Difference between Lay-off and Retrenchment

Definition of Lay-off

To lay-off is to temporarily or permanently terminate or get rid of the staff / employee. This is usually done by an company / firm on account of a business slowdown as a result of which there is insufficient work to be allotted to an employee who is registered with the establishment and who has not yet been retrenched.
It is Suspension or termination of employment (with or without notice) by the an employer or management. Generally, a company layoff involves the cessation of employee benefits such as salary or wages. The laid-off employees are paid laid-off compensation. All of the laid-off employees should be taken back in their usual posts, as soon as the lay-off lifted out.


Definition of Retrenchment

Retrenchment is to reduce the amount of corporate expenses. When a company/firm implements retrenchment, it cuts off or minimises all the unnecessary expenditures, usually by cutting back on the diversity of products or services it offers and often reducing the size of its company by closing down some of its offices that doesn’t necessarily mean a reduction in a company’s workforce.


Key Differences between lay-off and retrenchment

  • Whilst all lay-offs may be part of an retrenchment strategy, not all retrenchments necessarily involve lay-offs.
  • People often wrongly assume that if they’re competent and hardworking employees that they’re less likely to be laid off. Layoffs, however, are rarely related to employee job performance.

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