Labor union urges overhaul of Samsung's bonus calculation system

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Labor union urges overhaul of Samsung's bonus calculation system

Published: 05 Sep. 2025, 15:40

Audio report: written by reporters, read by AI

The logo of Samsung Electronics is seen at the company's store in Seoul on April 15. [REUTERS/YONHAP]

The National Samsung Electronics Union (NSEU), the company’s largest labor union, has formally demanded that management adopt a bonus system tied to operating profit, similar to the one recently agreed to at SK hynix.

The move comes just days after SK hynix’s labor and management scrapped the traditional cap on performance bonuses and struck a landmark deal to distribute 10 percent of operating profit to employees. Analysts say the decision could fuel similar demands at Samsung Electronics and other conglomerates during upcoming wage negotiations.

The NSEU sent a letter to Samsung executives on Thursday titled “Demand for Improvements to the Opaque Bonus System,” business sources said Friday. In the letter, the union, which represents more than 27,700 employees, called for scrapping the current bonus calculation system and replacing it with a scheme that allocates a fixed share of operating profit.

The letter was delivered to Samsung Electronics Executive Chairman Lee Jae-yong; Vice Chairman Jun Young-hyun, head of the Device Solutions division; and President Roh Tae-moon, acting head of the Device eXperience division.

The union strongly objected to Samsung’s existing Economic Value Added (EVA) system, calling it “non-transparent and unreasonable.” EVA bases bonuses on operating profit minus capital costs, such as corporate tax and investment capital, meaning payouts can shrink even if earnings rise due to heavy research and development or facility investments.

Earlier this week, Samsung’s umbrella union — which includes employees from five Samsung affiliates — also demanded an overhaul of the EVA system, calling it a “black box” calculation that workers cannot understand.

At SK hynix, the union and management agreed to eliminate the longstanding cap on performance bonuses, previously set at 1,000 percent of base salary, which is roughly 50 percent of annual pay. The new framework allocates 10 percent of the company’s entire operating profit to bonuses.

Previously, employees could receive up to 1,500 percent of their base salary in bonuses, combining the 1,000 percent cap with additional special payouts. This time, management proposed raising the ceiling to 1,700 percent of base salary, or 85 percent of annual pay, plus extras, and returning half of the remaining funds in savings or pension plans. But the union insisted that the entire profit-sharing pool be paid out to employees — and won.

Given SK hynix’s expected 37 trillion won ($26.57 billion) operating profit this year, employees are projected to receive payouts averaging around 100 million won each — a development that industry insiders say could make the company a “decisive factor” in this year’s collective bargaining season.

The NSEU praised the SK hynix deal as “a clear and fair standard that all employees can understand, and a turning point for rebuilding labor-management trust.”

SK hynix's headquarters in Icheon, Gyeonggi is seen on Jan. 23. [YONHAP]

Samsung’s situation is more complex. Unlike SK hynix, which relies solely on semiconductors, Samsung operates across multiple businesses, including chips, smartphones, TVs and home appliances. Distributing bonuses evenly based on total operating profit may be difficult given the varied performances of each division.

“There is also concern that while payouts may surge in boom years, they would shrink dramatically in downturns, potentially fueling more discontent,” said one industry official.

Globally, semiconductor companies tend to favor stock-based compensation over direct cash payouts. Nvidia offers restricted stock units tied to performance or tenure, while TSMC provides both cash and restricted stock awards to retain key talent.

Samsung and SK hynix have also been moving to strengthen stock compensation. Facing intense competition for global talent, both firms see equity-linked incentives as more effective in motivating employees and preventing brain drain than short-term cash bonuses.

Starting this year, Samsung has paid its executives in company stock instead of cash under its short- and long-term incentive programs.

“The purpose is to align the growth of the company with employees while boosting retention and motivation,” a Samsung spokesperson said.

In 2023, SK hynix launched a “Shareholder Participation Program,” allowing employees to receive 10 to 50 percent of their performance bonuses in company stock. This year, about 60 percent of its executives opted for stock payouts, worth roughly 8.3 billion won as of January.

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 KIM SU-MIN [[email protected]]