In a move to curb its financial challenges, Finnish telecommunications giant Nokia has revealed plans to slash between 9,000 and 14,000 jobs globally by the end of 2026.
This decision comes after a reported 20% drop in sales between July and September. The primary cause for this downturn is believed to be the demand for 5G equipment in critical markets, notably North America.
Nokia currently employs 86,000 people worldwide and has already been through several rounds of job cuts since 2015.
Financial Targets and Market Challenges
Nokia is aiming to cut costs significantly, with a targeted reduction of €800m to €1.2bn (£695m-£1bn) by 2026. The need for these measures comes from from their customers’ reduced spending due to high inflation and interest rates.
CEO Pekka Lundmark emphasised the need for investments in networks with improved capabilities, especially in the sectors of cloud computing and artificial intelligence. However, given the uncertain market conditions, Nokia has opted to safeguard its financial stability through cutting jobs.
Immediate Cost-Cutting Strategies
Nokia’s immediate strategy involves rapid cost reduction, aiming to cut €400m in 2024 and an additional €300m in 2025.
Although the company is optimistic about an improvement in their network businesses in the current quarter, the exact impact of these cost-cutting measures on their workforce remains unclear.
Nokia said that these decisions, while difficult, are essential to navigate market uncertainties and ensure long-term profitability and competitiveness.
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5G Challenges
Nokia’s has historically been a leading handset manufacturer, but has recently been taken over by the rise of internet-enabled touchscreen phones like the iPhone and Samsung’s Galaxy series.
After divesting its handset business to Microsoft, Nokia refocused on telecoms equipment, specialising in software and hardware.
In recent years, the company faced challenges due to slowing demand for 5G equipment, especially in the US and the EU, leading to a decline in sales. Nokia, along with its Swedish rival Ericsson, attempted to compensate for this slowdown by increasing sales in India, but the 5G rollout there has also slowed down.
Industry-Wide Impact
Nokia’s situation reflects a broader trend within the technology sector. Despite the increasing demand for tech services, companies have been facing reduced spending from both individual consumers and businesses.
Major players like Meta (formerly Facebook), Amazon, and X (formerly Twitter) have also resorted to layoffs in response to market challenges. However, the tech industry continues to be a good place for job seekers, with 80% of displaced tech employees managing to secure new positions within three months, as reported by job posting firm Zip Recruiter.
Do Ex-Employees Have Any Legal Rights?
Commenting on the lay offs, we asked a number of lawyers to give their thoughts on the legal implications of these mass job cuts.
“Nokia would have to ensure that a meaningful consultation process takes place before any termination notices are sent, failing which the company will potentially be facing multiple unfair dismissal claims. The company would also need to ensure that collective consultation obligations are followed. Not meeting these obligations is likely to lead to separate claims for protective awards for failing to inform and consult in a lawful manner.
“All alternatives should be considered as part of the employee consultation process before redundancies are made. Options are likely to include a recruitment freeze, filling vacancies internally from those at risk of redundancy, part time working, job sharing, and cutting back on the use of external consultants to name but a few.
“Nokia must ensure the correct procedures are followed, to prevent the risk of claims from employees for unfair dismissal and for protective awards for failure to inform and consult. Unfair dismissal compensation is generally capped at one year’s salary and benefits based on each employee’s loss of income, although the cap is removed and unlimited compensation could be award if any discrimination takes place against as part of the redundancy process. The award for failure to inform and consult is potentially available where the company doesn’t follow collective consultation obligations and entitles each employee to claim up to 90 days’ pay.”
Melanie Stancliffe, Employment Partner at the law firm Cripps, says:
“Where proposing to make 20 or more redundancies within a 90 day period, there would be a requirement to notify the government’s Redundancy Payments Service of the redundancies, as well as following a consultation process with employees and their representatives. As part of a fair dismissal process, Nokia would have to listen to any suggestions made by employees or representatives and consider whether there are any alternatives to dismissal.
If Nokia fails to follow the correct procedures then employees may be able to pursue a claim for unfair dismissal. Even if the reason for dismissal is a fair one (i.e. a genuine redundancy situation) then an unfair process can still give rise to a claim, although in practice such a claim would have little or no value if the employee would ultimately have been made redundant even if a fair process had been followed.”
