Between 2001 and 2005, Ericsson reduced its global workforce from 107,000 to 47,000 to adapt the company to the new market situation. In Sweden, 12,000 of the 40,000 employees were made redundant. These were able to benefit from an extensive support program.

Elisabeth Armgarth, who was responsible for the support program during the cutbacks, says: “For both the company and the trade unions, it was important to demonstrate Ericsson’s intention to be a good employer even when times were bad.”

It was important not to damage the Ericsson brand and to send the right signals to those who stayed on: “Don’t worry. Ericsson accepts its responsibility for its employees even when times are hard.”

The employer and the unions agreed to try to avoid paying severance pay and to help people instead to find long-term ways to guarantee their livelihoods. “We did not want to pay people to become unemployed,” Armgarth says.

Both parties agreed on a support program with four alternatives:

1. Help to start a new career

The aim was to help the redundant employees find new jobs. They were allowed to stay in the program from five to twelve months, depending on how long they had worked for the company. During this time they were still on Ericsson’s payroll with their regular salaries but were to devote all their working hours to finding a new job with professional help. Of the 12,000, 9,500 opted for this alternative.

2. Early retirement 

Those aged 58 or over were offered early retirement, if they had been employed for at least six years. Ericsson paid up to 70 percent of their regular salaries until they reached retirement age. About 1,500 opted for this alternative.

3. Severance pay

The rules for severance pay were designed to make it a less attractive alternative than help in finding a new career. Even so, 1,000 opted for this alternative. Most of them were employees in Sweden who came from other countries and wanted to move back home.

4. Normal redundancy

This complied with Swedish legislation, which stipulates a period of notice of one to six, months’ pay, depending on the period of employment. Fewer than 100 opted for this alternative.

 

By the end of 2005, nearly 80 percent of those who opted for the first alternative, help to start a new career, had found jobs within the 5–12 months permitted by the program.

Author: Svenolof Karlsson & Anders Lugn

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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