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sustainability
Article
The Impact of Incentive and Reward Systems on Employee
Performance in the Saudi Primary, Secondary, and Tertiary
Industrial Sectors: A Mediating Influence of Employee
Job Satisfaction
Ibrahim Ghazi Alkandi 1, * , Mohammed Arshad Khan 2, * , Mohammed Fallatah 1 , Ahmad Alabdulhadi 3 ,
Salem Alanizan 1 and Jaithen Alharbi 4
1 Business Administration Department, College of Administrative and Financial Sciences, Saudi Electronic
University, Riyadh 11673, Saudi Arabia
2 Department of Accountancy, College of Administrative and Financial Sciences, Saudi Electronic University,
Riyadh 11673, Saudi Arabia
3 Business Administration Department, College of Business Administration, Imam Abdulrahman bin Faisal
University, Dammam 31441, Saudi Arabia
4 Management and Humanities Department Applied College, Imam Mohamed bin Saud Islamic University,
Riyad 11564, Saudi Arabia
* Correspondence: i.alkandi@seu.edu.sa (I.G.A.); m.akhan@seu.edu.sa (M.A.K.)
Abstract: The three levels of the industrial sector in Saudi Arabia (primary, secondary, and tertiary
sectors) are collectively regarded as a pillar of the economy, with great potential that offers attractive
job prospects. Therefore, the success of Saudi private sector companies and foreign companies
operating in the Kingdom is pivotal. The purpose of this research is to investigate the effect of
incentives and rewards on the performance of employees in the Saudi industrial sectors, and the role
Citation: Alkandi, I.G.; Khan, M.A.; of job satisfaction in this relationship. The research population consisted of employees working with
Fallatah, M.; Alabdulhadi, A.; the industrial sectors in Eastern Region in Saudi Arabia, and the sample comprised 216 full-time
Alanizan, S.; Alharbi, J. The Impact of employees. Structural equation modeling (SEM) was used as a statistical method for testing the
Incentive and Reward Systems on hypotheses. The results demonstrated that there is an insignificant direct effect between incentives
Employee Performance in the Saudi and rewards, and employees’ performance. However, evidence shows a significant direct effect
Primary, Secondary, and Tertiary between incentives and rewards, and job satisfaction, as well as a significant direct effect between
Industrial Sectors: A Mediating
the mediating variable, job satisfaction, and performance. Furthermore, when job satisfaction acts
Influence of Employee Job
as a mediator, the influence of incentives and rewards on employees’ performance is significant.
Satisfaction. Sustainability 2023, 15,
The research findings have notable theoretical and practical implications for incentive and rewards
3415. https://doi.org/10.3390/
su15043415
systems. The present study seeks to further our understanding of the incentive and reward effect on
employees’ performance by examining job satisfaction as a mediating variable to the relationship.
Academic Editor: Lucian-Ionel
Additionally, the study attempts to explain how the relationship between proposed variables works in
Cioca
Saudi cultural context, which differs than Western contexts where most of the previous studies have
Received: 28 December 2022 been conducted. Analyzing employee job satisfaction as a mediator facilitates a better understanding
Revised: 30 January 2023 of how and why different forms of incentives and rewards enhance employees’ behavior at work.
Accepted: 9 February 2023
Published: 13 February 2023 Keywords: incentives and rewards system; performance; job satisfaction; industrial sector
Copyright: © 2023 by the authors.

1. Introduction
Licensee MDPI, Basel, Switzerland.
This article is an open access article
According to the three-sector economies model created by Allan Fisher in the first half
distributed under the terms and of the 20th century, industrial economies are split into three sub-sectors: extraction of raw
conditions of the Creative Commons materials (primary), manufacturing (secondary), and service industries (tertiary) that assist
Attribution (CC BY) license (https:// in transporting, distribution, and sale of commodities produced in the secondary industrial
creativecommons.org/licenses/by/ sector level [1].
4.0/).
Sustainability 2023, 15, 3415. https://doi.org/10.3390/su15043415 https://www.mdpi.com/journal/sustainability

Sustainability 2023, 15, 3415 2 of 22
The Kingdom’s abundant supply of natural resources and raw materials presents
major opportunities for industry, as there is a massive market for metals and petrochemical
products both domestically and internationally. The industrial sector in Saudi Arabia,
including all three industry activity sectors, is viewed as a pillar of the economy, one with
great growth potential that assures Saudi citizens and residents of attractive job prospects
in the decades ahead. The Kingdom recognizes that a formula based solely on abundant
crude oil and cheap foreign labor would not be sufficient to provide distinctive exports
to enhance diversification and generate abundant wealth for an expanding population.
As a result, the industry is embarking on an agenda centered on a more efficient and
educated workforce through internal competency development, unique talent acquisition,
investment, and capitalizing on the private sector [2].
The success of Saudi private sector companies as well as foreign companies operating
in the Kingdom is pivotal to the overall achievement of the goals outlined in the previous
paragraph, increasing the private sector’s contribution to the Gross Domestic Product
(GDP) and increasing the Foreign direct investment (FDI) in the Kingdom. Continuity of
this success will enable the achievement of the national Saudi Vision 2030 program targets
and goals.
Since the success of public entities and private sector companies is dependent on their
workforce, which is the most valuable form of resources a business or even a nation can pos-
sess, investment and enrichment of human capital not only improves short-term outcomes
for companies and public sector entities, but also paves the way for further development
and advancement [3]. Typically, employees contribute positively and actively to the success
of businesses when they reach a state of self-fulfillment as a result from individual’s full en-
gagement [4]. This state of employee’s self-fulfillment often includes ‘employee satisfaction’
or ‘employee motivation’ [5]. For example, a tool to increase motivation is promotion which
associates with more responsibilities that can lead to improvement and job enrichment
resulting in social recognition and status. For instance, [6] found that financial rewards,
feedback, and social recognition have significant impact on task performance. For that,
companies are required to invest in recognition, appreciation, and empowerment to achieve
satisfaction [7].
In today’s ever-changing world of business, competition from other companies in
different markets increases the need for companies to invest in workforce satisfaction, and
the Saudi industrial sector, the context of this study, is substantially competitive. According
to [8,9], in regard to human capabilities, the young workforce forms 67% of Saudis who
are aged under 34 years old; in addition, the country enjoys a robust economy, currency
stability and membership of the G20, Arab free trade Zone with low level tax which have
all created competitive advantages. For instance, over the following three decades, Saudi
industrial cities have grown from 3 to currently 35 industrial cities and zones [10]. Therefore,
the competition to attract and retain talented employees posed a challenge as many large
petrochemical and industrial services organizations have been established.
According to recent research [11], the new economic transition in Saudi Arabia requires
modern skills and contemporary management approaches. In addition, the study suggested
that Ministry of Human Resources and Social Development should focus on two objectives:
maximizing employees’ performance by building the skills of the Saudi workforce and
enabling the industrial sector as an engine of job creation and economic growth. However,
to ensure employees’ satisfaction and high performance, organizations normally rely on
incentives and reward systems as a strategy to retain and encourage people to deliver
their potential. Based on organizational circumstances, a combination of financial and
moral incentives is required to satisfy the social needs of employees, and increase their job
satisfaction and, in turn, their overall productivity [12,13].
The Reinforcement Theory which focuses on the relationship between the desired
behavior (for example, performance) and the motivational tool (for example, pay for
performance) is a fundamental theory in human behavior [6,14,15]. According to this
theory, a desired behavior can be promoted by using reinforcements such as rewards and
incentives [16]. Experimental studies applying reinforcement theory in the workplace

