Downsizing - Practical Advice and Systematic Implementation for Businesses

Implementing downsizing requires thorough planning and careful adherence to statutory requirements. Employers must be able to document a legitimate basis for the reduction in the number of positions and ensure that the process is carried out in a responsible and orderly manner. This guide provides practical advice for a structured downsizing process as well as a comprehensive checklist for businesses.

Basic Prerequisites

Documentation of Downsizing Need

For the business to downsize, there must be a legitimate reason to reduce the number of positions, and the business bears the burden of proof for this need. The need must be thoroughly documented and verifiable.

The first thing the business should do when changes are required is to assess the current organization, determine what changes are necessary and why, what consequences the measures will have for employees, and whether it is possible to meet the goals without layoffs. Such an assessment is crucial to provide a legitimate reason for the dismissal of one or more employees.

Planning and Process

Development of a Downsizing Plan

Subsequently, the business should create a plan for the ongoing process and ensure that the selection of redundant employees is conducted in a legitimate manner. The selection should take place within a certain pool (selection pool), based on established criteria (selection criteria).

Selection Pool

The selection pool is initially the entire company, but in many cases, there will be a legitimate reason to limit it, especially in larger businesses. The legitimacy of the pool division depends on specific assessment, where practical considerations, past practices, the organization of the business, geographical distances, the business's financial situation, the consideration of employees and the views of union representatives are relevant.

Geographical location, departmental affiliation, function, or competence can be natural delimitations for the selection pool. However, the pool should not be so narrow that it becomes impossible to make a real selection within the pool. Businesses bound by collective agreements that are bound by the seniority principle must pay particular attention to ensure that the importance of seniority is not overly diminished.

Selection Criteria

Legitimate Criteria

Once the pool is established, it is necessary to select which employees within the pool will be considered for dismissal. This assessment must be legitimate and verifiable. Selection criteria should be set based on what is important for the business after the restructuring is complete, so that the organization is left capable of taking the company where it wants to go.

Common criteria are a combination of seniority, competence (both formal qualifications and actual competence), applicability/suitability, and social considerations. Businesses bound by collective agreements must be aware that seniority holds a special position and must be considered, even if it is not always decisive.

Cooperation with Union Representatives

It would be advantageous for the legitimacy assessments if the union representative or employee representative agrees with the employer's assessments of the downsizing need and selection. Where possible, such agreement is recommended, but it is not a requirement. The employer retains the right to manage.

Assessment of Alternatives

Other Suitable Work

It is important that the business assesses whether there is any other suitable work that the employee can perform before dismissal is given. The assessment of other suitable work applies to the entire company, even if the selection is limited to a smaller pool.

"Suitable" work should not be interpreted strictly and includes also lower-paid positions of a different nature and lower employment fractions. If there is available work that the employee can perform, it is recommended to offer it where possible, even if it is believed that the employee is not interested.

Interest Balancing

Before proceeding with dismissal, an interest balancing must be conducted between the business's need to dismiss the employee and the employee's need not to be dismissed. In this assessment, the business's need for measures will be relevant, including whether the business is in a difficult economic situation.

The interest balancing is usually conducted at the very end, after the individual discussion meeting, as it should take place specifically in relation to the employee being considered for dismissal.

Alternative Solutions

Change Dismissal

Where it is possible to avoid dismissal by making changes to the employee's position, this will often be easier to implement, even where the changes are significant enough to go beyond the right to manage. Changes that exceed the right to manage must be implemented through change dismissal.

Although such change dismissals are regulated by the same provisions as ordinary dismissals, the threshold for dismissal is still somewhat lower, since such dismissal does not ordinarily impact the employee as severely.

Systematic Checklist

Basic Assessments

• Does the business genuinely need to downsize that cannot be resolved through other measures, and can it be justified in a legitimate and verifiable manner?

• Has the business considered redundancy through leasing its own employees to other companies? This can be an option as long as it involves less than 50 percent of the employees and occurs within the business's areas of expertise.

• Is the dismissal due to outsourcing of operations to others? In such cases, are special rules on business transfer and outsourcing to independent contractors considered?

Selection and Criteria

• Have a pool and criteria been established for the selection of which employees will be considered for dismissal?

• Have pool and criteria been established with regard to the business's needs, so that the business has the necessary competence to achieve its goals after restructuring?

• If the selection pool is narrower than the entire business, is it justified in a legitimate manner and hopefully anchored in cooperation with union representatives or safety representatives?

• Have legitimate selection criteria been established such as seniority, competence, qualifications, applicability, or social considerations?

Collective Agreement Considerations

• If the business is bound by a collective agreement with a seniority principle, has seniority been taken into account in the selection of redundant employees?

• Have the inputs and any objections of union representatives been considered in the process? If not, can the business's position be sufficiently justified?

Individual Assessments

• Has it been assessed whether there is other suitable work in the business that redundant employees can perform?

• Has an interest balancing been conducted between the business's need to dismiss the employee and the employee's need not to be dismissed?

• If changes are to be made in employees' positions, is it assessed whether the changes can be implemented by virtue of the right to manage or must go through the change dismissal route?

Advisory

• Has the business's employer association or legal counsel been consulted for legal guidance throughout the process?

Practical Recommendations

Businesses should establish clear routines and documentation for all stages of the downsizing process. Thorough preparation and systematic implementation reduce the risk of disputes and ensure that the process is perceived as fair by all involved parties.

Early involvement of union representatives and open communication about the business's situation and needs can contribute to constructive dialogue and possibly agreement on measures. This strengthens the business's position should disputes about the process's legitimacy arise later.