High Employee Turnover: Causes and Effective Solutions for Retention

Employee turnover is a big challenge for many businesses in Malaysia.

According to a 2024 study, “Employees Turnover Intention of Service Industry in Malaysia” that was published in the Selangor Business Review, 49% of Malaysian organizations face issues with turnover. In the same study, Malaysia has the third-highest voluntary turnover rate in Southeast Asia at 9.5%. 

The financial burden is significant. Studies from Society for Human Resource Management estimate that replacing an employee can cost a company 6 to 9 months of that employee’s salary.

This article will explore the key causes of high turnover and practical strategies to boost employee retention. 

 

What is employee turnover?

Employee turnover refers to the rate at which employees leave a company within a specific period, either voluntarily or involuntarily. This metric is a key indicator of workforce stability and can impact overall organizational performance.

High turnover rates often signal problems like dissatisfaction, poor workplace culture, or lack of career growth opportunities.

On the other hand, low turnover rates suggest a stable and engaged workforce. 

Turnover rates are usually expressed as a percentage and calculated monthly, quarterly, or annually. 

 

Types of turnover

Employee turnover can be categorized into different types based on the circumstances of the departure. Each providing insight into the reasons employees leave, which include:

1. Voluntary turnover (resignation)

This occurs when employees choose to leave an organization on their own. Common reasons include better job opportunities, dissatisfaction with their current role, or personal circumstances. 

Example: A sales associate resigns to take a higher-paying role in a competing company. 

2. Involuntary turnover (termination)

This happens when an employer ends an employee’s contract due to poor performance, misconduct, or organizational restructuring. 

Example: A company lays off staff due to downsizing. 

3. Avoidable turnover

Avoidable turnover involves employees leaving due to factors that could have been addressed by the employer, such as inadequate compensation or lack of career growth. 

Example: An IT specialist quits due to stagnant wages and a lack of training opportunities. 

4. Unavoidable turnover

This type of turnover is beyond the organization’s control, often due to personal or external factors. 

Example: An employee relocates because of a spouse’s job transfer or retires. 

 

Impacts of high employee turnover

High employee turnover can create significant challenges for organizations, affecting both operational and financial stability. Below are some of the key impacts:

1. Increased recruitment costs

Finding and training new employees requires significant resources.

Businesses must spend on job advertisements, recruitment agencies, interviews, onboarding, and training. Over time, these costs add up, straining budgets unnecessarily. 

2. Loss of productivity

When experienced employees leave, their knowledge and skills leave with them.

It takes time to find replacements and get them up to speed. This disrupts workflows and can cause delays in meeting deadlines or achieving goals. 

3. Reduced employee morale

Frequent departures can create uncertainty and stress for remaining staff.

They may feel overworked or question the company’s stability, leading to disengagement and even more turnover. 

4. Damage to employer brand

A high turnover rate can tarnish your reputation. Potential hires may view the company as unstable or unappealing, making it harder to attract top talent.

Negative reviews on platforms like LinkedIn or Glassdoor can amplify this problem. 

 

Common causes of high employee turnover

High employee turnover often stems from factors within the workplace that make employees feel undervalued or dissatisfied.

Identifying these causes is essential to creating an environment where employees want to stay and grow. 

Here are the most common reasons employees leave:

1. Lack of career development opportunities

Employees want to grow and advance in their careers.

When organizations fail to provide training, promotions, or opportunities to expand skills, employees may feel stagnant and seek better prospects elsewhere.

2. Poor work-life balance

Unreasonable workloads, excessive hours, or rigid schedules often lead to burnout.

Employees who feel their personal lives are compromised may look for roles offering more flexibility and balance.

3. Inadequate compensation and benefits

When salaries and benefits don’t match industry standards or employees’ expectations, dissatisfaction grows. Non-competitive pay often pushes employees to accept offers from competitors offering better packages. 

4. Toxic workplace culture

A negative work environment creates stress and dissatisfaction. It is characterized by favoritism, bullying, or ineffective leadership. Employees are less likely to stay in workplaces where they feel unsupported or disrespected. 

5. Mismatch in job expectations

When the actual job responsibilities differ significantly from what was promised during hiring, employees may feel deceived or frustrated. This mismatch erodes trust and increases turnover rates. 

How to reduce high employee turnover

Reducing employee turnover requires a proactive approach focused on understanding and addressing the needs of your workforce. Here are effective strategies to retain top talent:

1. Conduct stay interviews

Regularly check in with employees to understand what they value about their roles and what challenges they have. Unlike exit interviews, stay interviews focus on retaining current employees by addressing their concerns before they consider leaving. 

You can ask these questions during stay interviews:

• “What do you enjoy most about your role?”

This helps identify aspects of the job that keep the employee motivated and engaged.

• “What frustrates you about your job or work environment?”

Understanding pain points allows you to address issues that may push employees to leave.

• “Do you feel your skills are being fully utilized?”

This can reveal if employees feel challenged or underused, providing insights into potential career development opportunities. 

• “What changes or improvements would make your work experience better?”

This question opens the door for employees to share constructive feedback about the workplace or processes.

• “Do you see a future for yourself within this company? Why or why not?”

This can help identify whether employees feel there’s room for growth and advancement, or if they see barriers to staying long-term. 

2. Offer competitive compensation and benefits

Benchmark your salaries and benefit against industry standards to ensure they are competitive. Employees who feel fairly compensated are less likely to seek better offers elsewhere. Include perks like health insurance, bonuses and retirement plans to enhance satisfaction. 

3. Focus on career development

Provide employees with opportunities to learn and grow through training, mentorship programs, and clear promotion pathways. When employees see potential for advancement, they are more likely to stay engaged and committed to the company. 

4. Promote work-life balance

Flexible work arrangements, such as remote work options or adjustable hours, help employees manage their personal and professional lives effectively. Additionally, maintaining reasonable workloads reduces burnout and keeps employees motivated. 

5. Foster a positive workplace culture

Create an environment where inclusivity, respect, and teamwork are prioritized. Encourage open communication and recognize employee achievements to build morale and a sense of belonging. 

6. Enhance the onboarding process

A strong onboarding process helps new hires feel welcomed and prepared. Provide clear guidance, training, and support to set them up for success, reducing the chances of early turnover.

7. Use data-driven decision making

Analyze turnover data to identify patterns and underlying causes. For example, you might discover specific departments with high turnover rates or common reasons cited in exit interviews. Use this information to create targeted retention strategies. 

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