The effect of workplace environment and compensation on employee performance with job satisfaction as an intervening variable; study on employees of Permuda Tirta Kanjuruhan Regency, Malang

This study analyzes the influence of work environment and compensation on employee performance with job satisfaction as an intervening variable in Perumda Tirta Kanjuruhan, Malang Regency. Using the Structural Equation Model (SEM) approach based on Partial Least Square (PLS) on 411 respondents, the results showed that the work environment had a significant positive effect on performance and job satisfaction. Compensation had a negative effect on performance but positive on job satisfaction . Job satisfaction acts as a significant mediator between the work environment and compensation on performance. The dominant factors of the work environment included leadership fairness and communication between colleagues , while compensation was influenced by performance-based appreciation. These findings indicate that compensation injustice and mismatch of employee expectations are the causes of performance declines, even though job satisfaction is able to mediate these negative effects. Research recommends improvements to a holistic work environment (physical, psychological, social) and a transparent and performance-based compensation system to improve organizational productivity. The study contributes to the literature by clarifying the crucial role of job satisfaction as a mediator in work environment relationships, compensation, and employee performance.