RESEARCH IN MANAGEMENT OF TECHNOLOGY AND

BUSINESS
e-ISSN: 2773-5044 RMTB
Vol. 5 No. 1 (2024) 145-154
https://publisher.uthm.edu.my/periodicals/index.php/rmtb

The Relationship between Compensation and Job

Satisfaction
Nurin Zafirah Mohammad Amiruddin1, Shazaitul Azreen Rodzalan1*
1 Department of Management and Technology, Faculty of Technology Management and Business,
Universiti Tun Hussein Onn Malaysia, 86400 Batu Pahat, Johor. MALAYSIA

*Corresponding Author: [email protected]

DOI: https://doi.org/10.30880/rmtb.2024.05.01.013

Article Info Abstract

Received: 31 March 2024 The intensifying economic competition makes every organization strive
Accepted: 30 April 2024 to increase its competitiveness in order to sustain in business
Available online: 30 June 2024 environment. The success of an organization depends on the job
satisfaction of the employees in the organization. However, job
dissatisfaction occurs due to the salary received. Therefore,
Keywords
compensation is considered as something that can make employees
Job satisfaction, compensation, satisfied with their jobs. This study aims to identify the level of
manufacturing compensation as well as the level of job satisfaction among
manufacturing employees. In addition, this study also aims to identify
the relationship between compensation and job satisfaction.
Quantitative methods using questionnaires and Maslow’s Hierarchy of
Needs were used in this study. The questionnaire is divided into three
sections; Section A (demographic), Section B (compensation), and
Section C (job satisfaction). Primary data was distributed to a total
sample of 375 employees in manufacturing companies in Johor Bahru.
SPSS software was used to analyze the respondents' data. The results
showed that the compensation that manufacturing employees received
satisfied them. This study supports the hypothesis that there is a
positive relationship between compensation and job satisfaction among
manufacturing employees. This study benefit employees; if salaries are
paid appropriately, employees will continue to meet the next level of
need. This study can also help superiors to improve compensation
strategies in accordance with employee satisfaction. In addition, the
government should plan a compensation package as employees play an
important role in driving the Malaysian economy.

1. Introduction
Job satisfaction is a positive feeling or emotion towards work that employees receive based on their experience.
Job satisfaction is an individual's perception of something he does (Faramarzpour et al., 2011). In other words,
when a person is satisfied with their work, they tend to represent the organization with its commitment. Job
satisfaction is defined as an employee’s sense of accomplishment and success in the job. It is also related to
productivity and personal well-being. Job satisfaction is by doing a job without feeling burdened, being able to
do it in good condition, and being appreciated for the effort. It shows how enthusiastic and happy a person is
towards his work (Kaliski, 2007).
Compensation is a significant factor in determining an employee's level of job satisfaction. Compensation is
also very important to employees and individuals as a whole. Compensation is important to the success or
failure of an organization. Compensation is driven by policy, structure, employee involvement in the
This is an open access article under the CC BY-NC-SA 4.0 license.
Research in Management of Technology and Business Vol. 5 No. 1 (2024) p. 145-154 146

