The Effect of Work Life Balance and Compensations on Employee

Engagement with Employee Motivation as Intervening Variable for Y

Millenials Generations in Java, Indonesia

Aris Setiyani, Lenny Ch Nawangsari, Djumarno and Setyo Riyanto

Doctoral Management, Mercu Buana University, Indonesia

Keywords: Compensations, Work Life Balance, Employee Motivation, Employee Engagement, Millenial Generations,

SEM, AMOS.

Abstract: The important point of this research is to analyze the impact of compensations and work life balance on

employee engagement with employee motivation as an intervening variable. The respondents of this study

are Y millennial generations in Indonesia. The type of research is quantitative with the survey method.

Respondents of research were 285 people of millennial generations from Java, Indonesia. The data were

analyzed using Structural Equation Model - Analisis of Moment Structures (SEM AMOS). The results show

that there is an influence of compensations on employee engagement, but the work-life balance has not to

influence on employee engagement. Employee motivation has the effect of mediating of compensations but

not for work-life balance. The new things of this research are the respondents of this study from millennial

generations in Java Island, Indonesia.

1 INTRODUCTION

Most business leaders implicitly understand that

employee engagement is an important thing of

performance and productivity. Mercer I Sirota said

that assessing employee involvement can be done by

measuring employees' level of pride, motivation, and

commitment to the organization they work for. The

following are the results of the "2017 Trends in

Global Employee Engagement", employee

engagement survey released by Aon Hewitt in 2017

Figure 1: Trends in Global Employee Engagement

2017.

The engagement score graph is still fluctuating, so

further research needs to be done on what factors

cause the rise in the engagement score. Whether with

the emergence of Y millennial generations which

began to enter the workforce a lot of causes and how

practitioners of Human Resource (HR) respond to it,

it is something that must be analyzed more deeply.

This study aims to see whether compensation and

work-life balance programs affect employee

engagement. And also see whether employee

motivation has the effect of mediating between

compensation and work-life balance and also have an

influence on employee engagement.

2 LITERATURE REVIEW

2.1 Millenials Generations

William Strauss and Neil Howe collaborated in the

late 1980s when they began writing their first book,

Generations. These two historians developed their

theory further in the next book, The fourth turning,

which focused on the cycle of four types of

generations and the atmosphere of the era in US

history, (Nugroho, 2016). Generation Y (Millenials)

is a generation born around 1982 - 2004. Millennials

are born in very rapid technological developments.

Setiyani, A., Nawangsari, L., Djumarno, . and Riyanto, S.

The Effect of Work Life Balance and Compensations on Employee Engagement with Employee Motivation as Intervening Variable for Y Millenials Generations in Java, Indonesia.

DOI: 10.5220/0008435607090715

In Proceedings of the 2nd International Conference on Inclusive Business in the Changing World (ICIB 2019), pages 709-715

ISBN: 978-989-758-408-4

709

Having different behavior because of the more

advanced technology. Their knowledge of the digital

world is far greater than their parents (Wong & Chin,

2018). Characteristics of Genes suggest that they

want work-life balance. They need a relaxed and

flexible work environment (Brown et al., 2015)

2.2 Employee Engagement (EE)

There are so many scientists who define employee

involvement. Kahn, W.A. 1990, began research on

employee engagement and defining it as harnessing

the potential of employees for their work roles so that

they are involved physically, cognitively and

emotionally for the benefit of the organization.

According to (Muthike, 2017), employee engagement

can be explained as the readiness of workers to work

extra, trust the company and what they stand for in an

attempt to help the success of the organization.

Employee engagement is a work area approach

deliberated to confirm that workers will be committed

to the targets and values of their organization,

encourage to support to the success of the

organization, and at the same chance able to increase

their own feeling of prosperity (Dash & Mishra,

2014) .

2.3 Employee Motivation (EM)

The term “motivation” comes from the Latin word

"movere". "Movere" imply about a move.

