1*[email protected]

(Received: October 2022; Reviewed: October 2022; Accepted: October 2022;

Available online: January 2023; Published: Januari 2023)

ABSTRACT

High turnover intention can indicate an ineffective organization because the

company loses experienced employees and needs to retrain new employees. In
addition, the high level of turnover intention will create instability and uncertainty
about labor conditions and increase the cost of human resources. The purpose of
this study was to determine the effect of compensation and loyalty on employee
turnover intention by using a saturated sampling technique in sampling. Data
processing was carried out by analyzing correlation coefficients, coefficients of
determination, and hypothesis testing. The results of this study indicate that
compensation has a strong relationship with turnover intention and has a
significant negative effect on the turnover intention variable, which means that if
compensation is increased, turnover intention will decrease. Another result is that
loyalty has a strong relationship with turnover intention and has a significant
negative effect on turnover intention, which means that if employee loyalty
increases, turnover intention will decrease. Compensation and loyalty have a very
strong relationship with turnover intention, the higher the compensation and
loyalty, the lower the turnover intention.

Keywords: Compensation, Loyalty, Employee Turnover Intention

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INTRODUCTION leave the company, many reasons that

Human resources in a company cause turnover intention include the
are assets and have a very important desire to get a better job (Harnoto,
role and function for the success of a 2002).
company. Human resources play an The occurrence of turnover
important role, especially in intention is something that is not
companies engaged in services as the desired by the company. The high
spearhead of the company. Turnover level of turnover intention will have a
intention (the desire to move) is one negative impact on the organization
of the causes of turnover and can lead such as creating instability and
directly to real turnover, people leave uncertainty on labor conditions and
their jobs even though they do not increasing human resource costs.
have other alternative jobs for reasons High turnover intention indicates an
of reward, equity, and a sense of ineffective organization because the
security from conflicts that occur company loses experienced
within the company. organization employees and needs to retrain new
(Yuliani, 2005). Turnover intention is employees.
the level or intensity of the desire to
Table 1. Employee Turnover at PT. M
Initial Number of Number of Number of New Total
Year
Employees Employees Resigned Employees Employees
2014 35 1 2 36
2015 36 2 2 36
2016 36 2 2 36
Source: Company Data (2016)
From the company data above, loyalty results in strikes, absenteeism,
employee turnover at PT. M occurs sabotage, high absenteeism and
because of several possibilities. One turnovers.
of the reasons is the lack of
compensation provided by the LITERATURE REVIEW
company. Inappropriate 1. Compensation
compensation will lead to a decrease Compensation is a service
in employee performance and even fee or remuneration provided by
lead to employee turnover. Good the company to workers because
compensation is a compensation these workers have contributed
system that is responsive to situations energy and thoughts for the
and a system that can motivate progress of the company in order
employees. In addition to to achieve the goals set
compensation, other important factors (Sastrohadiwiryo, 2011).
that can lead to high or low turnover Compensation is all income in the
intention at PT. M is employee form of money, goods directly or
loyalty. Loyalty is loyalty reflected by indirectly received by employees
the willingness of employees to as compensation or services
maintain and defend the organization provided to the company (Oktari
inside and outside of work from the and Suhardi, 2021).
ravages of irresponsible people The purpose of providing
(Hasibuan, 2012). The absence of compensation (retribution) is,

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among others, as a bond of atmosphere in the company,

cooperation, job satisfaction, keeping company secret meetings,
effective procurement, motivation, maintaining and improving the
employee stability, discipline, as company's image, being frugal, not
well as the influence of labor demonstrating , not a priori to
unions and the government. change (Poerwopospito, 2010).
Factors that affect compensation The emergence of work loyalty is
are work productivity, ability to influenced by factors including
pay, supply and demand for labor, personal characteristics, job
employee organization, various characteristics, company or
laws and regulations (Oktari and organization design
Suhardi, 2021). characteristics, experience gained
2. Loyalitas in the company or organization
Loyalty is the determination (Saydam, 2011).
and ability to obey, implement, 3. Turnover Intention
and practice something that is Turnover intention is the
obeyed with full awareness and tendency or level at which
responsibility, determination and employees have the possibility to
daily behavior in carrying out tasks leave the company (Chen &
(Saydam, 2011). only physical Francesco, 2000). Turnover
loyalty, but more on non-physical intention is the level or intensity of
loyalty such as thoughts and the desire to leave the company,
attention (Tommy et al, 2010). The many reasons that cause turnover
loyalty of employees in an intention include the desire to get a
organization is absolutely better job (Harnoto, 2002).
necessary for the success of the Turnover intention is characterized
organization itself. The higher the by various things related to
loyalty of employees in an employee behavior, including
organization, the easier it is for the increased absenteeism, starting to
organization. It is to achieve be lazy to work, increased courage
organizational goals that have been to violate work rules, courage to
previously set by the owner of the oppose or protest to superiors, as
organization. Likewise, for well as seriousness to complete all
organizations with low employee employee responsibilities which
loyalty, it is increasingly difficult are very different from usual.
for the organization to achieve Harnoto, 2002).
organizational goals that have been
previously set by the owners of the RESEARCH METHODS
organization. The technique used in
The description of loyalty to analyzing the data that has been
the company includes honesty, obtained is descriptive analysis and
having a sense of belonging to the verification analysis. The sampling
company, understanding the technique used is Purpose Sampling,
company's difficulties, working by taking samples of the last 3 (three)
more than what the company years, namely 2014-2016.
requires, creating a pleasant The independent variables

