Effect of Empowerment and Compensation on Employee Loyalty
Nurlaily Wulandari, Alvin Arifin, Masfufatul Khoiriyah, R. A. Istiqomah Pujiningtiyas, Moh. Arifin
University of Bahaudin Mudhary Madura, 10 Raya Lenteng Rd, Sumenep, Indonesia
Keywords: Empowerment, compensation, loyalty, work environment
Abstract: This study was made to analyze and determine the effect of empowerment and compensation on work
environment loyalty, both physically, leadership, and compensation simultaneously have a definitive and
significant effect on employee loyalty at Primatama Sejahtera Trading Enterprises (UD). The population of
40 with a sample used as a whole, namely 40 employees. The data were obtained by distributing
questionnaires to respondents who were analyzed using multiple regression analyses where the aim of this
analysis was to test the influence between variables. Based on the results of the analysis with several stages,
compensation has a positive and significant effect on loyalty. Empowerment and compensation have a
positive and significant effect on loyalty. For the reliability test, showing that the empowerment variable with
the result 0.946, the compensation variable with a result of 0.769 and loyalty with a result of 0.811. it means
that all indicator are reliable. Multiple regression analysis results showed empowerment had a positive and
significant effect on loyalty by showing output <0.05. Compensation has a positive and significant impact on
loyalty also indicated by a value of <0.05. In a multiple regression test, the result is indicated by a significance
value <0.05.
1 INTRODUCTION
Loyalty is employee loyalty is the extent to which
employees are loyal to the organization, have a
feeling of commitment, inclusion, care,
responsibility, and devotion to it. Employee loyalty
can also be illustrated as the extent to which there is
a general willingness among employees to make
investments or personnel sacrifice for the good of the
organization (Upasana, 2015).
Companies expect employees who have a good
and high work ethic to contribute to the company, but
more than that, the company wants employees who
dedicate themselves to the company with integrity
and loyalty. With loyalty, employees can work
actively and have a high awareness of their duties and
responsibilities in the company (Manurung, 2017).
Dimensions and indicators of loyalty are as
follows (Boussalem, 2014): 1) Emotional loyalty,
namely the extent to which individuals are aware of
the distinctive characteristics of their work in terms
of the degree of independence, urgency, skills
needed, availability of supervision and guidance. 2)
Moral loyalty (normative), namely the commitment
of employees to remain with the organization, and
often this is reinforced by good support by the
organization for its employees, enabling them to
participate and interact positively. 3) Continuous
loyalty: The level of individual loyalty, in this case, is
controlled by the investment value that can be
achieved if continued with the organization or as
much as possible if you decide to attend another
organization.
Employees who have loyalty to the company can
be known from the characteristics of work loyalty
found in an employee, among others: obedience to the
rules, responsibility to the company or organization,
willingness to cooperate, sense of owning, inter-
personal relationships, and fondness for work
The regulations created by the company to
regulate keryawan, will be considered by employees
as something that can be used as a benchmark for the
company to assess the performance of its employees.
Employees who have loyalty, will not regard the rules
of entrepreneurship as something that binds
employees. However, with the loyalty, employees
will take it as a reference to further improve
performance. In addition to the indicators discussed
above there are several factors that can affect the high
and low loyalty of employees. It is thought that these
Wulandari, N., Arifin, A., Khoiriyah, M., Pujiningtiyas, R. and Arifin, M.
Effect of Empowerment and Compensation on Employee Loyalty.
DOI: 10.5220/0010330902590263
In Proceedings of the International Conference on Health Informatics, Medical, Biological Engineering, and Pharmaceutical (HIMBEP 2020), pages 259-263
ISBN: 978-989-758-500-5
Copyright
c
 2021 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
259

factors are compensation, empowerment, and job
satisfaction factors
Empowerment is a decision to give freedom to
expose his or her ability to work within certain
competencies that are still in the corridor of job
descriptions to achieve goals.
Correlation with aspects related to empowerment,
where the mechanism is to provide knowledge and
facts and the power of employees to be able to do
work with high accuracy. empowerment gives
authority to workers in decision making is also a
catalyst for workers to complete their work
effectively and efficiently (Alagele, 2018).
Empowerment has been a very vital and
fundamental ingredient in general management
during this course of the last few years. There is a
general motivation to give employees sufficient
freedom in their job definition and authority to be able
to fully apply capabilities to the overall goals of the
company (Boussalem, 2014). More and more
organizations are extensively adopting empowerment
policies as a technique for improving performance.