have found combination of positive reinforcers are contributed to employee’s performance
including money, feedback and social status [17,18]. Cho, Y et al. [16] observed that
feedback has more impact on performance than money does, in complex tasks. They also
stated that high performance is influenced by job satisfaction.
The assumption of this theory is that once a need has been fulfilled for an employee
(i.e., pay) satisfaction is accrued and a desired behavior will be produced as the outcome
(i.e., performance) [19]. This is in line with [16,17] who state that satisfaction is critical for
reinforcement theory. Reinforcement theory is associated with the equity and expectancy
theory in current perceptions [19]. On the other hand, these authors asserted that equity
and expectancy are more effective in the case of immediate rewards. Moreover, the use
of reinforcement theory techniques to understand human behavior relatively provides
considerable sophistication to social science [20]. This research also draws on the reinforce-
ment theory to test the relationship between rewards and employees’ performance with
consideration of satisfaction.
Much of the greater part of the literature recognized the impact of incentives and
rewards system on employees’ performance including [21–26]. However, two things are
worth mentioning. First, most studies on incentive systems were conducted in developed
countries such as the United States and China for example [27,28]. Countries with a
different cultural context such as Saudi Arabia suffers a dearth of studies in that matter.
Second, these studies seem to neglect many of the potential factors that could mediate
the relationship between rewards and performance. For that, recent researchers have
directed the attention towards studying potential intervening variables to this relationship.
Furthermore, such research into how rewards–employees’ performance mechanism work
in multi-industry with regard to another cultural context is indeed more relevant than
ever. The use of multi-industry will have substantial effect and wide perspective, while
acknowledging the homogenous nature of population in terms of culture and context.
The current research aims to investigate the relationship between incentives/rewards,
and employee performance through the mediating role of job satisfaction. This study is
important because it provides international evidence and indicators to understand the
enforcements factors for motivation toward a high level of performance in the industrial
sectors. The main research question is “How can companies in the Saudi industrial sector
enhances job performance through incentives and rewards, and what role job satisfaction
plays in this dynamic relationship?”. The study attempts to further our understanding
of the reward relationship with performance by testing job satisfaction as a mediator to
this relationship. Moreover, examining this dynamic relationship in the Saudi context,
where there is a dearth of research, might uncover the influence of cultural context when
compared with results from the dominant Western-based research.
The research delves into the existing literature to develop hypotheses based on re-
lationships established in previous research. Three variables: the independent variable
(incentive and rewards), the mediating variable (job satisfaction), and the dependent vari-
able (employee performance) are employed in this research. In this section, two hypotheses
are developed based on the literature review, with a focus on defining the relationships
between the three variables. Data were collected through a measurement instrument devel-
oped based on previous research and analyzed using structural equation modeling (SEM)
in Section 3. Then, analysis of results and hypotheses testing were discussed in Section 4.
Finally, Section 5 draws conclusions and provide recommendations for future research.
2. Literature Review
This research paper seeks to investigate the relationship between incentives/rewards,
in their different forms, and employee performance through the mediating role of job
satisfaction. The focus of the research is on employees working in the Saudi Arabian
industrial sector. Thus, it examines the literature of the three variables employed in this
research: the independent variable (incentive systems), the mediating variable (employee
job satisfaction), and the dependent variable (employee performance). Each main variable
is defined, and relationships between the main variables are derived. Finally, based
on these relationships, research hypotheses are developed and presented at the end of
each subsection.
2.1. Incentives and Rewards and Employee Performance

Several studies have analyzed employee performance and the role incentives play in
that dynamic relationship [25,29]. Much of the previous research indicated that organiza-
tions rely heavily on reward systems to retain and encourage people and to achieve high
levels of performance. However, diverse theories exist in the literature regarding these
variables which have been constructively developed and empirically tested. For example,
agency Theory is a crucial concept in this field. With regard to monetary incentives, one
of the influential theories is performance-related pay (PRP) which is a tool designed to
raise employee motivation and performance [30,31]. Other additional main theories have
contributed to the understanding of the relationship between incentives and motivation.
One is Expectancy Theory, which is the most widely used analytical framework for de-
termining whether a pay system influences motivation [32]. It demonstrates how tying
pay to individual performance might inspire employees to exert a high level of effort. This
is however contingent upon meeting three conditions: the individual must feel that s/he
can perform at the necessary level; that her/his performance will result in the intended
outcomes; and that the reward has a positive worth [33]. The other is the Reinforcement
Theory which focuses on the relationship between the desired behavior (for example, perfor-
mance) and the motivational tool (for example, pay for performance) [6,14,15]. According
to this theory, a desired behavior can be promoted by using reinforcements such as rewards
and incentives [16]. Prior research utilizing reinforcement theory [15,19], conducted a
reward–performance relationship and argued that the availability of rewards will affect a
person’s willingness to perform a task. According to [15], the external environment must be
designed positively to motivate employees and direct them to the desired behavior through
positive enforcement.
However, [34] examined the effect of financial incentives on the effort exerted by
public managers and the ways in which different types of work motivation (i.e., intrinsic,
extrinsic, and public service motivation) can moderate these effects. They showed that
financial incentives have no significant effect on managers’ efforts. Furthermore, the link
between financial incentives and managers’ effort, which was statistically insignificant
overall, is negatively influenced by participants’ intrinsic motivation, positively by extrinsic
drive, and not influenced by public service motivation.
On the other hand, [35] illustrated that intrinsic rewards, moral incentives, have a
positive and significant influence on the performance of the employee in an organization.
Their results further indicate that extrinsic rewards such as pay, bonuses, promotion, and
benefits have more effect on the job performance of an employee than moral incentives such
as career development, responsibility, recognition, and learning opportunities. Incentives
were found to be positively correlated with employee performance [36].
In today’s business environment, which is characterized by volatility, a firm’s success
is determined by the capabilities of their management to reshape its business environment
(freedom to perform independently), adopting bright approach of strategic capabilities and
ultimately the potential success of an organization is dependent upon its organizational
performance [37]. Moreover, the rapid changes in business environment in terms of
technology, consumers’ behavior and market requirements require quick response, high
productivity from employees which can be altered to discovering new opportunities in
order achieve organizational performance. In this context, the concept of employees’
performance defines the idea of the result, achieved the objective and the economic aspect
of efficiency and effectiveness [38]. In this regard, core competencies that refer to firm’s
distinctive resources and capabilities including employees Know-How capability are critical
sources of sustained competitive advantage [39]. Studies have proven that motivated
employees perform their job more effectively as reflecting their work environment, rewards
and incentives have a positive influence in performance [24,25]. That is, maintaining
highly skilled individuals who are motivated, hence rewarded, by professional human
resources systems are a vital component in achieving superior performance. On other
hand, weak system causing employees not finishing their tasks and job in an appropriate
manner or required standard, this capability issue is outside the control of an employees.
Recent studies indicated that employees who perceived compensation system are positively
contributing to organizational performance [40] and increasing their productivity [41].
A study conducted in non-western context using a single industry [42] indicated that
incentives and rewards system have a positive impact on employees’ performance.
Hypothesis (H1). Incentives and rewards have a positive influence on employee performance.
2.2. Incentives & Rewards and Job Satisfaction

