SK hynix prepares to begin wage negotiations, with employee welfare expected to be at center of talks

After weeks of attention on employee bonuses amid wage negotiations at Samsung Electronics, the focus is shifting to employee welfare as SK hynix prepares to begin its wage talks  as early as  this month, according to industry sources on Sunday.

The chipmaker, which helped reshape Korea's corporate compensation structure through its current profit-linked profit-sharing system, is once again in the spotlight following expectations that employees will seek expanded welfare benefits after Samsung Electronics agreed to introduce a housing loan program of up to 500 million won ($330,000).

During this year's negotiations, Samsung Electronics and its union agreed to introduce a housing loan program for employees who do not own homes, with the company providing up to 500 million won for home purchases and up to 300 million won for jeonse (lump-sum deposit) rentals at an annual interest rate of 1.5 percent.

Though SK hynix operates a similar housing loan program — also with an annual interest rate of 1.5 percent — the maximum loan amount is limited to 100 million won. Additionally, the repayment process requires a one-year grace period followed by equal principal repayments over 15 years.

As a result, calls for expanded housing support comparable to Samsung's are reportedly growing within SK hynix.

Employees and union members have expressed opinions on internal forums and in labor circles, arguing that the loan limit should be raised to around 500 million won and that the company should expand its employee welfare beyond additional bonuses.

“If SK hynix follows Samsung Electronics in introducing a large-scale housing support program, labor unions at other major companies are likely to seek similar benefits,” an insider from the business sector said. “As competition regarding bonuses evolves into one involving welfare benefits, rising labor costs could emerge as a new issue for companies.”

Among major Korean companies, SK hynix has been at the center of compensation-related debates in recent years. Following employee backlash over bonus payments in 2021, management and labor revised the compensation system several times.

It then overhauled the productivity incentive program in 2023, changing it from a system that paid up to 100 percent of an employee's base salary to one that provides up to 150 percent, depending on the company's operating profit margin.

Last year, SK hynix even removed the cap on its profit-sharing bonus program, funded by 10 percent of annual operating profit, and agreed to maintain the framework for the next 10 years.

Industry observers say that SK hynix has effectively established a bonus system linked to a fixed percentage of operating profit, which influenced recent labor negotiations at Samsung Electronics.

Samsung's labor union made the introduction of an operating profit-linked bonus structure a key demand during this year's wage talks and ultimately secured a special management performance bonus funded by 10.5 percent of the operating profit generated by the company's semiconductor business, or the Device Solutions division, on May 20. 

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY PARK YOUNG-WOO [[email protected]]