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Compensation has a high effect on employee retention within a company because with satisfactory compensation, employees will feel that the company is caring about employee needs. This study examines the effect of compensation on employee performance. The study was conducted in the hospitality industry in Medan City, North Sumatra, Indonesia. A total of 200 employees from 5 hotels in Medan City were taken as sample. Data were analyzed by using SMART PLS program. The results show that compensation has a significant positive effect on performance; compensation has a significant positive effect on retention; retention has a significant positive effect on performance; retention mediates the effect of compensation on performance. The result of the research is expected to give different perspective and novelty to the improvement of hotel employee performance in Medan City, North Sumatera.

Compensation, Employee Performance, and Mediating Role of Retention: A Study of Differential Semantic Scales