3 . Retention Challenges and Employee Turnover in Banking .


 Although it is not easy to recruit talent, in the volatile financial industry, it is even harder to retain talent. The result of high employee turnover can be the disruption of service, high costs of training, and loss of institutional knowledge (Mazlan & Jambulingam, 2023). A 2022 report further showed that staff turnover in Sri Lankan banks increased drastically in the wake of post-pandemic resignations, migration, and cost-of-living pressures (Gunawardhana & Damayanthi, 2019). According to the Labor Force Survey 2024, unemployment has also decreased marginally to 4.4% and many highly skilled professionals are being underutilized or relocated to better remunerated positions abroad (Census and Statistics, 2024).

Key retention challenges in the banking industry include:

·         Limited career progression for mid-level staff.

·         Salary stagnation compared to inflation and cost of living increases.

·         Work stress and long hours, especially in sales and credit roles (Nguyen, et al., 2020).

·         Global migration trends, pulling IT-skilled and finance-trained employees abroad (Taqa, 2025).

·         Digital disruption, which requires constant reskilling and adaptability.

The Herzberg Two-Factor Theory can be used to explain these challenges of retention. Hygiene factors, such as the pay, job security, and working conditions, discourage dissatisfaction, and the motivators, which include recognition, growth, and achievement, bring about satisfaction (Shinde, 2025). Hygiene factors in a lot of local banks are poor because the growth of the salary is slow, and motivators are not well developed since the performance-based recognition is limited (Ybañez, 2024).

Some banks have incorporated such strategies as flexible working practices, employee rewards programs, and organized training to make employees engage. As an example, the Sampath Bank Leadership Acceleration Program and the HNB Empower program are mentoring and career development programs (Sampath, 2024) (HNB, 2024). Nevertheless, the turnover rate of younger employees is still high, as they prefer international exposure and improvement of the work-life balance.

An overview of the review by the Central Bank indicates that services are the slowest growing sector at 2.4% and Financial service activities 1.5% in 2024 despite recovery (CBSL, 2024). This low growth restrains increment in salaries and incentives in the banking sector which also promotes turnover. Thus, it is not just the HR initiatives that are needed to retain but also the macroeconomic stability and competitive payrolls throughout the sector.


Figure 3 - Growth in Economic Activities in 2024


Reference                                                                                                                           

Mazlan, M. R. M. & Jambulingam, M., 2023. Challenges of Talent Retention: A Review of Literature. Journal of Business Management Review, 4(2), pp. 78-91.

Gunawardhana, C. S. & Damayanthi, N. M. M., 2019. Factors affecting employee’s turnover in the banking sector: Evidence from- small domestic licensed commercial banks in Sri Lanka. Journal of Business and Technology , 3(2), pp. 43-57.

Census and Statistics, 2024. Sri Lanka Labour Force Survey Annual Report - 2024, s.l.: Department of Census and Statistics Ministry of Finance, Planning and Economic Development.

Nguyen, Q. N., Hoang, L. & Nguyen, D. H. L., 2020. The impact of occupational stress on job satisfaction and job performance of banking credit officers. Management Science Letters. 

Taqa, A. R., 2025. Global Migration Trends and Their Implications for Public Policy.

Shinde, S., 2025. Motivators and Hygiene Factors in Employee Retention: Insights from Herzberg Theory.

Ybañez, R., 2024. Application of Herzberg's Two-Factor Theory: Motivational Factors and Hygiene Factors in the Financial Industr. Journal of Interdisciplinary Perspectives, 2(4).

Sampath, 2024. Sampath Bank Annual Report 2024, s.l.: Sampath Bank.

HNB, 2024. HNB Annual Report 2024, s.l.: s.n.

CBSL, 2024. Central Bank of Sri Lanka’s 2024 Economic Review, s.l.: Central Bank of Sri Lanka. 



Comments

  1. Nicely written. This article clearly described that the retention in the Sri Lankan banks is becoming more difficult due to low salary increments, career advancement, work stress and attraction by global migration particularly among talented professionals. The Two-Factor Theory by Herzberg expresses that dissatisfaction and turnover occur due to poor hygiene factors such as pay and job conditions and poor motivators such as recognition and growth opportunities. Even with the training and mentoring programs implemented by banks and flexible work arrangement, young workers continue to quit in favor of better work life balance and international exposure. As well, the lack of high sector development and economic unpredictability restrains the salary increase, so retention is not only an HR question but a problem of a bigger scale.