organization (Kang & Lee, 2021). Compensation is a set sum of money paid by an employer to an employee in
exchange for productive labor done (Heathfield, 2012).
Manufacturing sector is one of the sectors that contribute to the development of the Malaysian economy.
Sectors that also contribute to the Malaysian economy are the services sector, agriculture sector, and
construction sector. The manufacturing sector is associated with production that uses machinery, equipment,
raw materials, and labor. This proves when Malaysia is heavily dependent on electronics, electrical machinery
and appliances; chemicals and plastics; and petroleum products for production and export to Singapore, China,
the EU, the United States, and (Yusoff & Salleh, 2017). The rapid growth of this sector results in high
employment opportunities (Samsi et al., 2018). The increasing rate of manufacturing sector employees causes
employers to pay attention to employees’ needs to make sure they are satisfied with their jobs (Varshney, 2019).
Job satisfaction should be an important focus by employers because employees are the main factor that
determines the performance of an organization. A survey found that 46% of Malaysian employees are
dissatisfied with their jobs (Hays Asia, 2020). This proves that Malaysia ranks highest in terms of dissatisfaction
among several Asian countries like China, Hong Kong, Japan, and Singapore due to the salaries received by
Malaysian employees. Past studies have shown that dissatisfaction in work makes employees unable to perform
their jobs well, and this makes employees withdraw from their jobs (Loh et al., 2019). This dissatisfaction drives
employees to complain about various things. Insufficient salary, too much work, co-workers who aren’t ‘as good
as’, a leader who is only good at directing, or an unconducive work environment are some of the elements in the
workplace that cause some people to feel dissatisfied being in the workplace. Job dissatisfaction occurs due to
conditions at work, interpersonal relationships, and problems in personal life; without these, employees aren’t
motivated to do their jobs (Thant & Chang, 2020).
Manufacturing employees are dissatisfied with their management because their salaries or compensation do
not being paid. They did not get any explanation on this matter from their management. Compensation does
significantly affect job satisfaction. Employers who pay attention to this issue make employees eager to continue
to serve the organization, and also motivate employees to remain committed to their work (Chongyu, 2021). Job
satisfaction among employees is important for organizations to be able to retain employees in the organization
by meeting their satisfaction needs (Khaira & Shariff, 2021). To date, there is less research related to the
problem of compensation and job satisfaction in the manufacturing sector in Malaysia. Therefore, the researcher
chose to conduct a study related to compensation and job satisfaction among manufacturing employees around
Johor Bahru, Johor. Specifically, this study aims to determine the level of compensation among manufacturing
employees, to determine the level of job satisfaction among manufacturing employees and to investigate the
relationship between compensation and job satisfaction among manufacturing employees.

2. Literature Review
Job satisfaction improves a person’s well-being, reduces fatigue, greater work engagement and attention can be
given better if a person has a good perception of their job (Molina-Hernández, 2021). Employees who live in a
good environment show a positive side with the people around them, especially their co-workers (de Oliveira
Vasconcelos Filho, 2016). Career development causes employees to be dissatisfied in turn intending to leave the
organization. Employees showed interest in developing their future careers but employers didn’t take note of
this. Career development can keep employees in the organization but employers have to incur costs for it (Chin,
2018).

2.1 Job Satisfaction

Job satisfaction refers to a person’s feeling of satisfaction with a job, which acts as a motivation to work. Job
satisfaction represents positive feelings while job dissatisfaction represents the negative feelings employees
have towards what they work for (Davis & Nestrom, 1985). Job satisfaction also represents the extent to which
expectations of satisfaction and actual satisfaction are achieved. Job satisfaction is a complex concept and carries
different meanings for different people, job satisfaction is basically individual in nature. Job satisfaction is
usually associated with motivation, but satisfaction is not the same as motivation. Job satisfaction is more to
one’s attitude and inner state. Job satisfaction can be linked to feelings of personal accomplishment. When
employees are satisfied, they tend to be more concerned with the quality of their work, they are more committed
to the organization, they have higher retention rates, and they are generally more productive (Mullins, 2005).
Job satisfaction is often associated with employee behavior in the workplace. Employee behavior in an
organization does not necessarily provide satisfaction to employees. There are other factors related to this such
as compensation that need to be considered (Iqbal et al., 2017).

2.1.1 Theories of Job Satisfaction

 147 Research in Management of Technology and Business Vol. 5 No. 1 (2024) p. 145-154

Several theories have been used to explain human motivation such as Herzberg’s Motivation-Hygiene Theory
(Herzberg, 1959); Expectancy Theory (Vroom, 1964); and Maslow’s Hierarchy of Needs (Maslow, 1970). These
theories have been used to understand the behavioral factors that lead to job satisfaction. Therefore, Maslow’s
Needs Hierarchy Theory was chosen in this study because it is suitable for studying the relationship between
compensation and job satisfaction. This theory relates if manufacturing employees are rewarded to satisfy their
needs leads to high job satisfaction in manufacturing companies in Johor Bahru, Johor.

