Building Work Engagement through Appraisal Satisfaction and Psychological Contract in the Indonesian Public Sector

Abstract

This study examines how satisfaction with performance appraisal system fosters work engagement through psychological contract among employees in the Financial and Development Supervisory Board in Indonesia. Drawing on social exchange theory (SET), we propose that employees who perceive the appraisal system as fair, unbiased, effective, and useful are more likely to believe that their organization honors implicit promises and mutual obligations, which in turn enhances their engagement at work. Data were collected through a survey from 254 civil servant in Indonesia and analyzed using partial least squares structural equation modeling (PLS-SEM). The study shows that the level of satisfaction that employees feel about the performance appraisal system is closely tied to how they view their relationship with the organization and how engaged they are in their work. When the appraisal process is experienced as fair, clear, and genuinely useful, employees feel that the organization keeps its promises, and this strengthened psychological contract helps transform positive appraisal experiences into higher work engagement. This implies that public sector organizations need not only a technically sound appraisal design, but also careful implementation through good communication, transparent procedures, and consistent follow-up, so that employees perceive the system as a real sign of organizational commitment rather than a mere administrative routine.