The Effect of Human Resource Management Practices in

Implementation of Industry 4.0 on Employee Performance: Case

Study in a Company in Batam City

Famela Nandita,Winanda Wahana Warga Dalam

Politeknik Negeri Batam, Department of Business Management, Managerial Accounting Study Program, Ahmad Yani

Street, Batam Centre, Batam 29461, Indonesia

Keywords: Human Resource Management Practices, Training and Development, Compensation, Job Security,

Promotion, Industry 4.0 and Employee Performance.

Abstract: This study aims to examine the effect of human resource management practices in the form of training and

development, compensation, job security, and promotion to employee performance. The data collection

technique used is a survey with questionnaire. The sampling method used is purposive sampling techniques.

The samples used in this study were 280 employees of the production operator and office staff in one of the

companies in Batam City. The data processing techniques used is SPSS software version 26.0.The

analytical tool used is simple linear regression. The results show that training and development, job security,

and promotion are influential in employee performance, while compensation has negative effect and is

insignificant on employee performance.

1 INTRODUCTION

Batam is one area that has implemented industrial

system 4.0, which has several industrial areas and is

an example in technological development. One of the

electronics industry sectors in Batam that has applied

the industrial system 4.0 is PT XYZ Batam. PT XYZ

Batam is an example for other companies in the

application of industrial system 4.0. This can be seen

from the success of PT XYZ Batam in conducting

digital transformation so that it is able to adopt and

implement new operational systems that are more

efficient.

The emergence of the industrial revolution 4.0 is

intended to replace the work done by humans.

However, to maximize the application of industry 4.0,

companies also need to employ high-quality

employees. Employees must be able to collaborate

with new technologies, namely robots, because all

work carried out by the technology is still monitored

by employees. A successful collaboration between

employees and robots is one of the keys so the

application of industry 4.0 is running efficiently

Performance is an achievement in carrying out

tasks based on skill, experience, and timeliness.

Employees can be said to be one of the valuable assets

in a company so that employees who have low

academic and soft skills will be easily replaced by the

industrial system 4.0. Requirements for employees’

knowledge and skills in this case can change and

become more specialized (Dworschak & Zaiser,

2014).

This research is important to answer whether

human resource management practices significantly

influence employee performance. Based on this

background, researchers are interested in conducting

research by raising the title "The Effect of Human

Resource Management Practices in Implementation

of Industry 4.0 on Employee”.

2 LITERATURE REVIEW AND

HYPOTHESIS

2.1 Theory

2.1.1 Social Exchange Theory

The theory of social exchange was put forward by

several figures namely psychologists John Thibaut

and Harlod Kelley (1959), sociologists George

Homans (1961), Richard Emerson (1962), and Peter

116

Nandita, F. and Warga Dalam, W.

The Effect of Human Resource Management Practices in Implementation of Industry 4.0 on Employee Performance: Case Study in a Company in Batam City.

DOI: 10.5220/0010357001160124

In Proceedings of the 2nd International Conference on Applied Economics and Social Science (ICAESS 2020) - Shaping a Better Future Through Sustainable Technology, pages 116-124

ISBN: 978-989-758-517-3

Blau (1964). The theory is a social science that

proposes about social relationships that have an

element of rewards, sacrifice, and profit. Social

exchange theory in general analyzes the work

behavior of employees in a company. The theory of

social exchange will produce a reward from social

relations with others. These benefits can be obtained

by the sacrifice that has been issued, the higher the

sacrifice incurred, the higher the benefits obtained,

and the benefits received must also be proportional to

the investment made. Social exchange theory will

implement that an employee will be treated well by

the company so that the employee will have a good

commitment to work.

2.1.2 Motivation Theory

Motivation theory was put forward by Abraham

Maslow (1943). Motivation theory suggests that

humans have levels in meeting the needs of life.

Humans will continue to strive to meet their needs.

