The Effect of Work-Life Balance on Employee Productivity: The Mediating Role of Employee Mental Health in Indonesia

Abstract

This study examines the effect of work-life balance (WLB) on employee productivity (EP), with employee mental health (MH) as a mediating variable, among workers in Indonesia. Grounded in Human Capital Theory, the research conceptualizes work-life balance as a strategic organizational investment that preserves and enhances psychological capital, thereby influencing long-term labor productivity and workforce sustainability. A quantitative explanatory approach was adopted, utilizing primary data collected through an online survey of 219 respondents selected via purposive sampling. Data were analyzed using Partial Least Squares–Structural Equation Modeling (PLS-SEM) with SmartPLS software. The measurement model demonstrated satisfactory validity and reliability, while the structural model assessed direct effects, mediation, and explanatory power. The results indicate that work-life balance has a positive and statistically significant direct effect on both employee productivity and employee mental health. However, mental health does not exert a significant direct influence on employee productivity, nor does it significantly mediate the relationship between work-life balance and productivity. The model exhibited relatively low explanatory power (R2 = 0.015 for employee productivity and R2 = 0.047 for mental health), suggesting that structural, organizational, and institutional factors beyond individual psychological variables play a dominant role in shaping productivity outcomes in the Indonesian labor market. These findings underscore the importance of work-life balance policies as mechanisms for enhancing workforce sustainability and psychological well-being, while highlighting the conditional nature of psychological capital’s contribution to productivity in emerging economy contexts. The study contributes to labor economics

and human resource management literature by integrating mental health within a Human Capital framework and offers practical implications for organizations seeking to improve employee productivity through balanced work arrangements and supportive workplace practices. Limitations, including reliance on self-reported data and the cross-sectional design, are acknowledged, along with recommendations for future research.