2.1.2 Past Studies of Job Satisfaction

Based on a study by (Nemteanu & Dabija, 2021), they found that internal marketing greatly affects job
satisfaction, and also affects job performance and unproductive work behavior. Job satisfaction drives job
performance and contributes to the reduction of unproductive work behaviors. In another study by
(Cheremisova et al., 2020), employees with a high level of commitment are satisfied with self and social needs.
This study examines the relationship between the structural characteristics of the motivation of employees of
production enterprises, depending on their level of organizational commitment. Employees who value reward
systems, conducive work environments, trusting relationships with coworkers, and physical, emotional, and
psychological attachment are more willing to make efforts in the interests of the organization while
demonstrating a strong desire to remain committed to the organization. Job satisfaction has a substantial
beneficial influence on employee work engagement and psychological connection, as well as their decision to
remain in the employment organization, according to research findings (Mitonga-Monga, 2019).

2.2 Compensation
Compensation needs to be considered as it contributes to employee job satisfaction. Compensation is considered
important for employers and employees to convince employees to continue working in the organization.
Employees tend to relocate or quit work or go on strike if compensation is not paid properly. Satisfactory
compensation will instill employee trust in employers and organizations (Pertiwi & Supartha, 2021). When an
organization offers the best compensation to employees, then employees will get job satisfaction in the
organization, in turn, they are motivated to equally improve organizational performance (Syahreza et al., 2017).
The following are the components of compensation that will be used in this study.

2.2.1 Financial Rewards

Salaries, job bonuses, and fringe perks are examples of financial rewards that one can obtain from a job.
Employee benefits represented in monetary terms, such as sick pay, insurance, company cars, and other "perks,"
may also be included. Employees will be more satisfied with their jobs and perform better as a result of these
incentives. According to (Maslow, 1970), financial rewards have a stronger influence on employees'
organizational loyalty since they can afford to meet their basic requirements. A pay system for employees is
required in order to administer financial rewards for their dedication to the profession. This entails a pay scale
and job hierarchy, as well as shift pay, which compensates employees who work irregular or shifting hours for
the problems they encounter (Gelard & Rezaei, 2016).

2.2.2 Non-Financial Rewards

Increased responsibilities, promotions, acclaims, and public recognitions are examples of non-financial rewards
that impact people. Rewarding people entails more than just giving them money. It motivates them to put in
extra work by negotiating a settlement that covers a wide range of issues. Non-financial rewards are necessary
for firms to keep employees' efforts and minds focused on the job (Gelard & Rezaei, 2016).

2.2.3 Past Studies on Compensation

Moderate compensation practices reduce employee relations and employee retention. Such practices allow
employees to leave the organization due to dissatisfaction with the rewards provided. Therefore, employers are
advised to provide compensation commensurate with the job to ensure the involvement and voice of employees
are taken into account. This method is able to make employees continue with the organization in improving
organizational performance (Khalid & Nawab, 2018). A study by (Jagsi et al., 2016) found that compensation
differences between the sexes persist even when the jobs performed are the same. The traditional norm of the
division of labor by gender assumes that women continue to be burdened with greater responsibilities and
impact the profession causing women to tend not to be taken on full call. Moreover, women’s failure to negotiate
as aggressively as men result in women being less compensated. (Cambon & Yzerbyt, 2018) discovered that
compensation based on status disparities created a contrasting impression, with low-status groups viewing
compensation as a method to boost self-esteem and high-status groups viewing compensation as a method to
Research in Management of Technology and Business Vol. 5 No. 1 (2024) p. 145-154 148

look non-discriminatory in keeping with current standards. Therefore, the researcher agrees that compensation
is important in ensuring that these two groups do not feel valued by the organization.

2.3 Relationship between Compensation and Job Satisfaction

Past studies have shown compensation towards job satisfaction is related to situational leadership and
employee performance (Setyorini et al., 2018). Furthermore, there are past studies between compensation and
job satisfaction related to job motivation (Gelard & Rezaei, 2016), environment and discipline (Saputra et al.,
2018), and employee productivity (Fajarto et al., 2019). Compensation towards job satisfaction is closely linked
to job insecurity and turnover intention. Past studies have shown that if the compensation received is high, the
turnover intention rate decreases (Brahmannanda & Dewi, 2020). Based on past studies, if employees do not get
a clear picture of their careers, they tend to move to other organizations (Vizano et al., 2021). Based on the
review from past studies, this study hypothesized that:

H1: There is a positive relationship between compensation and job satisfaction.

