The Role of Compensation, Job Satisfaction, and Work Environment in Shaping Employee Loyalty

This study investigates the impact of compensation, job satisfaction, and the work environment on employee loyalty at CV. Graha Abadi Surabaya, a footwear manufacturing SME in Indonesia. In the broader context of Indonesian small and medium-sized enterprises (SMEs), employee loyalty plays a critical role in ensuring operational continuity and long-term organizational success. Addressing a gap in the literature concerning the integrated influence of these three variables within the SME sector, this research contributes novel insight into workforce dynamics specific to Indonesia’s manufacturing industry. A quantitative method was applied using a structured 5-point Likert scale questionnaire distributed to 32 full-time employees, representing the entire workforce of the company. The instruments were validated and tested for reliability prior to analysis. Multiple linear regression was employed via SPSS software, supported by classical assumption tests to ensure model robustness.Results reveal that job satisfaction significantly enhances employee loyalty. In contrast, compensation and work environment, while positively correlated with loyalty, do not individually demonstrate statistically significant effects. However, the combination of all three factors yields a significant joint influence on loyalty levels. The adjusted R² value of 0.824 indicates that 82.4% of the variance in employee loyalty can be explained by the model. The findings underline job satisfaction—particularly through aspects such as employee recognition, role clarity, and supportive internal communication—as the primary driver of loyalty. Although compensation and the work environment may not independently exert strong effects, their alignment with job satisfaction contributes to a more stable and loyal workforce. These insights offer practical implications for SME management and HR policy, especially in strengthening retention strategies and enhancing commitment among employees through a holistic approach to workplace satisfaction.