Impact of Retrenchment Strategies on the Existing Employees in Indian IT Industry

Abstract

Retrenchment strategies are increasingly vital for organizations facing financial pressures, particularly in India’s competitive IT industry. This study examines their impact on employees across five dimensions: cost reduction, divestment, workforce restructuring, operational efficiency, and transparency. Data were collected from 328 IT employees using a structured questionnaire and analyzed with SPSS to assess effects on perceptions, morale, and performance. Results indicate that cost reduction measures, including layoffs and pay cuts, heighten stress and job insecurity, while divestment creates uncertainty about organizational direction. Workforce restructuring, though intended to streamline operations, often results in role overload and reduced engagement. In contrast, operational efficiency initiatives are viewed more favorably, as employees associate them with sustainability. Transparency emerged as a critical moderating factor; open communication and fairness mitigated much of the negative psychological impact of retrenchment. The findings highlight that while retrenchment may be unavoidable, its implementation strongly shapes employee attitudes and commitment. The study provides insights for HR managers to balance financial goals with humane practices that support organizational resilience.