This theory divides the 5 needs of human life based

on a hierarchy of needs, namely arranged based on the

most basic needs to the highest needs. The first

hierarchy of needs includes the most basic needs in

sustaining life in the form of food, drink, shelter, and

other physical needs. Second, the need for security

and safety, namely the need for security against

various threats. Third, social needs, namely the need

for love, family, and friends. Fourth, the need for

appreciation is the need for a sense of wanting to be

appreciated by others. Fifth, the need for self-

actualization is the need to meet self-ambition.

2.2 Literature Review

The research of Abdullah, Ahsan, & Alam (2009)

regarding human resources management practices on

employee performance researched in Malaysia. The

results of the study indicate that there is a positive

influence between human resources practices on

company performance. The measurement of human

resources practices in the study consisted of training

and development, teamwork, compensation, human

resources planning, performance appraisal, and

employee safety. In this study, compensation and job

security do not have a relationship to company

performance.

In contrast to the research of Ilyas, Farooqi, &

Ahmad (2016) in the private companies Rawalpindi

and Islamabad, the results of the study showed that

human resources management practices,

compensation, the effect of performance evaluation,

and employee training had a positive effect on

employee performance.

Research conducted by Taib, Hj Salaudin, &

Hanafi (2019) aims to examine the effect of HR

management practices on employee performance and

mediate the role of employee involvement. The study

used a sample of 318 employees using stratified

sampling techniques. The study uses social exchange

theory as a guideline in examining and understanding

the relationship between HR practices, employee

performance, and employee involvement. The results

of this study indicate that HRM practices in the form

of training and development, compensation, job

security, and promotion have significant results on

employee performance. In addition, employee

involvement can also mediate the relationship

between HR practices and employee performance.

2.3 Hypothesis

2.3.1 Training and Development Have a

Significant Impact on Employee

Performance

Industry era 4.0 requires companies to design training

and development programs that can improve

employee performance. Companies can provide

various types of training to employees to enable them

to do multitasking work. Training can be interpreted

as an effort to reduce the gap between the ability of

employees with the abilities desired by the company.

Training can be done by increasing the knowledge

and skills possessed by employees. With this training,

employees are expected to be able to fulfill the

abilities desired by the company.

The results of research on human resource

management practices in the form of training and

development have a significant effect on employee

performance (Taib, Hj Salaudin, & Hanafi, 2019;

Abdullah, Ahsan, & Alam, 2009; Elnaga & Imran

2013; Theng, Said, & Wandary, 2013). Based on the

theory and previous research, the first hypothesis can

be formulated as follows:

H1: Training and development have a significant

effect on employee performance.

2.3.2 Compensation Has a Significant

Impact on Employee Performance

Compensation can be interpreted as all income

received by employees in return for services provided

to a company. Compensation is also used by company

management in increasing employee morale,

The Effect of Human Resource Management Practices in Implementation of Industry 4.0 on Employee Performance: Case Study in a

Company in Batam City

117

motivation, achievement, and job satisfaction.

Employees will continue to innovate to the company

if the employee gets compensation according to the

contribution he does to the company.

The results of research on human resource

management practices in the form of compensation

have a significant effect on employee performance

(Taib, Hj Salaudin, & Hanafi, 2019). Other studies

suggest that compensation has no significant effect on

business performance (Abdullah, Ahsan, & Nature,

2009). Based on the previous description, the

hypothesis can be formulated as follows:

H2: Compensation has a significant effect on

employee performance.

2.3.3 Job Security Has a Significant Impact

on Employee Performance

Job security is an activity that is related to the

activities carried out by employees in the company.

Job security is important in the company to protect

and prevent employees from things that are not

desirable. Employees will feel safe and work in peace

if job security in the company is well implemented.

The results of research on human resource

management practices in the form of job security

significantly influence employee performance (Taib,

Hj Salaudin, & Hanafi, 2019). Other studies suggest

that job security has no significant effect on business

performance (Abdullah, Ahsan, & nature, 2009).

Based on the previous description, the hypothesis can

be formulated as follows:

H3: Job security has a significant effect on employee

performance

2.3.4 Promotion Has a Significant Impact on

Employee Performance

Promotion can be interpreted as one of the practices

of human resource management in the company.