Incentives are defined as the utilized tools by organization leadership to recognize
and provide structured compensation for their respective teams. Incentives can be moral or
financial and can be performance based, or time based. Flat bonuses (additional incentives)
based on achievements are another type of incentive that is widely used in professional
organizational settings [13].
The first type of incentive is monetary. Financial incentives, which are defined as
tangibles which provide support in satisfying human needs, encourage employees to do
their best, and increase the level of their competencies such as through prompt payment
of salaries, bonuses, allowances, profit-sharing and one-time rewards [34]. Financial
incentives may take the form of a lump sum payment, monthly installments, or any other
form of compensation that generates more revenue for employees, such as bonuses [12,13].
Financial incentives are distinguished by their rapid and immediate effect, which gives
employees direct feedback on their efforts and performance [13,34]. A contrary perspective
on financial incentives is that they may not be applicable to a variety of professional,
service-based tasks that are not quantifiable in terms of output but rather on the basis of
services such as library services, supervision, security, and scientific research [43–46].
The second type of incentive is non-financial, moral incentives. A moral incentive
is defined as a collection of motivations aimed at achieving emotional and psychological
balance and meeting the humanitarian needs of employees through proper treatment and
resolution of issues that may cause complaints, the application of reward and punishment
rules, the provision of systemic and entertainment services to employees, and spiritual
enhancement in the workplace [12,47]. This form of incentive creates a favorable emotional
response from employees and serves to push them to continue improving as well as making
necessary behavioral modifications [48]. Moral motivation may influence an employee’s
behavior if the employee has been educated to believe that doing so is the right, decent,
or admirable thing to do. Moral incentives are related to psychological requirements;
interest in this area has grown with the emergence of human relations theories [13]. These
intangible benefits are contingent upon companies respecting their employees’ feelings,
dreams, and aspirations [17,18]. Moral incentives may take the form of participatory
decision-making, recognition awards, training and development, and celebrations for
notable personnel, among other things. Additionally, they could take the form of a letter
of appreciation to an employee or designating them as an honorary employee in the
company [49]. Increasing an employee’s satisfaction and loyalty to their work results in
increased cooperation with their colleagues, which includes the opportunity for promotion,
recognition and appreciation of job efforts, taking on a position, career impact, participation
in decision-making, opportunities for growth and innovation, and the freedom to articulate
their opinion [50].
It is argued that moral motivations are just as essential to job satisfaction as financial
motivations [16]. Moral incentives consequently elevate the spirit of individuals through
job enrichment, vacations, health insurance, appropriate post, nature of supervision, sense
of belonging, stability, job security, participation in decision-making, promotion, trust in the

firm’s objectives, system proposals, inclusion in a panel of honor, social harmony, literarily
and morally differentiating [13].
Many studies have examined the relationship between job satisfaction and incentives
and rewards in a variety of contexts [51]. The main finding of their study is that intrinsic
rewards have a positive and significant impact on employees’ job satisfaction. For example,
studies found that intrinsic motivation and appreciation, moral incentives, play a vital role
in the satisfaction of employees rather than financial incentives [17,18,52]. However, [35]
illustrated those intrinsic rewards and moral incentives, have a positive and significant
influence on the performance of the employee in an organization. Their results further
indicate that moral incentives such as career development, responsibility, recognition, and
learning opportunities have less effect on the job performance of an employee than extrinsic
rewards such as pay, bonuses, promotion, and benefits. Employees prefer to receive
immediate monetary benefits than recognition of their work. To examine this relationship
in the Saudi industrial sectors, the researchers developed the following hypothesis:
Hypothesis (H2a). Incentives and rewards have a positive influence on job satisfaction.
2.3. Job Satisfaction and Employee Performance

Job satisfaction is an important quality in the labor market and is a useful collective
indicator of efficiency in the workplace [53]. Hoppock first proposed the concept of job
satisfaction in his book titled ‘Job Satisfaction’ in 1935. He established that job satisfaction
is a combination of psychological, physiological, and environmental factors that makes
a person arrive at the conclusion that they are happy in their job. He considered job
satisfaction to be the worker’s mental and physical feelings of contentment with their
circumstances, that is to say, the objective reaction of the worker to the work situation,
and this subjective reaction is a consequence of interpreting the operating characteristics
based on his or her reference system [54]. Incentives and rewards are considered the
most important determents of job satisfaction [55], because its link with a wide-range of
organizational outcomes including performance [56].
The literature on job satisfaction and its expected outcomes is widespread [53]. It has
been found that job satisfaction has a beneficial effect on performance, as it enhances efforts
by minimizing employees’ shirking and wasteful job tasks. Additionally, job satisfaction
is positively correlated with performance. Job satisfaction is related to people’s views
toward their work; positive attitudes toward work increase job satisfaction, whilst negative
attitudes decrease it [57]. The concept of job satisfaction may be understood in two ways:
through the lens of facet satisfaction and overall satisfaction. Facet or factor satisfaction can
be derived from a range of employment characteristics (e.g., compensation, supervisors, or
work challenges), while overall satisfaction can be derived from an individual’s internal
state [58]. Working with friendly coworkers, receiving generous compensation, and having
forgiving managers all contribute to the formation of a positive internal state [59]. It
has been indicated that intrinsic motivators connected to job content, such as Hackman
and Oldham’s job characteristics model, are critical for job satisfaction development [57].
Moreover, Economic Theory demonstrates that salary, working hours, and work patterns
all have a significant impact on job satisfaction [60].
A plethora of researchers cite factors as causes of job satisfaction in their work. Ac-
cording to [61,62], job satisfaction has several components such as satisfaction with work,
pay, supervision, quality of work life, participation, organizational commitment, and or-
ganizational climate. Despite the popular belief amongst researchers that these facets
are correlated, the fact remains that each of these facets can be thought of as an indepen-
dent construct [63]. Satisfaction with one facet does not guarantee satisfaction with all
other satisfaction facets. Despite this independence, a relationship between demographic
variables with diverse satisfaction facets has been found in a number of studies [64–66].
Demographic factors such as age, education, tenure, and experience have a significant
influence on job satisfaction, making demographics an important consideration when

evaluating satisfaction.
In a study by [67], the majority of respondents believe compensation to be the most
important factor of job satisfaction. Numerous other studies including [68–71] show a
strong correlation between salary level and job satisfaction, despite the fact that these
research were mainly conducted in the hospitality industry. Through mixed methods
approach, [68] indicate that pay has a significant impact on job attitudes and satisfaction
in Hong Kong. [70] evaluate 2524 valid questionnaire responses from Spain and Portugal
and conclude that compensation is a highly significant predictor of job satisfaction in
both countries. Esen et al. [72] examine a variety of job satisfaction dimensions and sub-
variables. Their model includes prospects for job advancement, benefits, the ability to
balance personal and professional life, and well-being.
Most of the existing research concentrates on the relationship between job satisfaction
and employee performance with their results demonstrating that job satisfaction has a large
positive relationship with contextual performance, supporting individuals in promoting
their performance. Other researches provide a mixed bag of results, namely, both negative
and positive associations between these two factors. According to a study conducted by
Sousa-Poza, workforce performance increased because of increased job satisfaction practi-
cally in women [73], employees’ satisfaction has a positive influence on performance and
employees’ well-being among frontline staff [74], it results in increasing productivity, orga-
nizational responsibility, and physical and mental health, all of which contribute to increase
employees’ performance and overall organizational success [75]. Another study examined
the relationship between individual characteristics and frontline staff performance and
job satisfaction and reveals that these two variables have a favorable correlation [76]. The
relationship between employees’ job satisfaction and customer-oriented behavior has been
examined [77,78]. These studies report that employee job satisfaction has a significant effect
on employee customer-oriented behavior (job performance).
On the other hand, according to [79], who conduct their research in the banking indus-
try, a relationship exists between specific job features, sociodemographic parameters, and
employee job performance and there is insignificant effect of job satisfaction on employees’
performance. Researchers [80] report that there is less evidence of a strong association
between satisfaction and output.
Despite the findings from these studies, the majority of researchers support the premise
that satisfaction results in employee performance and confirm that job satisfaction has
a positive effect on performance and substantiate the claim that understanding how to
improve employee satisfaction is just as critical for an organization as understanding how
to improve employee performance. Therefore, the proposed hypothesis is:
Hypothesis (H2b). Employee’s job satisfaction has a positive influence on employee’s performance.
2.4. Employee Performance

