Why Employees Leave: Top 7 Causes of Employee Turnover

Employee turnover is one of the most pressing challenges faced by businesses today. The causes of employee turnover are often complex, ranging from dissatisfaction with compensation to a lack of career growth opportunities.

High turnover rates disrupt workplace productivity and incur significant costs for recruitment, training, and onboarding. According to a 2024 study titled “Employees Turnover Intention of Service Industry in Malaysia,” published in the Selangor Business Review, nearly half (49%) of Malaysian organisations are experiencing turnover issues.

The study also found that Malaysia has the third-highest voluntary turnover rate in Southeast Asia, at 9.5%. This trend is a wake-up call for organisations to address the root causes of employee turnover before it impacts their bottom line.

By understanding the key reasons why employees leave, businesses can implement targeted strategies to retain talent, foster loyalty, and build a resilient workforce. In this article, we’ll explore the top seven causes of employee turnover and provide actionable insights to help you create a more supportive and engaging workplace.

Top 7 Causes of Employee Turnover

Understanding why employees leave is crucial for addressing the problem effectively. Below are the top seven causes of employee turnover:

1. Lack of Career Growth Opportunities

Employees value growth and development. When organisations fail to provide clear career progression paths, employees may feel stagnant and seek opportunities elsewhere. A lack of training, mentorship, and upskilling programs can exacerbate this issue.

2. Inadequate Compensation and Benefits

Competitive salaries and benefits are fundamental to employee retention. In Malaysia, a 2023 survey by JobStreet found that 74% of employees cited low pay as a primary reason for leaving their jobs. Offering fair compensation, bonuses, and comprehensive benefits packages can help address this concern.

3. Poor Work-Life Balance

The rise of remote work has highlighted the importance of work-life balance. A 2023 report by Randstad Malaysia revealed that 1 in 2 Malaysian employees considered leaving their jobs to improve their work-life balance, marking a 16% increase compared to the previous year.

Employees who feel overworked or unable to manage personal responsibilities alongside their jobs are more likely to leave. Flexible working hours and mental health support can make a significant difference.

4. Toxic Work Environment

A toxic workplace culture characterised by bullying, discrimination, or lack of inclusivity can drive employees away. A healthy work environment fosters collaboration, respect, and trust among team members.

5. Lack of Recognition and Appreciation

Employees want to feel valued for their contributions. When organisations fail to recognise achievements or provide constructive feedback, employees may feel demotivated and disengaged.

6. Poor Management and Leadership

Ineffective leadership can lead to miscommunication, lack of direction, and low morale. Managers play a crucial role in employee satisfaction, and poor management practices can significantly contribute to turnover.

7. Financial Stress and Job Insecurity

Financial stress is a major concern for employees, particularly in uncertain economic times. In Malaysia, financial insecurity is a leading cause of stress, with many employees living paycheck to paycheck. Solutions, like Earned Wage Access (EWA), can provide employees with financial flexibility and peace of mind.

The Impact of Employee Turnover on Businesses

Employee turnover doesn’t just affect the individual leaving; it creates ripple effects that can significantly impact an organisation's overall performance. High turnover rates can disrupt operations, increase costs, and harm workplace morale. Below, we explore five key ways employee turnover impacts businesses:

1. Increased Recruitment and Training Costs

Replacing an employee is expensive. Recruitment involves advertising job openings, screening candidates, and conducting interviews, all of which require time and resources. Once a new hire is onboarded, additional costs are incurred for training and orientation.

According to a study by the Society for Human Resource Management (SHRM), the cost of replacing an employee can range from six to nine months of their salary. For Malaysian businesses, this financial burden can quickly add up, especially in industries with high turnover rates.

2. Loss of Productivity

When an employee leaves, their responsibilities are often distributed among remaining team members until a replacement is found. This can lead to overburdened employees and a decline in productivity. Additionally, new hires take time to reach full productivity, further delaying project timelines and business goals.

3. Decline in Team Morale

Frequent turnover can create a sense of instability within the workplace. The remaining employees may feel demotivated, overworked, or uncertain about their job security. This decline in morale can lead to disengagement, which further affects productivity and retention.

4. Loss of Institutional Knowledge

Long-term employees carry valuable institutional knowledge, including insights into company processes, client relationships, and industry expertise. When these employees leave, they take this knowledge with them, leaving a gap that is difficult to fill. This is particularly impactful in industries like finance or technology, where specialised skills are crucial.