Employees who have good achievements will

experience a move from one position to another

higher position, so that the income received is also

greater than before. Promotion is carried out so that

employees have high morale.

The results of research on human resource

management practices in the form of promotion

significantly influence employee performance (Taib,

Hj Salaudin, & Hanafi, 2019). Based on the previous

description, the hypothesis can be formulated as

follows:

H4: Promotion has a significant effect on employee

performance.

Based on previous theoretical and research studies,

the following framework is obtained:

Figure 1: Research Model

Source: Processed Data

3 METHOD

The research method used in this study is a

quantitative approach to testing hypotheses. Sample

in this research are employees from PT XYZ. The

Number of samples in this study use the Slovin

formula with an error level of 5%. From the

calculation results, a minimum sample size of

268.2043 was obtained. For that, the minimum

sample is 270 respondents.

Table 1: Number of employees of PT XYZ Batam.

Employees Total

Production O

erato

767

Office Staff 47

Total 814

Source: PT XYZ Batam

HRD Sampling in this study uses purposive sampling

with the criteria of permanent employees and contract

PT XYZ parts of the productionoperator, and office

staff. The questionnaire in this study consisted of two

parts. The first part is the general data of respondents.

The second part is the contents of the questionnaire

which contained 14 question items about training and

development, 12 question items about compensation,

11question items about job security, 12 question

items about promotion, 15 question items about

employee performance. In accordance with the

research variables, the source of the contents of the

questionnaire was adapted from (Taib, Hj salaudin, &

Hanafi, 2019).

ICAESS 2020 - The International Conference on Applied Economics and Social Science

118

3.1 Independent Variable

The independent variable in this study is the practice

of human resource management. Human resource

management practices are the most important thing

for a company that is used to obtain quality and

productive human resources. The indicators for

measuring human resource management practices in

this study consist of training and development (X1),

compensation (X2), job security (X3) and promotion

(X4).

3.1.1 Training and Development

Training and development are indispensable when

companies change their industrial systems. Training

is a systematic process provided by companies that

can change employee behavior in achieving company

goals (Rivai & Sagala, 2009). Development is one of

the programs provided by the company to improve

employee skills in carrying out tasks and obligations

in the future (Rivai & Sagala,

2009). Training and development provide many

benefits to employees and the company. Benefits in

the form of expertise and employee skills are valuable

assets for the company, in addition to that, with

training and development, the capabilities of

employees will increase.

The training and development variables in this

study were measured using 14 statement items

adapted from Taib, Hj Salaudin & Hanafi (2019), as

for the assessment indicators for these training and

development variables in the form of goals,

objectives, instructors, materials, methods, and

training participants.

3.1.2 Compensation

Compensation is the most important thing for

employees because compensation reflects a measure

of the value that the employee receives for what he

has given the company. Compensation can be

interpreted as a form of appreciation for services

performed by employees for the company. The

compensation provided by the company can be in the

form of financial, goods, services, and services so that

employees feel valued at work so that employees will

have high loyalty and commitment to the company

(Hartatik, 2014).

The compensation variable in this study was

measured using 12 statement items adapted from

Taib, Hj Salaudin & Hanafi (2019). The indicators of

assessment of this compensation variable are in the

form of satisfaction with salaries, incentives,

allowances, and facilities provided by the company.

3.1.3 Job Security

Job security is a condition in which employees feel

safe and avoid danger while doing work (Hartatik,

2014). Job security is the physical and mental

condition of employees caused by the work

environment in the company (Rivai & Sagala, 2009).

An effective work security system within the

company will reduce the occurrence of work injuries

or accidents. In addition, the effective

implementation of Kejra security can also increase

employee productivity in achieving the desired goals

of the company. The job safety variable in this study

was measured using 11 statement items adapted from

Taib, Hj Salaudin & Hanafi (2019). The indicators for

assessing this variable of job security are physical and

social work environments.