Accordingly, it makes a description of something that

will increase, maintain us to working and helping the

company to reach our purpose (Korth 2007 on

Nguyen 2019). “Motivation is psychological forces

that determine the direction of a person’s behavior in

an organization, a person’s level of effort and a

person’s level of persistence” (Jones & George 2008

on Nguyen, 2017). Motivation in community has an

important key of the part to play for the viability and

competitiveness of businesses in the environment of

economic recession (Cardoso et al., 2015). All

indicator in this study refers to Maslow theory that

consisting of physiological, security, affiliation,

esteem, and self-actualization.

2.4 Compensations (CP)

Compensation theory according to Dessler (1997),

states that compensation is one form of payment or

compensation given to employees because the

employee is employed by the organization. Which

includes the dimensions of compensation according

to Dessler include:

1. Financial compensation: Included in financial

compensation, include wages or incentives,

commissions, and bonuses

2. Non-financial compensation: those who enter

the non-financial category include health

benefits or health insurance, entertainment, and

all that is given is not in the form of money.

The compensation dimension can also refer to

the applicable laws and regulations in Indonesia,

in this case referring to Labor Law No. 13 of

2003

2.5 Work Life Balance (WLB)

In a study conducted by Fisher, Bulger & Smith

(2009), there are four parts of work life balance

including:

A. Work Interference with Personal Life (WIPL).

This dimension explains how big the effect of the

work can disturb with one's private life, for example

the work can make the person becomes difficult to

manage time with his activities.

B. Personal Life Interference with Work (PLIW).

This dimension is the opposite of the previous

dimension where this dimension analyzes the extent

to which an employee's private life can disturb with

his work. An example that we often encounter every

day is when an employee is having a personal

problem, sometimes to impact his work. Work lazily

or become out of focus

C. Personal Life Enhancement of Work (PLEW).

This dimension can illustrate how personal life can

improve the performance of individuals in the world

of work. For example, an individual has a good

religion or level of faith so he can rely on work

because of his honesty at work.

D. Work Enhancement of Personal Life (WEPL).

The point of WEPL refers to the extent to which work

can increase the quality of the individual's private life.

We can give an example, someone who acquires the

skills and knowledge of the world of work (for

example getting knowledge of 5R), then this

knowledge can be applied in his personal life every

day at home.

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710

3 HYPOTHESIS

By referring to the conceptual framework above, the

author formulates

H1: There is an influence of compensations on

employee motivation

H2: There is an influence of compensations on

employee engagement

H3: There is an effect of work life balance on

employee motivation

H4: There is an effect of work life balance on

employee engagement

H5: There is an influence of compensations on

employee engagement through employee

motivation

H6: There is an effect of work life balance on

employee engagement through employee

motivation

H7: There is an influence of employee motivation

on employee engagement

4 RESEARCH METHODS

This research uses quantitative methods with a survey

to respondents conducted on Y millennials

generations in Java, Indonesia. Total of the

respondents are 285 people. To measure the result in

the study, we are using scale of Likert with range 1-5.

5 RESULTS AND DISCUSSION

5.1 Statistical Analysis

Statistical Analysis in this research using Structural

Equation Model - Analisis of Moment Structures

(SEM - AMOS)

5.2 Goodness of Fit Model

The Goodness of Fit test used to analysis the accuracy

regression of the sample to evaluate the real value.

Statistically, the Goodness of Fit test can be done by

measuring the coefficient of determination, the F

statistic value and the statistical t value, according to

Ghozali (2011). The compatibility test of the

structural model in SEM analysis was carried out by

looking at several goodnesses of fit model criteria

such as Chi-Square, probability, df, GFI, AGFI, TLI,

CFI dan RMSEA.

Absolute Fit Test if it meets the criteria :

• Chi-Square and P-value: the size of the

model suitability test based on maximum

likelihood (ML). It is expected that the value

is low so that a high P-value (probability)

that exceeds 0.05 is obtained.

• The goodness of Fit Index (GFI): descriptive

asess of model suitability. The value is

expected to be greater than 0.90.

• Root Mean Square Error of Approximation

(RMSEA): the approximate value of the

average square root error. It is expected that

the low value is approximately equal to 0.08.

Figure 2: Complete Structure of the Variables to be analysed.

