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What is a downsizing process?
Downsizing is a permanent reduction in the number of employees that is due to the needs of the organisation, not the individual's circumstances. The process results in redundancies due to the organisation's circumstances and must be objective, justifiable and well documented. For employers and HR, it's about making the right assessments in the right order, in line with the Working Environment Act, with good information, participation and respect for those affected.
Step 1: Preparation and planning
Start by preparing thoroughly and clarifying whether there is actually a need for downsizing. The objective requirement means that you must be able to justify why fewer positions are needed and why this is necessary for the company's operations and future. Investigate and document less invasive alternatives first, such as cost reductions, streamlining, natural attrition or reorganisation. Create an unnamed picture of the future of the organisation, showing which functions and competencies you will need in the future. Plan participation, information and a timeline, and make sure that the assessments are in writing and consistent so that they can be verified. In this phase, it is essential to comply with the requirements for just cause for dismissal, facilitation of participation in restructuring and the obligation to provide the necessary information to the employees.
Step 2: Information and discussions
Inform early and clearly about background, needs, scope and progress. Employee representatives should be involved at an appropriate time, and questions about the scope and selection criteria should be discussed before you proceed. An orderly dialogue with representatives provides legitimacy, reduces anxiety and makes the process more robust. Make sure that communication is consistent and correct, that significant discussions are minuted, and that employees receive ongoing information that safeguards the working environment. Good participation and traceable information are both a legal requirement and an important measure to prevent disputes.
Step 3: Decision on downsizing
Once the basis has been investigated and discussed, the board must decide whether to implement downsizing. A board decision must be objectively justified, based on documented business needs and specify the scope and principles for implementation. The decision must be linked to previous assessments and communication, and forms the framework for further selection and individual processing. Remember that significant changes to the framework may trigger new information and discussions with employee representatives.
Step 4: Selection scope and criteria
The employer must define which part of the organisation is included in the selection, and establish which criteria will be used to assess who stays and who can be dismissed. The scope of the selection may be the entire organisation or an objectively defined unit, such as a department or function. The criteria must be relevant to the organisation's future needs, typically competence, qualifications, suitability and possibly seniority. The weighting must be clarified in advance, applied equally to everyone in the organisation and be verifiable. The ban on discrimination applies in full, and factors such as pregnancy, leave, health or age cannot have a negative impact. Documentation is key: write down how the circuit and criteria are defined, how the assessments are made and why the weighting is set as it is.
Step 5: Individual discussion meetings, redeployment and redundancies
Before a decision is made to terminate employment, the individual employee must be invited to a discussion meeting. The employer must explain the need for downsizing, the selection circle, the criteria and the preliminary assessment, and give the employee a real opportunity to provide information, objections and additional elements. After the meeting, the employer must consider redeployment to other suitable work as a real alternative to dismissal, including the possibility of adapting tasks and necessary training. If dismissal cannot be avoided, the letter of termination must fulfil the formal requirements of the law, the reasons must be clear, and the notice period must be handled correctly. Also remember the employee's preferential right to a new suitable position afterwards if the conditions are met. Use clear language, show respect in the meetings and ensure that the assessments are minuted and traceable.
Agree on voluntary solutions as an alternative to redundancies
As a supplement, the parties can agree on voluntary solutions, such as severance packages. Such arrangements can alleviate the burden, provide faster clarification and reduce conflicts, but they do not replace the requirements for objective reasons, proper process, discussion obligations, relocation assessment and formal requirements. Offers should be transparent, balanced and practised with equal treatment. Read more about what a good severance agreement should contain here.
Get in touch
Halvorsen & Co AS has extensive experience in labour law and legal downsizing in all industries. We assist employers and HR from planning and anchoring, through discussions, selection and dialogue meetings, to redeployment, dismissals and voluntary solutions. Do you want a reliable sparring partner who ensures a legally sound process and reduces the risk of disputes? Contact us for a non-binding chat about how we can help you through an effective and legal downsizing process that safeguards both the business and the people.