3.1.4 Promotions

Promotion occurs when an employee with good

performance can be moved from one job to a higher

job, higher salary, and responsibility (Rivai & Sagala,

2009). Promotion in general is evidence of

recognition of work performance achieved by

employees. Promotion has an important meaning for

the company, because with the promotion of

company stability and employee morale is more

secure. In addition, promotion is one way for

employees to improve their careers. Therefore,

employees will work with motivation and enthusiasm

Promotion variables in this study were measured

using 12 statement items adapted from Taib, Hj

Salaudin & Hanafi (2019). The indicators of

assessment of this promotional variable are job

performance, discipline, honesty, cooperation, skills,

loyalty, leadership, education, length of work and

management. Promotion occurs when an employee

with good performance can be moved from one job to

a higher job, higher salary, and responsibility (Rivai

& Sagala, 2009). Promotion in general is evidence of

recognition of work performance achieved by

employees. Promotion has an important meaning for

the company, because with the promotion of

company stability and employee morale is more

secure. In addition, promotion is one way for

employees to improve their careers. Therefore,

employees will work with motivation and

enthusiasm.

Promotion variables in this study were measured

using 12 statement items adapted from Taib, Hj

Salaudin & Hanafi (2019). The indicators of

assessment of this promotional variable are job

performance, discipline, honesty, cooperation, skills,

The Effect of Human Resource Management Practices in Implementation of Industry 4.0 on Employee Performance: Case Study in a

Company in Batam City

119

loyalty, leadership, education, length of work and

management.

3.2 Dependent Variable

3.2.1 Employee Performance

Employee performance namely the achievement of a

person in carrying out a given task both in quality and

quantity. Employee performance variables in this

study were measured using 15 statement items

adapted from Taib, Hj Salaudin & Hanafi (2019). The

indicators for assessing this variable are quality,

quantity, attendance, timeliness, and cooperation

ability.

4 RESULT AND DISCUSSION

4.1 Characteristics of Respondents

Respondents in this study were employees of PT

XYZ Batam. The characteristics of the data used in

this study can be seen through the elaboration in table

Table 2: Data Characteristics.

Explanation Total

Questionnai

e we

e dist

ibute

290

Questionnai

e that did not

etu

The questionnai

e does not comply with the

ements

Retu

ned questionnai

280

Questionnai

e that can

ocesse

280

Source: Processed Data

Data obtained from respondents were then adjusted

based on position, gender, age, marital status, last

education, and years of service. General

characteristics of respondents can be seen through the

elaboration in table 3.

Table 3: Characteristics of Respondents.

Respondent C

ia F

equency Pe

cen

age

Position

Office Staff 94 33,6%

Production

Ope

ato

186 66,4%

Gender Male 70 25,0%

Female 210 75,0%

Age

< 20 yea

49 17,5%

21- 30 yea

186 66,4%

–

40 yea

28 10,0%

–

50 yea

17 6,1%

Mar

ied

status

Single

234

83,6%

< SMA/Equal 92

32,9%

Education

Level

SMA 103

36,8%

D2 1

0,4%

D3 30

10,7%

D4 7

2,5%

S1 45

16,1%

S2 2

0,7%

Years of

service

<2 yea

139

49,6%

2 - 5 yea

106

37,9%

–

10 yea

5,4%

–

15 yea

4,6%

–

20 yea

0,7%

>20 yea

1,8%

al of Samples 280 100%

Source: Processed Data

4.2 Instrument Testing

4.2.1 Validity Test

The validity test in this study uses the Pearson

Correlation method. Question items to be valid if r

count > r table, with the number n = 200 respondents,

then obtained degree of freedom (df) =198 and r table

= 0.1388 at alpha = 0.05. So that the item is said to be

valid if r count > 0.1388. The question items in this

study represent variables of training and

development, compensation, job security,

promotions, and emloyee performance as valid with a

value of r count > 0.1388.