2.4 Conceptual Framework

Conceptual framework aims to show independent variables and dependent variables in this research.
Independent variable is compensation which consists of financial rewards and non-financial rewards as the
components of compensation and dependent variable is job satisfaction in this study.

Compensation
1. Financial Rewards Job Satisfaction
2. Non-Financial Rewards

Fig. 1 Conceptual Framework

3. Methodology
Research methodology is a process that connects research questions with data and it is basic planning that
includes research design, research instrument, data collection methods, and data analysis methods.

3.1 Research Design

Descriptive research will be used to study the level of job satisfaction among manufacturing employees. The
relationship between compensation and job satisfaction among manufacturing is also studied in this design.
Quantitative research will be used because this method is fast and covers a wide range of situations.

3.2 Population and Sampling

The population of this study are among manufacturing employees in Johor. To attain the objectives, the data will
be collected randomly by simple random sampling from manufacturing companies around Johor Bahru, Johor
with population of 15,934 employees. Therefore, a minimum of 375 respondents as sample size is required.
Krejcie Morgan’s work schedule will be used to determine the sample in this study.

3.3 Research Instrument

The research will use quantitative method with questionnaires as research instrument. The questionnaire will
be divided into three sections which are Section A, Section B, and Section C. Section A consists of the
demographic of the respondents such as gender, age, ethnicity, working experience, and income level. Section B
consists of compensation questions adopted from (Gelard & Rezaei, 2016). Section C consists of job satisfaction
questions adopted from (Macdonald, 1997). The questions will ask respondents to rate themselves using 5-point
Likert-type scale ranging from 1 (strongly disagree) to 5 (strongly agree).

3.4 Data Collection

This study will collect both primary and secondary data, which will be used to address the hypothesis and
research questions. Primary data is data obtained directly from the respondents; data comes from the original
and first source. Sources of information from the primary data will be collected through questionnaires. While
secondary data is data that is already available. Secondary data is easy to find and obtain because it is already
available in libraries, internet searchers, journals, articles, and so on. Secondary data is more in the form of notes
that have been booked or in the form of reports.
 149 Research in Management of Technology and Business Vol. 5 No. 1 (2024) p. 145-154

4. Data Analysis
Data analysis will participate in this research to identify research findings and to determine whether this
research will meet the objectives of the research. Data collection from primary sources that became the
questionnaire will be analyzed using descriptive analysis and correlation analysis methods.

4.1 Descriptive Analysis

Descriptive analysis was used to look at the percentages and mean values of values and frequencies. In this
study, the researcher used descriptive analysis related to knowing how to obtain population information from
the sample. The statistical analysis method that used to analyze the data for this study is the use of SPSS
software. Further, the research can make an explanation of the policy outcomes and data information from the
percentages and means for the research.

4.2 Correlation Analysis

Correlation analysis is used to identify relationships between variables. In this study, the researcher will use
correlation analysis in relation to knowing how to measure the extent of compatibility between variables. There
are two correlation coefficients used to measure the level of correlation. The most common of these is the
Pearson correlation coefficient, which is sensitive only to linear relationships between two variables while the
Spearman correlation coefficient is more sensitive to nonlinear relationships.

5. Results and Discussion

The respondents of this study are manufacturing employees. There are 15,934 employees working in
manufacturing companies around Johor Bahru. According to Krejcie and Morgan’s table (Krejcie & Morgan,
1970), at least 375 respondents are required. A total of 375 questionnaires were distributed. However, only 211
respondents provided feedback. Therefore, the reaction rate for this study is 56%.

5.1 Respondent Demographics

There are five demographic questions, namely gender, age, ethnicity, working experience, and income level.
Respondent demographics were analysed and discussed using frequency and percentage. Based on the result
that shown in Table 1, there are 211 respondents who take part in this study. Most of the respondents are
female (51.2%). Majority of the respondents are between 18 and 27 years old (44.1%) and ethnic Chinese had
the highest percentage (37.9%). While for working experience shows that most of the respondents have
working experience in between 0 and 5 years (41.7%). Income level shows that 40.3% of the respondents have
an income level in the range of RM 1,001 to RM 3,000.