5. Damage to Employer Brand

High turnover rates can harm an organisation’s reputation, making it less attractive to potential hires. In today’s digital age, platforms like Glassdoor allow employees to share their experiences publicly. Negative reviews about poor management, lack of growth opportunities, or inadequate compensation can deter top talent from applying.

How to Reduce Employee Turnover

Reducing employee turnover requires a proactive and holistic approach. By addressing the root causes of dissatisfaction, organisations can create a more supportive and engaging workplace. Below are five actionable strategies to help reduce turnover:

1. Offer Competitive Compensation and Benefits

Compensation is one of the most significant factors influencing employee retention. Ensure that your salary packages are competitive within your industry and region. In addition to base pay, consider offering benefits such as health insurance, retirement plans, and performance bonuses. For Malaysian employees, benefits like flexible working arrangements and childcare support are increasingly valued.

2. Foster a Positive Work Culture

A positive work culture is the foundation of employee satisfaction. Encourage open communication, inclusivity, and mutual respect within your organisation. Address issues like workplace bullying or discrimination promptly to create a safe and supportive environment. Celebrating achievements and fostering team collaboration can also enhance workplace morale.

3. Provide Career Development Opportunities

Employees are more likely to stay with an organisation that invests in their growth. Offer training programs, mentorship opportunities, and clear career progression paths. For example, upskilling initiatives in areas like digital literacy or leadership can empower employees to advance within the company.

4. Recognise and Reward Employees

Recognition is a powerful motivator. Regularly acknowledge employees’ contributions, whether through formal awards, public praise, or simple thank-you notes. Implementing a structured rewards program can further incentivise high performance and foster loyalty.

5. Address Financial Well-Being

Financial stress is a leading cause of employee dissatisfaction. Solutions like Paywatch’s Earned Wage Access (EWA) empower employees by allowing them to access their earned wages before payday. This flexibility reduces financial stress and enhances job satisfaction, making employees feel more secure and valued.

Why Addressing Employee Turnover is Crucial

Addressing employee turnover is not just about reducing costs; it’s about building a resilient and engaged workforce. Employees are the backbone of any organisation, and their satisfaction directly impacts productivity, innovation, and customer satisfaction.

When turnover is high, businesses face disruptions that can hinder growth and competitiveness. By proactively addressing the causes of employee turnover, organisations can foster a culture of trust, loyalty, and long-term success. Moreover, reducing turnover enhances the employer brand, making it easier to attract and retain top talent.

Employee turnover is a challenge that every organisation must address to ensure long-term success and sustainability. By understanding the causes of employee turnover, businesses can take proactive measures to create a supportive and engaging workplace.

Factors such as lack of career growth opportunities, inadequate compensation, poor work-life balance, and financial stress are common reasons employees leave. These issues, if left unaddressed, can lead to increased costs, loss of productivity, and damage to an organisation’s reputation.

However, the solution lies in fostering a positive work culture, offering competitive benefits, recognising employee contributions, and addressing financial well-being. By implementing these strategies, organisations can not only reduce turnover but also cultivate a loyal, motivated, and productive workforce.

At the heart of employee retention is the commitment to understanding and meeting the needs of your team. When employees feel valued, supported, and financially secure, they are more likely to remain engaged and dedicated to your organisation’s goals.

Prevent Turnover with Earned Wage Access (EWA) from Paywatch Malaysia!

At Paywatch Malaysia, we understand that addressing employee turnover begins with empowering your workforce. Financial stress is one of the leading causes of employee dissatisfaction, and our Earned Wage Access (EWA) is designed to tackle this challenge head-on.

With Paywatch Malaysia, your employees can access their earned wages anytime, providing them with the financial flexibility and peace of mind they need to thrive. Backed by leading financial institutions and fully Shariah-compliant, our platform ensures transparency, security, and trust for both employers and employees.

Here’s why Paywatch stands out:

• Empowering Financial Well-Being: Give your employees the ability to manage their finances better, reducing stress and enhancing job satisfaction.

• Transparent Pricing: No hidden fees, ensuring your employees can access their wages without unnecessary costs.

• Trusted Partnerships: Powered by leading banks and regulators, we prioritise safeguarding your employees’ benefits.

• Innovative Payroll Solutions: Redefine payday with flexible payroll options that align with modern workforce needs.

• Community-Focused: We are committed to fostering financial inclusion and supporting employees’ financial health.

Take the next step towards building a more resilient workforce and creating a culture of trust and support in your organisation. Contact us today to learn more about how our solutions can transform your workplace. Empower your employees, reduce turnover, and pave the way for a brighter, more sustainable future!