4.2.2 Reliability Test

The reliability tests were performed using Alpha

Cronbach’s. The question items that represent the

variables in this research are stated to be

exceptionally reliable based on the value of Cronbach

Alpha > 0.7. The result displayed in table 4.

Table 4: Test Reliability Questionnaire.

Variable

ach

Alpha

ach

Alpha

Conclusion

X1 0,754 0,70 Reliable

X2 0,758 0,70

Reliable

X3 0,752 0,70 Reliable

X4 0,754 0,70

Reliable

Y 0,728 0,70 Reliable

4.3 Classical Assumption Test

4.3.1 Normality Test

The normality test in this study was carried out by

using the one sample Kolmogoroc-Smirnov test in

SPSS version 26. The results of the normality test in

ICAESS 2020 - The International Conference on Applied Economics and Social Science

120

this study can be seen through the explanation in table

Table 5: Normality Test.

Unstandardized

Residual

Kolmogorov - Smirnov 0.050

Asymp.sig: (2 tailed) 0.200

Source: Processed Data

4.3.2 Heteroscedasticity Test

Heteroscedasticity test results in this study can be seen

through the translation in table 6:

Table 6: Heteroscedasticity Test

Variable T Sig.

X1 1.420 .157

X2 0.105 .917

X3 1.323 .187

-1.403

.162

Source: Processed Data

4.4 Hypothesis Test

4.4.1 Simple Linear Regression Testing

Results

Hypothesis testing in this study uses two- tailed

testing, namely by looking at the influence of the

significance of the independent variables on the

dependent variable. The guideline used is that if the

significance probability < 0.05 then H0 is rejected and

Ha is accepted, or the independent variable has a

significant effect on the dependent variable. The

results of testing the first hypothesis using simple

linear regression in this study can be seen through the

translation in table 7:

Table 7: Results of the Simple Linear Regression

Hypothesis 1

Unstandard

ize

T Sig.

B Std.

Error

(Constant) 28,378 2,948 9,626 0,000

Training &

Development

0,521 0,049 10,564 0,000

Based on table 7 above, the obtained equation for this

study is:

KK = 28,378+ 0,521PP+e

Based on table 7, the regression coefficient value is

the training and development variable on employee

performance of 0.521 or equal to 52.1% means that if

the training and development variable has increased

by one unit, the employee's performance will increase

by 52.1%. Tcount value of 10,564 with a significance

of 0,000, which means that the significance value of t

is smaller than 0.05 which is 0,000 <0.05. It can be

concluded that the training and development variable

(X1) has a significant effect on employee

performance (Y), so that H1 is supported.

The results of testing the second hypothesis using

simple linear regression in this study can be seen

through the translation in table 8:

Table 8: Results of the Simple Linear Regression

Hypothesis 2.

Unstandardized

Coefficients

T Sig.

BStd. E

(

Constant

)

61,942 2,405 25,759 0,000

Com

ensat

ion

-0,054 0,050 -1,078 0,282

Source: Processed Data

Based on table 8 above, the obtained equation for this

study is:

KK = 61,942 - 0,054KOMP +e

Based on table 8 and the equation above, it can be

concluded that the second hypothesis namely

compensation has a significant effect on employee

performance. From these results, it is known that a

positive constant value of 61,942 indicates the value

of employee performance before being influenced by

the independent variable, namely compensation. In

this case, if the compensation is constant, the average

level of employee performance is 61,942.

The value of the regression coefficient is the

compensation variable on employee performance of -

0.054 or equal to -5.4% which means that if the

compensation variable has increased by one unit the

employee's performance will decrease by -5.4%.

Tcount value of -1.078 with a significance of 0.282

means that the significance value of t is greater than

0.05, which is 0.282 <0.05. Therefore, it can be

concluded that the compensation variable (X2) in the

regression model is negative and has no significant

effect on employee performance (Y), so H2 is not

supported.

The Effect of Human Resource Management Practices in Implementation of Industry 4.0 on Employee Performance: Case Study in a

Company in Batam City

121

The results of testing the third hypothesis using

simple linear regression in this study can be seen

through the translation in table 9:

Table 9: Results of the Simple Linear Regression

Hypothesis 3.