Employee performance is catalyzed by the type of reward system in place within
organizations [81]. A study proposes that employee performance is a measure of an
employee’s financial or other outcomes that is directly related to the organization’s success
and achievement [82]. Employee performance is defined in an organizational setting
as the extent to which an organizational member contributes to the achievement of the
organization’s goals [83]. Organizations that do not have an effective incentives and
rewards system will be faced with challenges such as low staff morale, ineffective employee
performance, or a high employee turnover rate [84]. Organizations can assess employee
performance by analyzing the quantity and quality of output, as well as the timeliness and
productivity of work [85]. Employees’ level of motivation, behaviors, and attitudes toward
their organization are factors that influence their perception about the organization, as such,
their actions are critical to the society, management and overall organizational success [86].
That is, employees’ actions and behavior have an effect on the organization’s reputation.
Successful supervision, training & development, and empowerment of employees are

critical components of an organization’s performance, Consequently, the employee’s results
can be quantified using indicators that describe their performance pattern over time [87].
One way that employee performance can be measured is by productivity, which is
defined as the duration over which goods or services can be produced. It can also be
quantified; in which case it is treated as a variable [88]. Employees’ productivity is a
measure of an organization’s overall success in employing its labor, equipment, and capital
to convert employees’ efforts into usable output [89]. It has been proven that the contextual
performance and task performance behavior referring to job description independently
contribute to an organization’s performance as a whole [90], affecting employees’ rewards
over the time [91]. Performance has a critical input in the incentives and rewards system,
because when employees perform at a high level, they expect adequate payment in return.
If employees are unable to accomplish their goals and exhibit poor performance within an
organization, and at the same time are not incentivized to perform, they will experience
dissatisfaction [92].
Previous research have indicated a positive influence of incentives and rewards on
performance [21–25]. Thus, the rewards system performs a motivational role in increasing
productivity and employees’ job performance in order to achieve organizational goals.
In the same line, [17,18,52] postulated that a developed reward and incentives system
is inevitable to be implemented for achieving job satisfaction and subsequently high
performance.
Researchers, therefore, have directed the attention towards studying potential interven-
ing variables to this relationship. Many factors could potentially add to the understanding
of the relationship between incentives and performance. Such potential factors may include
for example: motivation. In [93], motivation as a mediating factor was examined and they
found that employee’s motivation significantly mediates the association between intrinsic
rewards and the employees’ performance. Several researchers advocated the impact of
rewards on job performance through the employees’ behavior such as job satisfaction. For
instance, [94] examined the mediating effect of job satisfaction between motivation, re-
wards, and job performance. Their findings indicate that the relationship between rewards,
motivation, and employees’ job performance is more powerful through job satisfaction.
Hence, it can be predicted that the relationship between incentive and rewards system
and employees’ performance would be mediated through job satisfaction. Hence, this
research aims to investigate the mediating role of job satisfaction on the relationship
between incentives and rewards systems and employees’ performance in Saudi Arabia. To
facilitate this investigation, it was hypothesized:
Hypothesis (H3). Job satisfaction mediates the relationship between incentives/rewards systems
and employee’s performance.
3. Methods and Materials

The current research aims to explore the relationship between incentive/rewards and
employee’s performance through the mediating role of job satisfaction in the Saudi context.
Using a quantitative method is suitable for research purposes. The sample was selected
from full-time employees working in the largest region of the Kingdom, the Eastern Region,
where the diversity of the industry provides a good representation of the whole country.
Data were collected from January to March 2022 via a questionnaire developed for this
study using online Google Forms.
Previous research investigated a relevant relationship through the quantitative ap-
proach and supported the credibility and validity of the instrument used to measure the
relevant constructs [95,96]. Data for this research was gathered using four instruments and
compiled into one survey questionnaire (Supplementary Materials). The first section was
devoted to collecting data on subjects’ personal characteristics, while the other sections
were used to measure the research variables: incentive/rewards, employee’s performance,
for this study using online Google Forms.
Previous research investigated a relevant relationship through the quantitative ap-
proach and supported the credibility and validity of the instrument used to measure the
relevant constructs [95,96]. Data for this research was gathered using four instruments and
Sustainability 2023, 15, 3415 compiled into one survey questionnaire (Supplementary Materials). The first section9 was of 22
devoted to collecting data on subjects’ personal characteristics, while the other sections
were used to measure the research variables: incentive/rewards, employee’s performance,
and
and job
job satisfaction.
satisfaction. The
The researchers
researchers ensured
ensured thethe confidentiality
confidentiality and and clarity
clarity of
of the
the survey
survey
questions
questions and how appropriate it was for use in the targeted space, the Saudi industrial
and how appropriate it was for use in the targeted space, the Saudi industrial
sector.
sector. The
The length
length of
of the
the survey
survey was
was also
also carefully
carefully maintained
maintained to toensure
ensurethat
thatparticipants’
participants’
interest
interest would be preserved. Distribution techniques used to facilitate collection
would be preserved. Distribution techniques used to facilitate data were
data collection
social networking and the snowballing amongst employees. The Saudi
were social networking and the snowballing amongst employees. The Saudi convenience convenience sam-
pling technique
sampling was adopted
technique for cultural
was adopted homogeneity
for cultural homogeneityand accessibility purposes.
and accessibility More
purposes.
than 300 questionnaires were distributed, 216 were returned and eligible
More than 300 questionnaires were distributed, 216 were returned and eligible for data for data analysis.
The researchers
analysis. therefore concluded
The researchers that the data
therefore concluded wasthe
that adequate
data was foradequate
Statisticalfor
analysis due
Statistical
to the large sample size and normality, through two-step Structural Equation
analysis due to the large sample size and normality, through two-step Structural Equation Modeling—
the measurement
Modeling—the model or confirmatory
measurement factor analysis
model or confirmatory factorand structural
analysis model through
and structural model
SPSS AM`OS.
through SPSS AM‘OS.
Each construct
construct was
was measured
measured through
through aa set of instruments
instruments recorded
recorded on a five-point
Likert type scale (see Section 3.1 andand Appendix
Appendix A A for
for details).
details). Reliability,
Reliability, factor
factor loadings,
loadings,
and goodness-of-fit for each scale of the study were conducted, and quantitative analysis
of the empirical
empirical data
data was
was carried
carried out
out to
to diagnose
diagnose thethe relationships
relationships among
among thethe variables.
variables.
Moreover, SEM allows to concurrently test the mediating hypothesis, rather than separate separate
regression analyses for testing them [97].
3.1. Research
3.1. Research Model
Model and
and Instrument
Instrument
Following the discussion
Following the discussion of of the
the theoretical
theoretical background
background andand related
related literature,
literature, this
this
research proposes
research proposes anan integrated
integrated model
model byby using
using incentive/rewards
incentive/rewards asas independent
independentcon-con-
structs which
structs which areare predicted
predicted to
to influence employees’ performance
influence employees’ performance (dependent
(dependent construct),
construct),
also job
also job satisfaction
satisfaction was
was predicted
predicted toto facilitate
facilitate the
the relationship
relationship between
between thethe independent
independent
and dependent constructs (see Figure
and dependent constructs (see Figure 1). 1).
Figure
Figure 1.
1. Hypothesized
Hypothesized Model
Model Proposing
Proposing the
the Direct
Direct and Mediating Relationships.
and Mediating Relationships.
The data for this study were gathered from one survey with four sections. The
first section, which established the characteristics of the respondents, was created by
this research’ authors. The other sections of the survey required participants to rate
their levels of incentives and rewards systems (IR), employee performance measures
(PM), and job satisfaction (JS) preferences with regard to differing dimensions of their
experiences of working in the industry. The questionnaire was designed using a five-point
Likert scale (1 = strongly disagree; 2 = disagree, 3 = Neither agree nor disagree, 4 = agree,
and 5 = strongly agree). The instruments used in the current study mostly showed good
reliability scores of more than 0.8.
The second section, concerning incentives and rewards (IR), contains 10 questions
adopted from several reliable studies [47,98,99]. An example question was (Financial
incentives are important to me and to my desire to excel at my job).
Section three, the employee performance measures (PM) section, was dedicated to
measuring respondents’ impressions of their employers’ performance and the effect of
incentives on performance from their perspective. It was adopted from research con-
ducted by [95,99]. This section contains four questions about the perception of employee
performance. An example question was (I have a drive to achieve more when I am moti-
vated morally).
Lastly, section four, the job satisfaction (JS) section, measures the degree of satisfaction
of employees with the job itself, their position and independence within their work environ-
ment, and with incentives provided in their company. The measurements were conducted
through the short form of the Minnesota Satisfaction Questionnaire proposed by [100,101].
This is in line with many researchers who use this well-established and highly reliable
questionnaire to measure job satisfaction in their respective studies. This section measures
the degree of satisfaction of participants through five questions answered in Likert scale
format. An example question was (What is your level of satisfaction with regard to financial
incentives provided by your company).
3.2. Data Analysis Procedure

