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HR Legal

Underperformance in the Nordics

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Legal news
calendar 24. September 2023
globus Denmark, Sweden, Norway

Handling underperformance is tricky, but terminating due to underperformance is even trickier. Different steps are required to limit the risk of claims of unjustified termination. Companies often handle underperformance similarly across the Nordics as the rules are alike. The main rule is that it must be clear to the employees what to improve and the consequences if they do not.

There are different ways to handle underperformance. Some companies have formalized performance improvement plans (PIPs), while others have more informal procedures.

However, if the company’s attempts to improve performance are unsuccessful, companies can rarely lawfully proceed directly to termination. The reason is that justified termination due to underperformance requires prior written warnings in most cases. Often, PIPs do not meet the requirements set by the courts. We have previously written about an unjustified termination following a PIP process here.

The good warning

Warnings may limit the risk of claims if performance does not improve. However, it always depends on the circumstances in each case, and different elements may come into play. One key element is whether the warning is good enough to be the basis for a termination.

The recommendations for drafting a “good warning” are similar across the Nordics and include that warnings should be:

  • Written
  • Clear and precise as to what needs to be improved
  • Within the employee’s control
  • Consequences if the employee fails, including risk of termination

Depending on the circumstances, other elements may also include:

  • Deadlines for improving performance
  • Follow-ups
  • Support and coaching

If the employee still fails to improve, most companies proceed to termination. In this connection, it becomes a question of timing. The reason is that there are no clear rules on how much time the employee must have to improve after receiving the warning. Instead, it is decisive that the employee has a real chance to improve their performance before being terminated. At the same time, the employee must not get too much time. Otherwise, the risk is that the warning expires while the company is waiting for the employee to improve.

IUNO’s opinion

Underperformance is difficult to handle in practice, and there are many pitfalls. Circumstances, such as promotions or salary increases, may make the process more difficult. It may also be that the employee is incapable of performing their work. On that basis, a clean approach and a case-by-case assessment is always required to limit the risk of claims of unjustified termination.

IUNO recommends that companies have internal procedures for underperformance. Such procedures should include clear guidance on how warnings are drafted and how to follow up with the employee. Procedures may also include guidance on union information and consultation requirements.

This newsletter is in a series explaining restructuring and dismissals in the Nordics. Read about changing terms and conditions here and misconduct here

There are different ways to handle underperformance. Some companies have formalized performance improvement plans (PIPs), while others have more informal procedures.

However, if the company’s attempts to improve performance are unsuccessful, companies can rarely lawfully proceed directly to termination. The reason is that justified termination due to underperformance requires prior written warnings in most cases. Often, PIPs do not meet the requirements set by the courts. We have previously written about an unjustified termination following a PIP process here.

The good warning

Warnings may limit the risk of claims if performance does not improve. However, it always depends on the circumstances in each case, and different elements may come into play. One key element is whether the warning is good enough to be the basis for a termination.

The recommendations for drafting a “good warning” are similar across the Nordics and include that warnings should be:

  • Written
  • Clear and precise as to what needs to be improved
  • Within the employee’s control
  • Consequences if the employee fails, including risk of termination

Depending on the circumstances, other elements may also include:

  • Deadlines for improving performance
  • Follow-ups
  • Support and coaching

If the employee still fails to improve, most companies proceed to termination. In this connection, it becomes a question of timing. The reason is that there are no clear rules on how much time the employee must have to improve after receiving the warning. Instead, it is decisive that the employee has a real chance to improve their performance before being terminated. At the same time, the employee must not get too much time. Otherwise, the risk is that the warning expires while the company is waiting for the employee to improve.

IUNO’s opinion

Underperformance is difficult to handle in practice, and there are many pitfalls. Circumstances, such as promotions or salary increases, may make the process more difficult. It may also be that the employee is incapable of performing their work. On that basis, a clean approach and a case-by-case assessment is always required to limit the risk of claims of unjustified termination.

IUNO recommends that companies have internal procedures for underperformance. Such procedures should include clear guidance on how warnings are drafted and how to follow up with the employee. Procedures may also include guidance on union information and consultation requirements.

This newsletter is in a series explaining restructuring and dismissals in the Nordics. Read about changing terms and conditions here and misconduct here

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Anders

Etgen Reitz

Partner

Søren

Hessellund Klausen

Partner

Kirsten

Astrup

Managing associate (on leave)

Sofie

Aurora Braut Bache

Managing associate

Cecillie

Groth Henriksen

Senior associate

Johan

Gustav Dein

Associate

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The team

Alexandra

Jensen

Legal advisor

Anders

Etgen Reitz

Partner

Caroline

Thorsen

Junior legal assistant

Cecillie

Groth Henriksen

Senior associate

Johan

Gustav Dein

Associate

Julie

Meyer

Senior legal assistant

Kirsten

Astrup

Managing associate (on leave)

Maria

Kjærsgaard Juhl

Legal advisor

Rikke

Grønlund Holm

Senior associate

Sofie

Aurora Braut Bache

Managing associate

Søren

Hessellund Klausen

Partner