Difference Between Layoff & Retrenchment

Before you pack up your office, learn the difference between a layoff and retrenchment.
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Many people use the terms "layoff" and "retrenchment" synonymously, but they should consider them as separate terms. While a corporate retrenchment may lead to layoffs, management may find ways to avoid losing employees and still reduce expenses. The decision is typically driven by the company's long-term goals and current financial situation.

Retrenchment Meaning

    Retrenchment is a term used for reducing expenses. If your company is facing a financial hardship, it may decide to revisit business operations and do away with branch operations that are losing money. It may also reduce the budget for office supplies, look at the current staffing needs and whether the operation will suffer from a staff reduction. The company may delay launching a new product line or discontinue services no longer considered essential to the success of the company.

Layoff Meaning

    A layoff is the termination of employment due to no fault of the employee. Often layoffs are limited to specific departments or branches, low seniority personnel or based on the needs of the company. A layoff can be permanent or temporary in nature. Before you leave, know how long the layoff is likely to last. An employer may plan to retool operations and then rehire employees on an as needed basis. You don't want to spend a lot of time looking for a new job if it looks like you will have an opportunity to return to your current job shortly.

Layoff Alternatives

    An employer may choose to save money without putting the staff through the trauma of a layoff. You may decide to offer employees who are close to retirement age the opportunity to retire early. If you are closing a location, you may be able to offer the employees the chance to transfer to a different location. If your company is overstaffed in one area of operations and understaffed in another, you can offer qualified employees the opportunity to apply for jobs in the understaffed area.

What Happens Next

    If you are laid off from your job, you may qualify for unemployment benefits until you can find a new job or your current employer calls you back to work. Unemployment benefits won't replace your full salary, but they will help you stay afloat financially while you look for a new position. If you have considered a career change, a layoff may create the perfect opportunity to pursue additional skills or education.

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