A two-step modelling technique which is recommended for conducting structural
equation modeling (SEM) was developed by [102]. Thus, the following steps were followed
to carry out the data analysis: In the first stage, each latent construct and its respective
indicators were identified. Items’ reliability and their respective loadings on their appro-
priate latent constructs were assessed independently to test the reliability, factor loadings,
confirmatory factor analysis, constructs correlations covariances and significance, and
goodness-of-fit for each scale of the study.
In the second stage, the structural model, the overall relationships between constructs
were focused on by specifying how each construct appears in the model. The logic behind
this two-step approach is to attain an accurate representation of the reliability of the
measurements whilst avoiding the interactions between measurements and the structural
model [103].
4. Analysis of Results and Hypotheses Testing

In this fourth section of the current study, descriptive statistics will be explained, and
Construct reliability is assessed using Cronbach’s Alpha. The dynamic between the three
main variables in this research and the four developed hypotheses are analyzed and tested
using established statistical analysis tools such as SEM, Confirmatory Factor Analysis (CFA)
using IBM SPSS AMOS 22.0.
4.1. Descriptive Statistics

Descriptive statistics presented in the first section of the questionnaire (Table 1), show
that the respondents, was dominated (>50%) by those in the 30–39 years age group, which is
representative of the Kingdom’s population’s median age (GASTAT, 2021). The majority of
respondents have 6–15 years of professional experience, which provides a considerable and
meaningful perspective of employment within the industry. In addition, >67% of respon-
dents hold undergraduate degrees or higher. In terms of concentration within the industry,
oil and gas (primary and secondary industrial sectors) dominate the sample population
with >61% representation, followed by general industrial services and manufacturing with
13% and 10%, respectively. Other subsectors, tertiary industrial sectors’ representation
varied between 1–3% such as the banking & finance, construction, science and tech, health,
hospitality industries.
Table 1. Socio-demographic characteristics.
Variable (n = 216) Frequency %

Age (years)
<30 31 14.4
30–39 110 50.9
40–49 27 12.5
50+ 48 22.2
Education
High school 38 17.6
Diploma 33 15.3
Undergraduate 97 44.9
Masters 44 20.4
Doctorate 4 1.9
Gender
Male 203 94.0
Female 13 6.0
Industry
Banking & Finance 3 1.46
Construction 1 0.46
Science and tech 6 2.74
Health 8 3.74
Hospitality 1 0.46
Industrial services 29 13.4
Manufacturing 23 10.6
Mining 2 0.92
Oil & Gas 133 61.5
Project management 3 1.46
Other 7 3.26
Experience
1–5 years 27 12.5
6–10 years 62 28.7
11–15 years 102 47.2
16+ years 25 11.6
4.2. Reliability of Constructs and Correlation Test

Correlation coefficients and Cronbach’s Alpha (Table 2) for all study variables and
latent constructs were derived and tabulated (including the modified latent constructs).
Construct reliability was assessed using Cronbach’s Alpha, which was found to be above
0.6—an accepted cutoff point—for each construct in our study [104]. Pearson’s correlation
coefficient magnitude revealed that there is a strong correlation between the three constructs
“IR”, “PM”, and “JS”. No weak or moderate correlation was found between latent constructs
at the 0.000 significant levels.
Table 2. Reliability of constructs & correlation coef.
Latent Variables Mean SD Cronbach’s Alpha (α) EJS PM

Incentive Rewards (10-items) 3.81 0.63 0.81 0.87 *** 0.76 ***
Incentive Rewards-modified (7-items) 3.60 0.78 0.84 0.89 *** 0.85 ***
Performance Measures (4-items) 4.05 0.56 0.60 0.84 ***
Employee Job Satisfaction (5-items) 3.49 0.82 0.85
Note: *** p < 0.001.
4.3. Measurement Model

Confirmatory Factor Analysis (CFA) was computed using AMOS 22.0 to test the
measurement models. As part of confirmatory factor analysis, factor loadings were assessed
for each item. The indicators of all three constructs, Performance Measure (PM), Job
Satisfaction (JS), and Incentives and Rewards (IR) loaded adequately on their respective
factors with no loading below the 0.6 cutoff point [105] (Tables 3–6).
Table 3. Dimensionality of Performance Measure.
Items (Total Variance Explained 47.63%) Factor Loadings

PM 1 0.74
PM 2 0.72
PM 3 0.64
PM 4 0.60
Table 4. Dimensionality of Employee Job Satisfaction.

JS 1 0.80
JS 2 0.77
JS 3 0.84
JS 4 0.74
JS 5 0.79
Table 5. Dimensionality of Incentives/Rewards.

IR 1 0.23
IR 2 0.24
IR 3 0.65
IR 4 0.60
IR 5 0.76
IR 6 0.76
IR 7 0.75
IR 8 0.52
IR 9 0.67
IR 10 0.74
Table 6. Dimensionality of Incentives/Rewards (adjusted for modified model).