The Effect of Work Life Balance and Compensations on Employee Engagement with Employee Motivation as Intervening Variable for Y

Millenials Generations in Java, Indonesia

711

The estimation results of the structural model are

the results of the goodness of fit test, we can see in

the picture of the model. The figure 2 above is a

complete structure of variables and indicators that are

used in this research.

After analyzing the data, we obtain a structure that

has a goodness of fit Meeting the SEM AMOS

prerequisites are as figure 3.

Based on the picture above, after modifying with

re-calculation, the model has a likelihood above 0.05

(probability = 0.146), RMSEA is0.02 (Specifications:

0.02 - 0.08) so, the model can use to test the

hypothesis in this research.

5.3 Significance Test

Significance test aims to test whether there is a

significant effect of exogenous variables on

endogenous variables. The hypotheses built in this

test are as follows:

Ho: There is no significant effect of exogenous

variables on endogenous variables.

Ha: There is a significant impact of independent

variables on dependent variables.

With a significant level of 0.05, Ho will be rejected if

the significant value (P) <0.05 and cr> 1.96, whereas

if the value is significant (P)> 0.05 and cr <1.96 then

Ho is accepted.

The table 1 is the results of the model significance

test.

5.4 Sobel Test

In this study, the employee motivation variable acts

as an intervening variable, to test whether the

employee motivation variable can mediate the impact

of compensations and work life balance on the

employee engagement so that the Sobel test can be

conducted as in table 2.

Figure 3: Result of Goodness Fit Model.

Table 1: Result of Significance Test Regression Weights: (Group number 1 - Default model).

Estimate

S.E.

C.R.

Label

EMPL_MOTIV

<---

COMPENSATION

,641

,080

7,998

***

par_17

EMPL_MOTIV

<---

WLB

,029

,081

,361

,718

par_18

EMPL_ENGAGE

<---

COMPENSATION

,222

,053

4,161

***

par_19

EMPL_ENGAGE

<---

WLB

-,041

,048

-,845

,398

par_20

EMPL_ENGAGE

<---

EMPL_MOTIVATION

,794

,045

17,530

***

par_21

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712

Tabel 2: Result of Sobel Test.

Variable

Correlance

P Value

Result

Compensations

CP-EM-EE

0.0000

Has an effect mediating

Work Life Balance

WLB-EM-EE

0.71178

Not effect mediating

The hypotheses used in the Sobel test are as follows:

Ho: Employee motivation can mediate the effect of

compensations on employee engagement variable.

Ha: Employee motivation can not mediate the

influence of work life balance on employee

engagement variables.

With a significance level of 0.05, Ho is rejected if

the p-value of the Sobel test results is > 0.05, while if

the p-value is < 0.05 Ho is accepted.

It is mean that employee motivation has a mediating

effect.

5.5 The Result of Hypothesis Testing

Based on the results of SEM analysis in the table

above, some results are obtained as follows:

1. H1: There are Influences of Compensations on

Employee Motivation => accepted

The result of the p-value influence of the

compensation variable on employee motivation is

very significant (p = ***) with c.r marked positive at

7.998. Because the p-value obtained is <0.05 and cr

is positive and> 1.96, H1 is accepted, summarize that

the compensations have a positive and significant

impact on the employee motivation variable, the

higher the compensation variable, the higher the

employee motivation variable, vice versa.

2. H2: There is an Influence of Compensations on

Employee Engagement => Accepted

The result of the p-value of the effect of the

compensation variable on employee engagement is

significant (P = ***) with c.r marked positive at

4.161. Because the value of p-value obtained <0.05

and c.r is positive and >1.96, H2 is accepted, and it is

concluded that compensation variable positive

influence and significant on employee engagement.

3. H3: There is an effect of Work life Balance on

Employee Motivation => Not Accepted

The value of the p-value influence of the work life

balance variable on employee motivation is 0.718

with c.r marked positive at 0.361. Because the p-value

obtained is >0.05 and cr is positive and <1.96, it is

mean that work life balance has not to influence on

employee motivation.

4. H4: There is an effect of work life balance on

employee engagement => Not accepted

The value of the p-value influence of the work life

balance variable on employee engagement is not

significant (0.398) with c.r marked negative at 0.845.

