Impact of Compensation on Turnover Intention Mediated by Job Satisfaction: A Case Study of MSME Employees in Semarang City

Abstract

This study investigates the effect of compensation on turnover intention, with job satisfaction as a mediating variable, among employees working in Micro, Small, and Medium Enterprises (MSMEs) in the culinary sector of Semarang City, Indonesia. The research adopts a quantitative explanatory approach using Structural Equation Modeling–Partial Least Squares (SEM-PLS) with SmartPLS 3.0. A total of 150 permanent MSME employees were selected via purposive sampling. Data were collected through a structured questionnaire based on validated indicators from Robbins, Herzberg’s theory, and Mobley’s turnover model. The findings reveal that compensation has a significant negative effect on turnover intention and a positive effect on job satisfaction. Furthermore, job satisfaction significantly mediates the relationship between compensation and turnover intention. These results support Herzberg’s Two-Factor Theory, which posits that compensation is a hygiene factor that, when unmet, leads to dissatisfaction and potential turnover. The mediation findings reflect a complex psychological mechanism, where satisfaction plays a pivotal role in employee retention. This study provides empirical validation of Herzberg’s framework in the Indonesian MSME context and suggests that compensation strategies should be complemented by improvements in workplace environment, role clarity, and interpersonal relationships to effectively reduce turnover. Future studies are encouraged to use longitudinal designs or mixed methods and expand to other MSME sectors and regions to enhance generalizability. Keywords: Compensation; Turnover Intentio; Job Satisfaction; Herzberg’s Two-Factor Theory; MSMEs