Redundancies in the Nordics

Companies who consider termination of employment first need to contemplate the legal grounds for the termination. If the termination is due to redundancy, companies must be ready to document the reasons for the redundancy. A position becomes redundant when the termination of one or more employees is necessary due to circumstances that are unrelated to them personally. Reasons for redundancy include economic difficulties, the removal of a specific role, or the decision to close the business.

When termination is due to redundancy, one of the most important questions is often the selection of the affected employees. In Denmark, companies are free to select based on non-discriminatory criteria, assuming that the employees do not enjoy any special protection. In Norway, companies are more restricted because the criteria also must be objective and, in addition, include seniority as a criteria in most cases. Companies are subject to the most restrictions in Sweden, where the so-called “last in, first out” principle defines the affected employees by identifying them on the LIFO list, subject to a few exceptions.  

In addition to the selection process, companies must consider whether there are information and consultation requirements within each country. In Denmark, information and consultation requirements only exist in limited situations. In Norway, individual discussion meetings are always required before a termination can occur. In Sweden, consultation obligations apply towards the unions when an employee is a trade union member, or the company is subject to a collective agreement.

Employee entitlements

Affected employees have a number of statutory and contractual entitlements that are triggered by termination of employment. Such entitlements often vary across the Nordics. Despite such differences, common considerations include:

• Length of the notice period
• Procedure until termination date (work as usual, release from duties, etc.)
• Statutory and/or extraordinary severance pay
• Vacant positions that could be relevant for affected employees
• Outplacement entitlements
• Holiday
• Certificate of employment
• Re-employment rights (Sweden and Norway only)
• Employees in protected groups

It is especially important to identify protected employee groups when selecting between multiple employees. The protected groups are not the same across the Nordics. For example, employees on parental leave are protected in Denmark but not in Sweden and Norway, where they are only entitled to a delayed notice period. 

IUNO’s opinion

IUNO recommends that companies take the necessary time to prepare before completing a redundancy process. Preparations should include an overview of the individual entitlements, the selection criteria, the reasons relating to the redundancy, and the documentation package. Such preparations will usually also lower the risk of delays and claims for compensation.

We have previously written about a case in Sweden, which showed how important LIFO-lists are, here. We have also described the importance of the preferential right in a Norwegian case, here.

This newsletter is the fourth one in part of a series of newsletters explaining restructuring and dismissals in the Nordics. You can read about misconduct here, underperformance here, and changing employment terms here.