Samsung pay deal marks seismic change for South Korea, emboldening unions - Reuters
The deal Samsung Electronics (005930.KS), opens new tab struck with its union averts a massive strike and gives its memory chip workers eye-popping bonuses. It also opens a Pandora's box for companies in South Korea - a country known for militant wage-bargaining.
Unionised Samsung workers voted in favour of the government-mediated pact on Wednesday, marking the first big win for a Samsung union. More significantly, it is only the second time that a major South Korean company has agreed in writing to reward workers with a fixed percentage of operating profit.
With profits skyrocketing due to the AI boom and under pressure to narrow its bonus gap with rival chipmaker SK Hynix (000660.KS), opens new tab, Samsung agreed to allocate 10.5% of its semiconductor operating profit to special bonuses for chip workers. Some memory chip workers are set to receive total bonuses of $416,000.
A cap limiting special bonuses linked to a unit's performance to 50% of a worker's salary was also abolished. Moreover, the deal covers 10 years of earnings.[...]
Those decisions by Samsung - a bellwether for South Korea Inc - are likely to harden the stances of other domestic unions also demanding employees be rewarded from operating profit and could embolden more to follow suit.
"It could start a new fire at other big companies in Korea," said Kim Keechang, a professor of law at Korea University. "It might be only the beginning."
He noted that the deal goes against long-standing global norms about corporate earnings. Bonuses are normally calculated after taxes are paid and Samsung's chip workers have de facto jumped the queue in claiming their share of the company's riches.
Even the country's union-friendly President Lee Jae Myung expressed concern ahead of the deal being struck.[...]
Business groups are alarmed.
"This agreement reflects Samsung Electronics' special circumstances and labour groups should not generalise it and spread excessive bonus demands across industry," the Korea Enterprises Federation said in a statement.
Samsung may have had no choice but to cave, with its memory chip workers furious about the bonus gap with SK Hynix and, according to its union, leaving for its rival in droves. Without the deal, which was less generous than SK Hynix's, 48,000 workers would have gone on strike for 18 days.
According to media reports, SK Hynix allocated 10% of operating profit to bonuses last year, changing its cap on bonuses. Under its new pay structure, chip workers are said to be getting close to 3,000% of their base salary in bonus for the past financial year.[...]
The bonus dilemma, one could argue, should be limited to Samsung and SK Hynix - the primary South Korean beneficiaries of the colossal investments in AI. But other unions are making similar demands.
In a dispute at internet giant Kakao (035720.KS), opens new tab, one option workers are discussing with management is apportioning 10% of operating profit to bonuses, Kakao's union said. Workers at the company and four of its affiliates have threatened to strike if their demands are not met.
Unions for telecoms firm LG Uplus (032640.KS), opens new tab and HD Hyundai Heavy Industries (329180.KS), opens new tab, a major shipbuilder, have said they want at least 30% of operating profit to be allocated to performance compensation among other demands. Wage negotiations at LG Uplus are underway, while those for HD Hyundai Heavy are likely to start next month.
At Samsung Biologics (207940.KS), opens new tab, workers walked off the job for five days this month with demands that included 20% of operating profit to be given over to performance bonuses. Management has not budged and the dispute is ongoing with employees refusing to do overtime or work on holidays.