IR 3 0.65
IR 4 0.63
IR 5 0.78
IR 6 0.76
IR 7 0.74
IR 9 0.68
IR 10 0.78
Pertaining to the Incentives and Rewards construct, three items loaded relatively
inadequately, and after reevaluating the survey and looking at the literature to reconcile
these low loadings (below 0.5, see Tables 5 and 6), it was decided to drop them. The new
factor loadings with the total variance explained (the latent construct IR captured variance
of the seven remaining IR items) were tabulated, demonstrating how much the parameters
and fit were enhanced.
The model-fit measures were used to assess the model’s overall goodness of fit (Chi-
Square, CMIN/df, GFI, CFI, TLI, SRMR, and RMSEA) and all of the values were within the
appropriate acceptance levels [106,107]. The three factors of the modified model, Figure 2,
(Performance Measure, Incentives and Rewards, and Job Satisfaction) all yielded an ade-
Sustainability 2023, 15, 3415 quate fit with the following parameter values: Chi-Square = 147.93, p = 0.000, CMIN/df =
13 of 22
1.59, GFI = 0.93, CFI = 0.96, TLI = 0.95, SRMR = 0.0447, and RMSEA = 0.052.
The Scale fit indices show that Performance Measure is an adequate fit (Chi-Square =
177. 31,
TheCMIN/df
model-fit=measures
4.15, GFI were
= 0.91, CFIto= assess
used 0.92, TLI
the=model’s
0.90, SRMR
overall= 0.032, and of
goodness RMSEAfit (Chi-=
0.071), the scale fit indices show that Incentives and Rewards is an
Square, CMIN/df, GFI, CFI, TLI, SRMR, and RMSEA) and all of the values were within adequate fit (Chi-
Square = 254.32, acceptance
the appropriate CMIN/df = levels
5.54, GFI = 0.92, The
[106,107]. CFI =three
0.94,factors
TLI = 0.91,
of theSRMR = 0.07,
modified and
model,
RMSEA = 0.064) and the scale fit indices show that Job Satisfaction is an adequate
Figure 2, (Performance Measure, Incentives and Rewards, and Job Satisfaction) all yielded fit (Chi-
Square = 148.46,
an adequate fit CMIN/df
with the =following
4.52, GFI =parameter
0.9, CFI = 0.91, TLI =Chi-Square
values: 0.92, SRMR== 147.93,
0.04, andp RMSEA
= 0.000,
=CMIN/df
0.048). = 1.59, GFI = 0.93, CFI = 0.96, TLI = 0.95, SRMR = 0.0447, and RMSEA = 0.052.
Figure 2. The
The Model of the Study.
The Scale fit indices show that Performance Measure is an adequate fit
(Chi-Square = 177. 31, CMIN/df = 4.15, GFI = 0.91, CFI = 0.92, TLI = 0.90, SRMR = 0.032,
and RMSEA = 0.071), the scale fit indices show that Incentives and Rewards is an adequate
fit (Chi-Square = 254.32, CMIN/df = 5.54, GFI = 0.92, CFI = 0.94, TLI = 0.91, SRMR = 0.07,
and RMSEA = 0.064) and the scale fit indices show that Job Satisfaction is an adequate fit
(Chi-Square = 148.46, CMIN/df = 4.52, GFI = 0.9, CFI = 0.91, TLI = 0.92, SRMR = 0.04, and
RMSEA = 0.048).
4.4. Hypotheses Testing Results

The model was run using bootstrapping procedure in AMOS (performing 5000 resam-
ples). Additionally, statistical significance for the indirect effect was determined at 95 per
cent bias and accelerated confidence intervals which is a standard in social sciences [97].
According to our data and the calculation parameters applied, our results demonstrated
the following: (see Table 7).
Table 7. Mediation Analysis.
Latent Variables Direct Effect Indirect Effect p

(H1) IR → PM 0.10 0.77
(H3) IR → JS → PM 0.67 0.04
(H2b) JS → PM 0.74 0.04
(H2a) IR → JS 0.91 0.00
Hypothesis 1 is not supported. There is an insignificant direct effect between our

independent variable Incentive Reward and our dependent variable Performance Measures.
The standardized coefficient for direct effect (H1) of IR on PM (excluding the effect of the
mediator JS) is insignificant with (β = 0.1; p > 0.05 = 0.77), a finding that indicates that
hypothesis 1 is not supported, and the IR → PM relationship is insignificant.
Hypothesis 2a is supported. There is a significant direct effect between our indepen-
dent variable of focus, Incentives and Rewards, and our mediating variable of interest, Job
Satisfaction. The standardized coefficient for the direct effect (H2a) of IR on JS is significant
with (β = 0.91; p < 0.05 = 0.00). This means that hypothesis 2a is supported, and the IR →
JS relationship is indeed significant.
Hypothesis 2b is supported. There is a significant direct effect between our mediat-
ing variable, Job Satisfaction, and our dependent variable, Performance Measures. The
standardized coefficient for the direct effect (H2b) of JS on PM is significant with (β = 0.74;
p < 0.05 = 0.04). This means that hypothesis 2b is supported, and the JS → PM relationship
is indeed significant.
Hypothesis 3 is supported. There is a significant indirect effect (mediation effect by Job
Satisfaction) between IR and PM (β = 0. 67; p < 0.05 = 0.04). We can say that incentives and
rewards have a significant indirect effect on performance measure through the mediator
job satisfaction. So, the mediation effect here is said to be a full-mediation effect because
the direct effect IR → PM is insignificant, nevertheless, the indirect effect IR → JS → PM
is significant.
5. Discussion and Conclusions

The present study investigated whether incentive and rewards have a positive effect
on employees’ performance through the enhancement of job satisfaction. An interesting
result was that an insignificant direct effect has been found between incentive and rewards
and employees’ performance; therefore, this hypothesis (H1) did not receive statistical
support from our data. Although this result is in line with some previous research [35]
while contradicting others [52], a possible explanation for this might be related to gender
differences as most of the participants in this study were males (94%). This could have
influenced the outcome since the Saudi collectivistic culture dictates that each gender has
distinctive roles, and that males are the primary financial supporters of their families;
hence they tend to be more concerned and motivated with financial well-being rather
than intangible or moral incentives. This finding was also reported in [108], where the
performance of males was significantly improved by monetary and mixed incentives.
The results support a positive relationship between incentives and rewards and job
satisfaction (H2a) and a significant direct effect between job satisfaction and employees’
performance (H2b). More importantly, the mediating role of job satisfaction in the rela-
tionship between incentive and rewards, and employees’ performance was significant
(H3). This means that incentives and rewards have an indirect effect on employee’s per-
formance through job satisfaction. In other words, an increase in incentives and rewards
increases job satisfaction thus increasing employee’s performance. The reason behind the
existence of this facilitation is that when employees are properly incentivized on a regular
and systematic basis, their level of job satisfaction increases (H2a). This was the highest
direct effect found for a relationship with a standardized coefficient of 0.91. Consequently,
when employees are satisfied with their jobs, they tend to perform better because they
believe in what they do (H3), which was the second highest direct effect relationship with a
standardized coefficient of 0.74.
The present study makes three important contributions: First, the added value of
the present study is that it avoids the traditional linkage in the Incentives and Rewards–
Employees’ Performance relationship by highlighting the critical mediation effect of job
satisfaction. The findings of this research are in agreement with a number of previous
published research work, and in partial disagreement with other research findings in the
literature. The findings of this study are in agreement with [13] who found that incentives
and rewards in themselves do not influence performance. However, a mediating variable
such as job satisfaction or job motivation is needed [94].
The current study significantly demonstrated the importance of non-financial, moral
incentives in achieving job satisfaction. This finding was supported by [109] in that intrinsic
reward being positively related to employee satisfaction, where the latter is serving as a
mediator between intrinsic reward and employee performance. On the other hand, [110]
investigated the relationship between reward systems, employee motivation and employee
performance in car dealers in Bahrain and found that both direct and indirect (financial and
non-financial) incentives and rewards had a significant direct relationship on employee
performance notwithstanding a mediating variable. His findings are not supported by this
research findings on Saudi industrial sector employees. Nonetheless, support was found
in the existence of a relationship between employee job satisfaction and performance, a
common conclusion between this research and that of [110].
Under the Incentives and Rewards variable, the three highest relevant measurement
instruments were found to be IR5, IR6, and IR10. IR5 had the highest relevance evi-
dent by a factor loading of 0.78, where ~64% of employees within the sample testified
through their responses that sufficient monetary incentives were provided, and 67% agreed
that performance-based incentives were paid (IR6, factor loading of 0.76. However, only
42% indicated that they were further incentivized through additional bonuses for profes-
sional, distinguished performance (IR10, factor loading of 0.78). According to the results,
this research finds that organizations within the Saudi industrial sector invest in basic,
performance-based incentives and rewards systems that are acceptable by their employees.
The findings show that reward systems providing basic needs as well as performance-based
incentives are established within major corporations in the industrial sector, indicating a
high degree of satisfaction with employment conditions related to compensation enhance-
ment measures (incentives and rewards). However, the area where Saudi industrial sector
companies are lacking is in providing additional monetary rewards for professionalism.
Moreover, under the performance construct, the highest relevant measurement instru-
ments were found to be PM1 with a factor loading of 0.74. However, employee performance
effects with respect to incentivization were measured by two instruments, one for financial
incentives (PM3, factor loading of 0.64), and the other for moral, non-financial incentives
(PM4, factor loading of 0.60). Both results showed that nearly 89% of respondents, a
dominant majority, agreed that their performance was influenced by being incentivized or
motivated. The results from these two instruments do not contradict the unsupported H1,
the hypothesized significant positive relationship between incentive system and perfor-
mance measures, rather they reflect the emotionally influenced perceptions of employees
to financial and moral incentives as isolated dimensional responses, irrespective of the low
significance level of the overall relationship between Incentives and rewards and Perfor-
mance Measures variables. The statistical analysis realized and successfully eliminated
the possibility of a Type-I error due to the skewed results of PM3 and PM4, which were
extremely skewed to the left side of the Likert scale, towards strong agreement.
The survey expanded to measure satisfaction with forms of moral incentives, other
measurement instruments included in the survey section tested factors of relevance to the
dependent variable, incentives and rewards, including deserved promotions, respect of
opinions and aspirations, and provision of transportation allowance, all of which were
>55% in agreement, which further establishes that companies in the industrial sector in
Saudi Arabia provide competitive benefits to employees but that there is a need for further
enhancement to remain competitive against the rapidly increasing competition leading in
the sector.
Second, the added value in this study is in the context, source and the size of the data.
The study explores the research model in Saudi Arabia, a country with a cultural profile
different than the Western context where most previous studies were conducted. This study
responded to the scarcity of research in such context, hoping that it provides theoretical and
practical insights for scholars and practitioners. Moreover, it could be an advantage that the
data was collected from a big and wide sector (i.e., industrial sector) where many local and
global talents have landed. Therefore, the study sample representation and implications
are better compared to other sectors with narrow employment size and less effect to the
overall economy.
Third, it is interesting that when job satisfaction acts as a mediator, the influence of
incentives and rewards system on employees’ performance is significant. Job satisfaction
seems to be an important mediator that contributes to employees’ performance. That is,
employees’ productivity becomes visible and enhanced when their levels of job satisfaction
are high and supported by managers’ good incentives and reward systems. This finding
suggests that the relationship between reward and performance is complex and encourage
researchers to further examine potential intervening variables in future studies.
6. Limitations and Suggestions for Future Research