This means that the empowerment policy will
increase creative solutions for any mistakes that can
occur in daily activities so that performance will also
increase. Also, empowerment provides employees
with the ability to rethink ways to carry out these
activities (Al-Edenat & Alhawamdeh, 2018).
The dimensions and indicators of empowerment
are as follows (Onsardi, Asmawi, & Abdullah, 2017):
1) Authority, (2) Responsibility, 3) Training, 4)
Knowledge and information, 5) Feedback, 6)
Recognition of achievement, 7) Trust, 8) Tolerance,
and 9) treat employees with respect and dignity.
Aspects or components that need attention in
order to empower human resources are: Sedarmayanti
(in Onsardi, Kahirul Bahrun, & Ratnawili 2019) :
1) Employee skills include: knowledge, skills,
and attitude or behavior.
2) The placement of employees in accordance
with the demands of the needs of the office in
an organiation, means that the employee placed
in a position is always associated with the
ability of the employee in question.
3) Clear authority.
4) Clear employee responsibilities.
5) Trust in employees.
6) Support for employees.
7) Leadership
8) Motivation.
Compensation is income outside of basic salary.
Compensation must be given fairly. Fairness in
income can be seen when what is produced is what is
done (Wamuyu, Gichira, Wanjau, & Mung'atu,
2015). The compensation received by employees both
in financial and in-kind as remuneration given to
employees' efforts for the organization.
Compensation is also an achievement against the use
of labor or services provided by the workforce.
Compensation is the number of packages that the
organization offers to workers as a reward for their
hard work (Onsardi, Asmawi, & Abdullah, 2017).
Sinambela (2016) "employees use their
knowledge, skills, energy, time, and commitment, not
only want to dedicate or devote themselves to the
organization, to achieve other goals that it wants to
achieve, namely to expect rewards or remuneratim for
the performance and productivity of the work it
produces". Salaries and benefits play an important
role in attracting people to work creatively and at
home within the company. It is thus very important to
determine the amount of a fair salary that is
appropriate and beneficial"
Compensation is a contra achievement for the use
of labor or services provided by the workforce. Total
compensation from all awards is given to employees
in return for these services (Putra, Jodi, & Prayoga,
2019). Compensation is a fundamental problem in
every organization because the management is paid
by the employees. This is seen as an important
segment of human resources because of its
sensitivity, this is purely an employee problem, and
because most organizations deal with it with
emergencies (Akhigbe & Ifeyinwa, 2017).
The dimensions and indicators of compensation
are as follows (Manurung, 2017): 1) Wages and
salaries. 2) Bonuses and incentives. 3) Insurance and
pension plans. 4) Other facilities and benefits.
From the view of some of the above experts, that
compensation becomes the main reason a person
works. People who work because they expect
compensation or compensation received from the
company or institution in which they work. From this
it can be seen that the compensation affects employee
loyalty, the greater the compensation that the
company will give will have a higher impact on
employee loyalty to the company. The above
statements are in line with several research results,
including the results of nasurdin et al., (2011) which
explained that: The regression results showed that
employees‟ perceptions of HRM practices (training,
performance appraisal, employment security,
employee involvement, and compensation) generally
have a positive effect on service-oriented OCB
(loyalty, service delivery, and participation).
Specifically, the findings indicate that training,
compensation, and performance appraisal were
positively related to loyalty. The results of the above
HIMBEP 2020 - International Conference on Health Informatics, Medical, Biological Engineering, and Pharmaceutical
260

Loyalty
(Y)
Compensation
(X2)
Empowerment
(X1)
H1
H2
H3
study explain that training, compensation and
performance have a positive relationship with loyalty.
It is also in line with the results of pratama et al.
research,
The objectives of this study are: 1) To analyze the
effect of empowerment on loyalty. 2) Analyzing the
effect of compensation on loyalty. 3) Knowing the
effect of empowerment and compensation on loyalty.
From the research objectives, the following
framework can be made:
Picture 1. Framework of thinking
The hypotheses of this study are: 1)
Empowerment has a positive and significant effect on
loyalty. 2) Compensation has a positive and
significant effect on loyalty. 3) Empowerment and
compensation have a positive and significant effect
on loyalty.
2 RESEARCH METHODS
This research is a quantitative research that presents
statistical data. Data were collected by distributing
questionnaires to respondents. The analysis used is
multiple regression analysis where this analysis aims
to test the influence between variables. The object of
this research is the Primatama Sejahtera Trading
Business (UD). The population of 40 with a sample
used as a whole, namely 40 employees.
3 RESULTS AND DISCUSSION
The first analysis is a descriptive analysis that is used
to classify respondents by category.
