The Influence of Retirement Age and Rewards on Employee Performance at Bank Indonesia with Work Motivation as a Mediating Variable

This study investigates the effects of the 46-year retirement age policy and rewards on employee performance at Bank Indonesia’s East Java Province branch, with work motivation as a mediating variable. Using a quantitative approach, data were collected from 35 employees impacted by the policy and analyzed using Structural Equation Modeling (SEM) with SmartPLS. The findings reveal that the retirement age does not significantly affect employee performance or motivation. Rewards, while not directly influencing performance, have a significant indirect effect on performance through motivation. This highlights motivation’s critical role in enhancing the effectiveness of reward systems. While rewards alone may not drive performance, their impact is amplified when they successfully enhance employee motivation. The study underscores the importance of designing integrative human resource policies. Leveraging rewards to foster motivation can effectively improve performance, even when the direct influence of rewards is limited. Organizations should develop reward systems that not only offer financial incentives but also promote intrinsic motivation and engagement. Creating a supportive work environment and providing career development opportunities are also essential to enhance employee well-being and organizational outcomes. The study contributes theoretically by affirming the mediating role of motivation in the rewards-performance relationship. It also highlights the complexities of these dynamics, challenging traditional theories like Herzberg’s Two-Factor Theory and Vroom’s Expectancy Theory. Future research is encouraged to explore additional factors, such as leadership and organizational culture, to better understand employee performance.