Abstract:
This study examines the impact of compensation practices on employee retention, with a focus on salary, benefits, and non-financial incentives. Employee retention has become a critical challenge for organizations seeking to maintain a stable and motivated workforce in a competitive environment. Using a quantitative research approach, data were collected through a structured questionnaire and analysed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results demonstrate strong reliability and convergent validity of the measurement model, with acceptable values for Cronbach’s alpha, composite reliability, and average variance extracted. The structural model findings reveal that benefits and non-financial incentives have a significant positive impact on employee retention, while salary does not show a statistically significant effect. These findings suggest that employees place greater importance on non-monetary rewards such as recognition, career development opportunities, and work-life balance than on direct financial compensation. The study contributes to the existing literature by providing practical insights for human resource managers and organizational policymakers to design more effective compensation strategies aimed at improving employee retention.