Because the p-value obtained> 0.05 and c.r is

negative and <1.96, it is mean that work life balance

has not to influence on employee engagement.

5. H5: There is an influence of compensations on

Employee Engagement through

Employee Motivation => Accepted

From the Sobel test result, we can see that the p-value

to the correlation of compensations on employee

engagement through employee motivation is 0.0000.

The value < 0.05, it's mean that employee motivation

affects mediator of compensation on employee

engagement

6. H6: There is an effect of work life balance on

employee engagement through employee

motivation => Not accepted

From the Sobel test result, we can see that the p-value

to the correlation of work life balance on employee

engagement through employee motivation is

0.71178. The value > 0.05, it is mean that employee

motivation does not affect mediator of work life

balance on employee engagement

7. H7: There is an Influence of Employee

Motivation on Employee Engagement =>

Accepted

The worth of p-value of the Employee Motivation

variable on Employee Engagement is very significant

(p = ***) with c.r marked positive at 17,530. Because

the p-value obtained is <0.05 and cr is positive and>

1.96, it is concluded that the employee motivation

variable has a positive and significant effect on the

employee engagement variable, the higher the

employee motivation variable, the higher the

employee engagement, and vice versa.

The Effect of Work Life Balance and Compensations on Employee Engagement with Employee Motivation as Intervening Variable for Y

Millenials Generations in Java, Indonesia

713

6 MANAGEMENT

IMPLICATIONS

From 285 data collected, compensation is very

important to increase employee motivation while

work life balance programs are not very popular

among the millennial generation. In addition to

compensation, communication is also considered to

be a factor that supports an employee to be able to

survive in a company. With good communication,

fellow supervisors and subordinates and fellow

employees will create a good work culture and a

conducive work environment.

A conducive work environment can be created from

many factors, including good cooperation between

teams. Besides that, the safety factor is also support

for someone who will work comfortably in one

environment in the company

Whereas flexible working hours are indeed

currently very much favored by millennials, but not

all companies can implement them. Especially for

manufacturing companies that produce mass

production with goods that are fast moving will be

very dependent on the discipline of employee

working hours. Every line in production is usually

determined by how many people work in that area. So

that if there are several employees who arrive late, it

can greatly disrupt the productivity of work on the

line. Employer branding is one of the considerations

of a millennial retainer or not in the company. In the

current disruptive era, many millennials views are

shifting where the fame of a company has its value in

their hearts. They feel proud if they can work in a

company that is classy or known to the public. So

management must also think about this, how to

complete a company branding so that millennials are

interested in joining and working together and also

those who have worked will stay at the company.

So, management needs to make a strategy on how

to provide clear information regarding compensation

programs to increase employee motivation, thus

increasing employee engagement.

7 CONCLUSION

The results of this study can be summarized as

follows:

1. Compensation influences employee motivation.

This means that good compensation can

improve employee motivation for Y millennials

generations

2. Compensation have a direct influence on

employee engagement. This means that good

compensation can improve employee

engagement for Y millennials generations.

3. Employee motivation has the effect of

mediating the relationship between

compensations on employee engagement

4. Work Life balance has not influence on

employee motivation and employee

engagement.

5. Employee motivations have not to effect

mediating the connection between work life

balance on employee engagement

8 LIMITATION OF THIS

RESEARCH

Limitations of this research are :

1 This study only takes samples on the island of

Java; there are still other islands in Indonesia

that have not been studied about how the

behavior of the millennial generation in

another Island in Indonesia.

2 The variables studied were only

compensations and work life balance, which

were seen to be related to employee

motivation and employee engagement, other

researcher can explore many variables that it

can improve employee engagement

9 DIRECTION FOR FURTHER

STUDY

It recommended to explore more variable that can

influence employee motivation and employee

engagement, So management has a clear strategy,

how to maintain the millennial generation to stay in

the company and not move to another company. The

sample for future study must increase to get results

that represent the millennial generation in Indonesia

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The Effect of Work Life Balance and Compensations on Employee Engagement with Employee Motivation as Intervening Variable for Y

Millenials Generations in Java, Indonesia

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