This study has important findings which provided scientific contributions and practi-
cal insights. However, akin to any other study, this study has a number of limitations which
need to be addressed. First, making any generalizations based on a sample of 216 partici-
pants is difficult. Although this number of responses was due to difficult accessibility and
obtaining answers from full-time employees.
Second, the majority of the research sample were males (94%). Although this reflects
the nature of employment in the industrial sector in Saudi Arabia which is male dominated,
the results may not apply to women workers. As mentioned earlier, this also might
explain why respondents in this study tend to be overly concerned, hence motivated,
with financial well-being rather than intangible, moral incentives. The culture of an Arab
society is that a man is mainly responsible for the financial security of his family, which
in comparison, might leave working women more concerned, and motivated with non-
monetary incentives.
There were similarities between the attitudes expressed by the participants in this
study and those described by [108]. These authors found that men performed 12.86%
better with monetary incentives than nonmonetary, which was statistically significant at
the 10% level. In comparison, when a female sample was used, financial incentives had
little-to-no effect on women’s performance, while non-monetary incentives resulted in a
15.95% increase in performance. However, a larger sample size including other economic
cities in the country may provide more definitive and wide-ranging results in order to
confirm these findings, validate and extend our model used in this study. Moreover, using
a qualitative approach in future studies may provide deeper understanding of this matter.
Another limitation is the concentration of survey respondents in private and semi-
private companies in the Saudi industrial sector, future studies including governmental
entities are encouraged. Future researchers are also encouraged to test other mediating
variables such as employee self-motivation and drive, tenure, and loyalty. Moreover, job
nature-based incentives such as proximity to family, i.e., the geographic location of the job,
and applicability of the post being fully or partially virtual are intriguing variables to be
considered in future research.
7. Theoretical and Practical Implications

The outcomes of this research have theoretical and practical significance, suggesting
critical theoretical implications for incentive management systems. Firstly, this study
advances our knowledge of the mechanism by which incentive and reward systems affect
employee performance by examining the mediating role of employee job satisfaction as
a link between incentive and reward systems and employee performance. By doing so,
the current study avoids the traditional linkage in the relationship of these variables by
highlighting the critical mediation effect of job satisfaction in causal explanation. According
to the findings of this study, firms can increase employee job satisfaction through the use of
incentives and rewards, which subsequently enhances employee performance. Analyzing
employee job satisfaction as a mediator allows for a better understanding of how and why
different forms of incentives and rewards enhance employee behavior at work.
Secondly, this study was conducted in a country with a thriving economy, the Kingdom
of Saudi Arabia, that has scarcity of research in this context. Thus far, little research
has been conducted on incentive and reward management systems and their impact on
employee performance in the Saudi industrial sector. Nevertheless, the study was able to
find applicable relationships between different reward forms and employee performance
through a mediating variable. This finding encourages more research to find the appropriate
employee retention and acquisition tools that suit the Saudi market.
The practical implications of our study include: First, the verification that incentive
and reward systems are positively viewed as beneficial in improving employee perfor-
mance. Second, the research affirms that incentives and rewards are critical in motivating
employees. Additionally, because this study demonstrates that incentives and awards have
a considerable, indirect influence on employee performance, it is proposing that firms lay
the foundations for conditions conducive to improving employee performance and strive
to improve employee job satisfaction. Moreover, because incentives and rewards have
a favorable effect on job satisfaction, employers are encouraged to implement a rewards
management system (financial and non-financial) that incentivizes employees to achieve
their goals and fosters maximum job satisfaction. Another technique to motivate employees
is to establish challenging yet achievable goals which gives an intrinsic incentive (intangible
award, i.e., appreciation, promotion, and authority). Firms should require all employees to
set personal growth goals for work, education, and project completion and provide training
to employees on how to develop quantifiable goals and encourage them to do so on a short-
and long-term basis. Allowing employees to contribute to corporate goals helps them feel
connected to a broader purpose. Employees earning incentives and rewards for meeting
goals, and setting new ones, aids in boosting their job satisfaction.
Supplementary Materials: The following supporting information can be downloaded at https:

//www.mdpi.com/article/10.3390/su15043415/s1, File S1: The Research Survey.
Author Contributions: Conceptualization, I.G.A., M.A.K., M.F., A.A., S.A. and J.A.; supervision,
I.G.A. and M.A.K.; methodology, I.G.A., M.A.K. and J.A.; software, M.F. and S.A.; validation, I.G.A.,
M.A.K., M.F., A.A., S.A. and J.A.; formal analysis, I.G.A., M.F., A.A and J.A.; investigation, I.G.A.,
M.A.K., M.F., A.A., S.A. and J.A.; resources, I.G.A., M.A.K., M.F., A.A., S.A. and J.A.; data curation,
I.G.A., M.A.K., M.F., A.A., S.A. and J.A.; writing—original draft preparation, I.G.A., M.A.K., M.F.,
A.A., S.A. and J.A.; writing—review and editing, I.G.A., M.A.K., M.F., A.A., S.A. and J.A.; visual-
ization, I.G.A., M.A.K., M.F., A.A., S.A. and J.A. All authors have read and agreed to the published
version of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflict of interest.
Appendix A
Dimension Variable Code Source(s)
1. Financial incentives are important to me and to
my desire to excel at my job.
2. Moral incentives (non-financial) are important
to me and my desire to excel at my job.
3. Deserved promotions are provided consistently
in the company I work for.
4. Opinions and aspirations are respected in the
company I work for. IR 1
5. The company I work for provides sufficient IR 2
monetary incentives to meet the requirements IR 3
of life. IR 4
Obeidat, O. (2015) [47]
6. The company I work for provides incentives for IR 5
1 Incentives and rewards Barongo, E. K.
employees that are based on performance. IR 6
(2013) [99]
7. The company provides bonuses for workers IR 7
according to their roles and consistent with IR 8
their level of performance. IR 9
8. The company provides overtime payment to IR 10
staff for working after hours.
9. The company provides sufficient transportation
allowance for those who live far areas away.
10. The company provides additional financial
incentives to employees when they work
professionally.
1. The level of employee output or productivity in

