Analysis of the Role of Monetary and Non-Monetary Rewards on Employee Performance: Mediating Role of Employee Motivation
DOI:
https://doi.org/10.25077/jakp.11.2.243-265.2026Abstract
This study examines the effects of monetary and non-monetary rewards on employee motivation and performance within the Directorate General of Taxes in Indonesia, with particular attention to the mediating role of employee motivation. Unlike studies that treat rewards as a single construct, this study analyzes monetary and non-monetary rewards as distinct variables. Data were collected through questionnaires administered to employees at one regional office of the Directorate General of Taxes. A total of 164 responses were obtained and analyzed using partial least squares structural equation modeling (PLS-SEM) with SmartPLS. The findings indicate that monetary rewards and employee motivation have positive and significant effects on employee performance, whereas non-monetary rewards have a negative and significant direct effect. Both monetary and non-monetary rewards positively influence employee motivation, which also positively mediates the relationships between both types of rewards and employee performance. The negative direct effect and positive indirect effect of non-monetary rewards indicate competitive mediation. These findings suggest that although non-monetary rewards may enhance performance indirectly by strengthening employee motivation, their negative direct relationship with performance warrants further investigation. From the perspective of Vroom’s Expectancy Theory, employees’ perceptions of the instrumentality and valence of non-monetary rewards may help explain this pattern, although these mechanisms require further empirical examination. This study contributes to public-sector human resource management by demonstrating the importance of distinguishing between monetary and non-monetary rewards when designing reward systems. The findings also highlight the need for public-sector managers and policymakers to evaluate the perceived fairness, relevance, and effectiveness of reward practices to support employee motivation and performance.
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