Retrenchment has become a significant concern in the Information Technology (IT) sector due to rapid technological advancement, automation, artificial intelligence, economic slowdown, organizational restructuring and changing market demands. This study focuses on employee perception of retrenchment in the IT sector with reference to Coimbatore. The study aims to identify the major reasons for retrenchment, analyse its impact on employees financial and mental well being and examine the re- employment opportunities available for retrenched employees. The study also found that retrenchment significantly affects employees by causing financial instability, stress, anxiety, emotional pressure and job insecurity. The study suggests that IT companies should focus on reskilling, employees support programs and transparent workforce management to reduce the negative impact of retrenchment.