your company is generally high.
2. Your company’s internal work processes and PM 1 Hussein, P.D.S.S.;
performance are effective and productive. PM 2 Hazzaa, L.H.
2 Employee Performance 3. I have a desire to work more efficiently when I PM 3 (2021) [100]
am financially motivated. PM 4 Zhang, J. (2020) [95]
4. I have a drive to achieve more when I am
motivated morally.
1. In general, what is your level of satisfaction

with your job?
2. What is your level of satisfaction with regard to
financial incentives provided by your
company?
3. What is your level of satisfaction with regard to JS 1 Hussein, P.D.S.S.;
non-financial incentives provided by your JS 2 Hazzaa, L.H.
3 Job Satisfaction company? JS 3 (2021) [102]
4. What is your level of satisfaction with the JS 4 Obeidat, O. (2015) [47]
amount of independence in performing your JS 5 Zhang, J. (2020) [95]
duties (freedom to perform independently and
apply judgment with minimal supervision)?
5. What is your level of satisfaction with new
skills development (on-job and classroom
training) that improve your performance?
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Supplementary Materials: The Research Survey
Questionnaire
Dear industrial sector employee,
The attached survey is carried out as part of a research project entitled “The effect of corporate incentive
and rewards systems on employee performance in the Saudi industrial sector” undertaken as part of an
effort to explore areas of improvement in relation to incentivizing employees. Also, it aims to find
associations between types of incentive used and employee performance. The study aims to assess the
following aspects:
a) Incentive and rewards system measures

b) Impression of employee performance measures
c) Employee job satisfaction measures
This survey is an important part of an on-going study. Your cooperation by answering the questions in this
survey will be greatly appreciated. Please select your responses as per the measures provided. All
information will be used strictly for humanitarian effort development purposes, and responses will remain
confidential. No individual will be specifically named in the project report.
Your cooperation and help are highly appreciated.
Should you have any questions or concerns, please contact us at: I.alkandi@seu.edu.sa
Best Regards,
Section One: Personal Characteristics
Select the subgroup you are associated with the most
Age
Under 30
30-39
46-49
50+
Education
High school
Diploma
Bachelors
Masters
Doctorate
Gender
Male
Female
Experience Level
1-5 years
6-10 years
11-15 years
16-20 years
21+ years
Industry Sector
Science & technology research centers
Mining
Oil & Gas, Petrochemicals
Product manufacturing
Industrial service industry (design, drilling, maintenance, etc.)
Other
Section Two: Incentives/Rewards
1. Financial incentives are important to me and to my desire to excel at my job

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree
2. Moral incentives (non-financial) are important to me and my desire to excel at my job

3. Deserved promotions are provided consistently in the company I work for
4. Opinions and aspirations are respected in the company I work for

5. The company I work for provides sufficient monetary incentives to meet the requirements of
life.
6. The company I work for provides incentives for employees that are based on performance.
7. The company provides bonuses for workers according to their roles and consistent with their
level of performance.
8. The company provides overtime payment to staff for working after hours.
9. The company provides sufficient transportation allowance for those who live far away.
10. The company provides additional financial incentives to employees when they work
professionally.
Section Three: Performance measures
1. The level of employee output or productivity in your company is generally high

2. Your company’s internal work processes and performance are effective and productive
3. I have desire to work more efficiently when I am financially motivated
4. I am driven to achieve more when I am motivated morally

Section Four: Employee Job Satisfaction
1. In general, what is your level of satisfaction with your job?
A. Strongly Satisfied B. Satisfied C. Neutral D. Dissatisfied E. Strongly Dissatisfied
2. What is your level of satisfaction with regards to financial incentives provided by your
company?
3. What is your level of satisfaction with regards to non-financial incentives provided by your
company?
4. What is your level of satisfaction with the amount of independence in performing your duties
(freedom to perform independently and apply judgment with minimal supervision)?
5. What is your level of satisfaction with new skills development (on-job and classroom training)
that improve your performance?
Thank You!
Your help in completing the questionnaire is greatly appreciated

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sustainability

Copyright: © 2023 by the authors.

Sustainability 2023, 15, 3415. https://doi.org/10.3390/su15043415 https://www.mdpi.com/journal/sustainability

incentives [16]. Experimental studies applying reinforcement theory in the workplace

2.1. Incentives and Rewards and Employee Performance

2.2. Incentives & Rewards and Job Satisfaction

of belonging, stability, job security, participation in decision-making, promotion, trust in the

2.3. Job Satisfaction and Employee Performance

influence on job satisfaction, making demographics an important consideration when

2.4. Employee Performance

Successful supervision, training & development, and empowerment of employees are

3. Methods and Materials

3.2. Data Analysis Procedure

4. Analysis of Results and Hypotheses Testing

4.1. Descriptive Statistics

Table 1. Socio-demographic characteristics.

Variable (n = 216) Frequency %

4.2. Reliability of Constructs and Correlation Test

Table 2. Reliability of constructs & correlation coef.

Latent Variables Mean SD Cronbach’s Alpha (α) EJS PM

4.3. Measurement Model

Table 3. Dimensionality of Performance Measure.

Items (Total Variance Explained 47.63%) Factor Loadings

Table 4. Dimensionality of Employee Job Satisfaction.

Items (Total Variance Explained 61.31%) Factor Loadings

Table 5. Dimensionality of Incentives/Rewards.

Items (Total Variance Explained 39.60%) Factor Loadings

Table 6. Dimensionality of Incentives/Rewards (adjusted for modified model).

Items (Total Variance Explained 52.24%) Factor Loadings

4.4. Hypotheses Testing Results

Table 7. Mediation Analysis.

Latent Variables Direct Effect Indirect Effect p

Hypothesis 1 is not supported. There is an insignificant direct effect between our

5. Discussion and Conclusions

6. Limitations and Suggestions for Future Research

7. Theoretical and Practical Implications

Supplementary Materials: The following supporting information can be downloaded at https:

1. The level of employee output or productivity in

1. In general, what is your level of satisfaction

Dear industrial sector employee,

a) Incentive and rewards system measures

Your cooperation and help are highly appreciated.

Section One: Personal Characteristics

Select the subgroup you are associated with the most

Section Two: Incentives/Rewards

1. Financial incentives are important to me and to my desire to excel at my job

2. Moral incentives (non-financial) are important to me and my desire to excel at my job

3. Deserved promotions are provided consistently in the company I work for

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree

4. Opinions and aspirations are respected in the company I work for

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree

Section Three: Performance measures

1. The level of employee output or productivity in your company is generally high

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree

3. I have desire to work more efficiently when I am financially motivated

A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree

4. I am driven to achieve more when I am motivated morally

Section Four: Employee Job Satisfaction

1. In general, what is your level of satisfaction with your job?

A. Strongly Satisfied B. Satisfied C. Neutral D. Dissatisfied E. Strongly Dissatisfied