Unstandardized

Coefficiens

T Sig.

B Std. Error

(Constant) 35,124 2,549 13,778 0,000

Job

Security

0,541 0,057 9,575 0,000

Source: Processed Data

Based on table 9 above, the obtained equation for this

study is:

KK = 35,124 + 0,541KMNK +e

Based on table 9 and the equation above, it can be

concluded that the third hypothesis namely job

security has a significant effect on employee

performance. From these results, it is known that a

positive constant value of 35.124 indicates the value

of employee performance before being influenced by

the independent variable, namely job security. In this

case, if job security is constant, the average level of

employee performance is 35,124.

The regression coefficient value is the variable of

job security on employee performance of 0.541 or

equal to 54.1%, which means that if the work safety

variable has increased by one unit, the employee's

performance will increase by 54.1%. T value of 9.575

with a significance of 0.000 means that the

significance value of t is less than 0.05, which is 0.000

<0.05. Then, it can be concluded that the work safety

variable (X3) has a significant effect on employee

performance (Y), so that H3 is supported. The

results of testing the fourth hypothesis using simple

linear regression in this study can be seen through the

translation in table 10:

Table 10: Results of the Simple Linear Regression

Hypothesis 4.

Unstanda

dize

Coefficient

T Sig.

B Std. Error

(Constant) 35,126 1,848 19,005 0,000

omotion 0,508 0,038 13,254 0,000

Source: Processed Data

Based on table 10 above, the obtained equation for this

study is:

KK = 35,126 + 0,508PRMS +e

Based on table 10 and the equation above, it can be

concluded that the fourth hypothesis namely

promotion has a significant effect on employee

performance. From these results, it is known that a

positive constant value of 35.126 indicates the value

of employee performance before being influenced by

the independent variable, namely promotion. In this

case, if the promotion is constant, the average level of

employee performance is 35,126.

The regression coefficient value is the promotion

variable on employee performance of 0.508 or equal

to 50.8%, which means that if the promotion variable

has increased by one unit, the employee's

performance will increase by 50.8%. Tcount value of

13.254 with a significance of 0.000 means that the

significance value of t is less than 0.05, 0.000 <0.05.

It can be concluded that the promotion variable (X4)

has a significant effect on employee performance (Y),

so that H4 is supported.

4.5 Data Analysis

Based on statistical tests that have been carried out on

all four hypotheses using SPSS software version

26.0, the results obtained are that all three hypotheses

are accepted and one hypothesis is not accepted. The

following table summarizes the results of a simple

linear regression statistical test in this study:

Table 11: Summary of Hypothesis Test Results.

Hypothesis T Sig. Results

Training and

Development Has a

Significant Impact

on Employee

Performance

10,564 0,000 Supported

Compensation has a

Significant Effect

on Employee

Performance

-1,078 0,282

Not

Supported

Job Security Has a

Significant Effect

on Employee

Performance

9,575 0,000 Supported

Promotion has a

Significant Effect

on Employee

Performance

13,254 0,000 Supported

Source: Processed Data

ICAESS 2020 - The International Conference on Applied Economics and Social Science

122

5 CONCLUSIONS

The main objective of this study is to examine

whether there is an influence of human resource

management practices in the application of industry

4.0 with training and development variables,

compensation, job security, and promotion of

employee performance. This study also found that

training and development, job security, and

promotion has affects employee performance. While

compensation has no affects employee performance.

Implication of the current research to provide

information and input to PT XYZ in maintaining its

success so that it can meet the demands of today's

industrial development. In addition, this research to

provide information is expected for companies,

especially management in making policies and

strategies in running their business as well as as input

and consideration for other companies that want to

implement the industrial system 4.0.

Future research could replicate and extend this

study by adding other variables and samples from

different industries to offer a better understanding.

And the next research should add to other influences

that can affect employee performance with human

resource management practices.

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