    ReplyDelete
    Replies
    1. Thank you for your thoughtful and insightful comment. You have clearly highlighted the real challenges Sri Lankan banks face today, especially the impact of limited salary growth, high work pressure, and global migration trends on retention. Your use of Herzberg’s Two-Factor Theory adds strong theoretical depth, showing how both hygiene factors and motivators influence employees’ decisions to stay or leave.

      I also agree that despite initiatives like mentoring, training, and flexible work arrangements, many young professionals still seek better work–life balance and international opportunities. As you pointed out, this goes beyond HR practices alone — the broader economic conditions and limited sectoral growth also play a significant role. Your perspective reinforces the need for a more holistic, long-term strategy to improve retention in the banking sector.

      Delete
  2. A concise and well-explained overview of why retaining talent in banking is even more challenging than attracting it. You clearly connect macro factors like post-crisis resignations, migration, and slow sector growth with micro-level issues such as limited career paths, salary stagnation, workload, and constant reskilling demands. Using Herzberg’s Two-Factor Theory to frame weak hygiene factors and underdeveloped motivators gives a strong theoretical backbone, while examples like Sampath Bank’s Leadership Acceleration Program and HNB Empower show how banks are trying to respond in practice. The final link you draw between macroeconomic stability, sector-wide pay structures, and bank-level HR initiatives highlights very well that retention is both a human resource and an economic policy challenge.

    ReplyDelete
    Replies
    1. Thank you for your thoughtful and well-articulated comment. You’ve captured the dual nature of the retention challenge very clearly — how it is shaped not only by internal HR policies but also by broader economic and sector-wide constraints. I appreciate the way you link macro realities such as resignations and slow industry growth with individual-level concerns like workload, career stagnation, and skill pressures. Your use of Herzberg’s Two-Factor Theory strengthens the analysis, especially in showing how both hygiene factors and motivators influence employees’ decisions to stay or leave.

      Highlighting real examples such as Sampath Bank’s Leadership Acceleration Program and HNB Empower adds practical value and shows that the industry is actively experimenting with solutions. I agree fully with your point that sustainable retention will require a balance between organisational initiatives, competitive sector-wide compensation, and long-term economic stability. Thank you again for adding depth to the discussion.

      Delete
  3. Yes Imeshi ,Your article highlights that retaining talent in the banking sector is more difficult than hiring due to high turnover and migration. Key issues include limited career growth, low salary increases, work stress, and digital skill demands. Herzberg’s theory explains that poor hygiene factors and weak motivators reduce employee satisfaction. Some banks use flexible work, rewards, and training programs to engage staff, but younger employees still leave for international opportunities. Retention depends not only on HR strategies but also on macroeconomic stability and competitive pay.

    ReplyDelete
    Replies
    1. Thank you for this insightful comment, and yes, you’ve captured the key points very accurately. Retaining talent in the banking sector has become increasingly challenging, especially with high turnover, migration, and growing expectations around career progression and digital skills.

      I appreciate how you linked these issues to Herzberg’s theory—it’s a useful framework for understanding why both hygiene factors and true motivators need to be addressed to keep employees engaged.

      You also highlight an important reality: while banks can strengthen their internal strategies through flexible work, rewards, and continuous learning, retention is also shaped by broader economic conditions and the competitiveness of the local job market.

      Your analysis adds meaningful depth to the discussion. Thank you for engaging so thoughtfully.

      Delete
  4. Excellent analysis of retention challenges in Sri Lanka's banking sector. I liked the way you were able to relate turnover concerns with Herzberg's theory and combined both internal HR strategies with external economic factors that impact employee retention. Examples of leadership and development programs made the discussion quite practical and enlightening.

    ReplyDelete
    Replies
    1. Thank you for your thoughtful feedback. I’m glad the integration of Herzberg’s theory with both internal HR strategies and external economic pressures came through clearly. I appreciate your recognition of the practical examples as well.

      Delete

Post a Comment

Popular posts from this blog