Table 1. Frequency Distribution
Category Frequency Percentage
Frequency
Distribution
Male 12 30%
Women 28 70%
Age
≤ 20
Tahun
11 27,5%
> 20
Tahun
29 72,5%
Salary
≤ Rp
1.000.00
0
21 52,5%
>Rp
1.000.00
0
19 47,5%
Source: Primary Data, Processed 2020
Table 2: Validity Test
Variable Indicator
Pearson
Correlation
Informatio
n
Empowerme
nt
X1.1 .897
**
Valid
X1.2 .727
**
Vali
d
X1.3 .677
**
Vali
d
X1.4 .663
**
Vali
d
X1.5 .674
**
Vali
d
X1.6 .559
**
Vali
d
X1.7 .455
**
Vali
d
X1.8 .413
**
Valid
X1.9 .331
*
Valid
Compensatio
n
X2.1 .350
*
Valid
X2.2 .720
**
Vali
d
X2.3 .627
**
Vali
d
X2.4 .584
**
Vali
d
Loyalty
Y1.1 .501
**
Valid
Y1.2 .816
**
Vali
d
Y1.3 .339
*
Vali
d
Source: Primary Data, Processed 2020
From the frequency distribution, it can be seen
that female employees dominate with 28 compared to
male employees with only 12. While employees who
are under 20 years old are less than over 20 years old
where the ratio is 11 to 29. Employee salaries below
1 million are 29 compared to which above 1 million
are 19 employees.
The second analysis is the variable validity test to
measure the instruments used in the study. The results
of the validity test are as follows.
From the results of the validity test of all variable
instruments, it shows that all instruments show valid
results.
Effect of Empowerment and Compensation on Employee Loyalty
261

The next analysis is the reliability test where the
reliability test criteria are if the Cronbach's alpha
value is> 0.7, the research variable is reliable. The
results of the reliability test are as follows:
Table 3: Reliability Test
Variable Cronbach’s Alpha
Information
Empowerment .946
Reliabel
Compensation .769 Reliabel
Loyalty .811 Reliabel
Source: Primary Data, Processed 2020
From the results of the reliability analysis shows
that empowerment, compensation and loyalty
variables show reliable results according to the
criteria> 0.7
The next analysis is a simple regression test,
which is to test the influence between research
variables. The variable has a significant effect if the
value in the significance coefficients table is <0.05.
The test results between variables are as follows:
Coefficients
a
Model
Unstandardized
Coefficients
Standardize
d
Coefficients
t Sig.
B Std. Erro
r
Beta
1 (Constant)
.206 .368 .560 .579
Empowerme
n
t
.395 .140 .357
2.81
9
.008
Compensatio
n
.430 .113 .481
3.79
0
.001
a. Dependent Variable: Loyalty
The results of multiple regression analysis show
that empowerment has a positive and significant
effect on loyalty with a significance output <0.05.
Compensation has a positive and significant effect on
loyalty is also indicated by a significance value <0.05.
The next analysis is multiple regression test,
which is to test the influence between research
variables. The variable has a significant effect if the
value in the significance coefficients table is <0.05.
The test results between variables are as follows:
ANOVA
a
Model
Sum of
Squares
df
Mean
Square
F Sig.
1 Regressi
on
15.764 2 7.882 17.294 .000
b
Residual 16.337 37 .456
Total 32.628 39
a.Dependent Variable: Loyalitas
b.Predictors: (Constant), Empowerment, Compensation
The results of this analysis indicate that
empowerment and compensation have a positive and
significant effect on loyalty. These results are
indicated by a significance value <0.05.
4 CONCLUSIONS AND
RECOMMENDATION
The conclusions of this study are: 1) Empowerment
has a positive and significant effect on loyalty. 2)
Compensation has a positive and significant effect on
loyalty. 3) Empowerment and compensation have a
positive and significant effect on loyalty. This is
indicated by a validity test result where all
instruments show valid results. For the reliability test,
showing that the empowerment variable with the
result 0.946 indicates reliabel, the compensation
variable with a result of 0.769 shows results that are
also reliabel and loyalty with a result of 0.811
showing reliable results in accordance with the
criteria > 0.7
Multiple regression analysis results showed
empowerment had a positive and significant effect on
loyalty by showing output <0.05. Compensation has
a positive and significant impact on loyalty also
indicated by a value of <0.05. The next analysis is a
multiple regression test that is to test the influence
between research variables. Variables have a
significant effect when the value on the coefficients
table < of 0.05. From the results of the analysis shows
that empowerment and compensation have a positive
and significant effect on loyalty. The result is
indicated by a significance value <0.05.
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