Retrenchment refers to the termination of employees due to business-related factors such as cost-cutting, restructuring, downsizing, or economic downturns. Unlike resignation or dismissal, retrenchment is often an involuntary workforce reduction initiated by the employer to ensure financial stability and operational efficiency. It is usually governed by labor laws and employment contracts, requiring companies to provide advance notice, severance pay, and legal compliance.

Industries like manufacturing, retail, logistics, e-commerce, and facility management services (FMS) may resort to retrenchment during market downturns, automation-driven job redundancies, or mergers and acquisitions. Companies leverage HRMS and workforce analytics to assess workforce planning, track legal obligations, and ensure fair retrenchment processes while minimizing business disruptions and maintaining employer reputation.