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studied were compensation and respondents stated quite agree. The

loyalty, while the dependent variable statement “I always obey the
studied was employee turnover orders of an authorized superior, I
intention. The stages of analysis complete tasks well and on time
carried out are testing research and I always report the results of
instruments (testing validity and my work to my superiors”
reliability), descriptive analysis occupies the better category with
(recapitulation of respondents' an average score of 4.08. While the
responses to the variables studied), statement "I am able to store and
multiple regression analysis, and maintain goods (data and facilities)
hypothesis testing. Data collection as well as possible" needs attention
techniques using questionnaires, because it has the lowest average
observation and literature study. value.
The Turnover Intention
RESULTS AND DISCUSSION variable is in the sufficient
The results of testing the category with an average value of
validity of the questionnaire items on 3.01 because it is in the 2.60 - 3.39
compensation, loyalty, and turnover category. A total of 1.92% of
intention variables indicate that all respondents stated strongly agree,
items are valid and can be used to 36.15% of respondents agreed,
measure the variables studied. All 4.62% of respondents stated quite
variables to be studied are declared agree, 70.77% of respondents said
reliable because the value of they disagreed, 11.54% of
Cronbach's alpha is greater than 0.60. respondents stated strongly
A. Recapitulation of Respondents’ disagree.
Responses B. Multiple Regression Analysis
The compensation variable Compensation has a strong
is in the high category with an relationship with Turnover
average value of 3.93 because it is Intention which is indicated by the
in the 3.40 - 4.19 category. A total correlation coefficient (R) of
of 15.77% of respondents stated 0.625. Loyalty has a strong
strongly agree, 69.68% of relationship with Turnover
respondents agreed, 14.55% of Intention which is indicated by the
respondents stated quite agree. The correlation coefficient (R) of
statement “The compensation 0.686. Compensation and Loyalty
provided by the company to me is have a strong relationship together
fair and proper” is in the better with Turnover Intention marked by
category with an average score of a correlation coefficient (R) of
4.11. 0.829 and has a determination
The loyalty variable is in the coefficient of 0.688. This shows
good category with an average that Compensation and Loyalty
value of 4.02 because it is in the have an effect on Turnover
3.40 - 4.19 category. A total of Intention of 68.8% and 31.2%
7.97% of respondents stated influenced by other factors.
strongly agree, 88.68% of
respondents agreed, and 3.35% of

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C. Hypothesis test Employees always prioritize the

Based on the t-test interests of the office above personal
conducted, it was found that interests when working, employees
compensation has a significant do not abuse the authority given by
negative effect on Turnover the company and employees always
Intention, meaning that if report the results of their work to their
compensation is increased, superiors.
Turnover Intention will decrease. Turnover intention in the
Likewise, Loyalty has a significant company can be said to be high as
negative effect on Turnover reflected by employees who will
Intention, meaning that if protest company policies if they are
employee Loyalty increases, not in accordance with the wishes of
Turnover Intention will decrease. employees. Employees will feel
better at work when employees leave
DISCUSSION the company. Employees will have a
The compensation provided by higher sense of responsibility when
the company can be said to be good they leave the company.
with the support of the employee's
statement that the salary with the CONCLUSION AND
employee's living needs is SUGGESTION
appropriate. The salary provided by Based on the results of data
the company is in accordance with processing and analysis that has been
government regulations. The wages carried out, it can be concluded that
received are sufficient to meet their several causes are as follows:
daily needs. Incentives given by the 1. Employee responses regarding
company cause employees to stay in compensation and loyalty are quite
the company. Seniority is the basis of varied but in general employees
the company in providing incentives. state that compensation and loyalty
Job evaluation carried out by the in the company are in the good
company as the basis for providing category. Meanwhile, turnover
employee compensation. The intention in the company is in the
provision of annual leave, sabbatical sufficient category.
leave and maternity leave is in 2. Compensation has a strong
accordance with government relationship with Turnover
regulations and the company is Intention. Compensation has a
always on time in providing salaries significant negative effect on
to employees. Turnover Intention, meaning that
Employee loyalty to the if compensation is increased,
company can be said to be high. This Turnover Intention will decrease.
is reflected in the employees always 3. Loyalty has a strong relationship
obeying company regulations. During with Turnover Intention. Loyalty
work, employees always come to has a significant negative effect on
work and leave work on time, Turnover Intention, meaning that
employees always obey orders from if loyalty increases, Turnover
authorized superiors, employees Intention will decrease.
complete tasks properly and on time.

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