Table 1 Respondents demographic

Demographic Frequency (f) Percentage (%)
Gender Male 103 48.8
Female 108 51.2
Age 18 – 27 years old 93 44.1
28 – 37 years old 70 33.2
38 – 47 years old 30 14.2
48 years old and above 18 8.5
Ethnicity Malay 77 36.5
Chinese 80 37.9
Indian 43 20.4
Iban 7 3.3
Melanau 4 1.9

Working experience 0 – 5 years 88 41.7

Research in Management of Technology and Business Vol. 5 No. 1 (2024) p. 145-154 150

6 – 10 years 71 33.6
11 – 15 years 33 15.6
16 years and above 19 9.0
Income level RM1,000 and below 51 24.2
RM1,001 – RM3,000 85 40.3
RM3,001 – RM5,000 52 24.6
RM5,000 and above 23 10.9

5.2 Financial Rewards

Table 2 shows the mean and standard deviation for financial rewards. FR1 shows the highest mean value for
financial rewards with a mean value of 3.85 while FR12 has the lowest mean value with a mean value of 2.62.
For standard deviation, FR11 has the highest standard deviation value for financial rewards with a standard
deviation value of 1.403 while FR2 has the lowest standard deviation value with a standard deviation value of
1.013.

Table 2 Mean and standard deviation for financial rewards

Label Statement Mean () Standard Deviation ()
FR1 I get my salary on time. 3.85 1.153
FR2 I receive a good salary. 3.63 1.013
I receive a salary that tallies with my
FR3 3.54 1.126
qualifications.
FR4 I am happy with the salary structure. 3.40 1.097
FR5 I get a pay increment every year. 3.33 1.205
FR6 I always receive bonus from the superior. 3.09 1.270
I share the profits generated from company
FR7 2.90 1.125
projects.
I able to uplift my welfare through projects
FR8 3.06 1.056
held in the workplace.
FR9 I am paid for extra time worked. 3.48 1.240
I get medical allowances from company
FR10 3.25 1.290
whenever I am sick.
I receive transport allowances every
FR11 2.80 1.403
month.
I am paid an accommodation allowance
FR12 2.62 1.298
every month.
Overall mean 3.24 0.842

5.3 Non-Financial Rewards

Table 3 shows the mean and standard deviation for non-financial rewards. NFR2 shows the highest mean value
for non-financial rewards with a mean value of 3.82 while NFR8 has the lowest mean value with a mean value of
2.68. For standard deviation, NFR10 has the highest standard deviation value for non-financial rewards with a
standard deviation value of 1.271 while NFR2 has the lowest standard deviation value with a standard deviation
value of 0.889.

Table 3 Mean and standard deviation for non-financial rewards

Label Statement Mean () Standard Deviation ()
 151 Research in Management of Technology and Business Vol. 5 No. 1 (2024) p. 145-154

I am always praised for any good work I do

NFR1 3.65 1.047
at the workplace.
I work in good physical working conditions
NFR2 3.82 0.889
at the workplace.
I get superior's recognition for the good
NFR3 3.65 0.961
work I do.
I receive appropriate gifts from the
NFR4 3.31 1.107
superior for the good work I do.
NFR5 I have been recognised by the superior. 3.62 1.004
NFR6 I expect a promotion anytime this year. 3.16 1.146
I get an appreciation for the extra
NFR7 3.49 1.007
responsibilities I hold at the workplace.
I have been provided with accommodation
NFR8 2.68 1.230
by the company.
I have been provided with means of
NFR9 transport to and from the workplace every 2.79 1.259
day by the company.
I have been provided with medical
NFR10 2.94 1.271
treatment by the company.
I get leave whenever I have a serious
NFR11 3.71 1.081
problem.
My superior attends to my social and
NFR12 3.29 1.018
professional problems.
Overall mean 3.34 0.724

5.4 Job Satisfaction

Table 4 shows the mean and standard deviation for job satisfaction. JS1 shows the highest mean value for job
satisfaction with a mean value of 4.00 while JS9 has the lowest mean value with a mean value of 3.48. For
standard deviation, JS9 has the highest standard deviation value for job satisfaction with a standard deviation
value of 1.006 while JS6 has the lowest standard deviation value with a standard deviation value of 0.737.

