Lloyds Banking Group is preparing to put approximately 3,000 employees at risk of dismissal as part of a performance management overhaul led by chief executive Charlie Nunn.

The banking giant plans to warn around 5 per cent of its 63,000-strong workforce that they face potential job losses unless their performance improves significantly. Managers have been instructed to rank staff performance, with those deemed underperforming to be placed on structured support plans that could ultimately lead to dismissal.

Around 1,500 of those placed on performance improvement plans are expected to lose their jobs if they fail to meet the required standards. The move comes as the bank addresses unusually low staff turnover rates, with fewer than 5 per cent of employees leaving annually compared to the historical average of 15 per cent.

The initiative forms part of Nunn's final year implementing his five-year strategic plan, which aims to diversify income streams, encourage digital banking adoption, and streamline the business structure.

A Lloyds spokesperson defended the measures, stating they were designed to "embed a high-performance culture in the organisation".

"As we build highly skilled teams to move faster forward and deliver great outcomes for our customers, we are striving to embed a high-performance culture in the organisation," the spokesperson said. "We know change can be uncomfortable, but we are excited about the opportunities ahead as we propel forward to achieve our growth ambitions and delivering exceptional customer experiences."

Ged Nichols, general secretary of the Accord union representing Lloyds workers, confirmed increased performance focus this year but said the union had not yet heard of managers being asked to rank staff.

"There has been an increased focus on performance in Lloyds Banking Group this year with more use of the structured support plans to help individuals who may be falling short of their performance objectives," Nichols said. "We work hard to support individual members through these processes to help them to keep their jobs and we'll continue to do so."

The performance review follows a pattern of significant job reductions at Lloyds, which owns Halifax and Bank of Scotland brands. In January 2024, the bank announced 1,600 branch network redundancies, following earlier plans to cut 3,000 roles across the wider business.

Executives will monitor staff progress through human resources software as they attempt to address retention issues caused by economic uncertainty. The bank has simultaneously been creating new positions in digital banking and asset management while expanding its Indian operations with hundreds of new information technology roles.

Lloyds also faces substantial financial pressures from the car finance commission scandal, having already set aside £1.2 billion for potential compensation claims dating back to 2007.

Company shares rose nearly 1 per cent following news of the management restructure.

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