Downsizing, often referred to as a layoff, is the process of reducing the size of an organisation’s workforce by terminating a certain percentage of its employee base. Organisations may utilize downsizing to help cut costs and remain competitive and efficient. Employees asked to exit are often compensated with a severance package of a fixed amount or a few months salary. The after effects of downsizing can be extremely negative, as remaining employees may fear themselves to be in a similar situation at a later time.