Table 4 Mean and standard deviation for job satisfaction

Label Statement Mean () Standard Deviation ()
JS1 I receive recognition for a job well done. 4.00 0.834
JS2 I feel close to the people at work. 3.94 0.793
JS3 I feel good about working at the company. 3.90 0.796
JS4 I feel secure about my job. 3.79 0.801
JS5 I feel good about my job. 3.91 0.760
JS6 I believe superior is concerned about me. 3.70 0.737
JS7 I get along with my superior. 3.85 0.760
JS8 I believe work is good for my physical health. 3.78 0.885
JS9 My salaries are good. 3.48 1.006
JS10 All my talents and skills are used at work. 3.75 0.876
Overall mean 3.81 0.547

5.5 Correlation Analysis

Research in Management of Technology and Business Vol. 5 No. 1 (2024) p. 145-154 152

Based on the Table 5, financial rewards are 0.572 correlated with job satisfaction. It indicates that the
relationship between financial rewards and job satisfaction are interrelated with positive value of the
correlation coefficient. According to Pearson correlation, it considered as moderate strength of correlation
coefficient since 0.572 is fall under the range of 0.40 to 0.59. Hence, there is a moderate relationship between
financial rewards and job satisfaction. While non-financial rewards are 0.610 correlated with job satisfaction. It
indicates that the relationship between non-financial rewards and job satisfaction are interrelated with positive
value of the correlation coefficient. According to Pearson correlation, it considered as high strength of
correlation coefficient since 0.610 is fall under the range of 0.60 to 0.79. Hence, there is a strong relationship
between non-financial rewards and job satisfaction.

Table 5 Correlation analysis

Job Satisfaction Financial Rewards Non-Financial Rewards
Pearson Correlation 0.572 0.610
p-value 0.000 0.000
N 211 211

6. Conclusion
This chapter covers in detail the findings and conclusions of previous researchers by commenting on the results
of the analysis for each research instrument used. This chapter has also suggested that this study be a reference
to the organization, individual, or researcher who will come and then draw conclusions for the entire study
conducted.

6.1 Discussion on Compensation Level

The first objective of this study was to determine the level of compensation among manufacturing employees.
Based on the findings, non-financial rewards had received the highest mean (overall) which is 3.34 among the
items of compensation. It shows that non-financial rewards become important rewards in fact it becomes the
reasons why employees are satisfied with their job.

6.2 Discussion on Job Satisfaction Level

The second objective of the study was to determine the level of job satisfaction among manufacturing
employees. Based on the findings, job satisfaction is found to have a high level of tendency with a mean value of
3.81. The result shows that manufacturing employees in Johor Bahru have a high degree of job satisfaction.

6.3 Discussion on Relationship between Compensation and Job Satisfaction

The relationship between these two variables is explained through a hypothesis namely ‘There is a positive
relationship between compensation and job satisfaction’. In this study conducted, the hypothesis was clearly
answered and accepted that there is a positive relationship between the two variables with a value of r = 0.626
where it is at a high level of relationship, and this is based on the Pearson correlation coefficient table.

6.4 Conclusion
Based on the overall findings of this study, it is possible to conclude that non-financial rewards have become key
rewards, and in fact, are one of the reasons why employees are satisfied with their jobs. Furthermore, the results
of this study clearly suggest that there is a relationship between compensation and job satisfaction. This
demonstrates that, despite the fact that the relationship appears straightforward, it has an impact on job
satisfaction among manufacturing employees. The researcher suggests that future researcher to conduct
advanced studies that combine quantitative and qualitative research methods such as conducting interviews
with respondents or observation methods in the workplace. This study can be used in future with same and
some other combinations of variables to have more accurate and specific results.

Acknowledgement
The authors would like to thank the Faculty of Technology Management and Business, Universiti Tun Hussein
Onn Malaysia for its support.
 153 Research in Management of Technology and Business Vol. 5 No. 1 (2024) p. 145-154

Conflict of Interest
Authors declare that there is no conflict of interests regarding the publication of the paper.

Author Contribution
The authors confirm contribution to the paper as follows: study conception and design: N.Z.M.A. and S.A.R.;
data collection: N.Z.M.A.; analysis and interpretation of results: N.Z.M.A.; draft manuscript preparation:
N.Z.M.A. and S.A.R. All authors reviewed the results and approved the final version of the manuscript.

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