SK Hynix has reached a preliminary agreement with its labor union to raise wages by 6.3% and restructure the performance-based bonus (PS) payment scheme: 40% in cash for the current year and 60% converted into company stock (including a 20% deferred component). While this move aligns employee interests with share price performance, it deviates from the previously agreed-upon 10-year cash-dominated framework, raising the risk of employee backlash. The final proposal remains subject to a vote by union representatives.
South Korea's memory chip giant $SK hynix (SKHY.US)$ has reached a preliminary consensus with the labor union on salaries and the collective bargaining agreement for 2026, with the core change being a significant adjustment to the method of distributing performance-based bonuses.
According to Yonhap News Agency on the 20th, the preliminary agreement drafted by both parties includes a 6.3% wage increase and revisions to the current Profit Sharing (PS) system—40% to be paid in cash within the year, while the remaining 60% will be paid in company stock. If the agreement is ultimately approved, this will mark another major adjustment to SK Hynix's performance bonus system since its restructuring last year.
The labor union held an emergency extraordinary representative assembly on August 20 to explain the contents of the aforementioned preliminary agreement to its members and plans to hold a representative vote in the near future to complete the final ratification process. However, the shift in the performance bonus payment method means that employees' actual compensation will be linked to the company's stock price, which may trigger dissatisfaction among some staff.
Restructuring of Performance Bonus Structure: Reduced Cash Proportion, Dominance of Stock Payments
This agreement introduces substantial changes to the payment structure of performance bonuses (PS). Under the new plan, 40% of the total performance bonus will be paid in cash within the year, while the remaining 60% will be distributed in the form of company treasury stock. Of the stock portion, 40% can be liquidated within the year, while the other 20% is subject to deferred payment arrangements.
Previously, SK Hynix's management and labor reached an agreement last year stipulating that 10% of the previous year's operating profit would serve as the source for performance bonuses, abolishing the corresponding cap, and agreeing to maintain this system unchanged for ten years. The scheme at that time provided for 80% of the total performance bonus to be paid in cash within the year, with the remaining 20% deferred and paid in cash in two equal installments of 10% each over two years. This latest adjustment signifies a significant deviation from the actual payment method only about one year after the agreement was reached.
Potential Payout Scale: Pre-tax Amount Per Employee Could Reach KRW 700 Million
According to forecasts from the securities industry, if SK Hynix's full-year operating profit reaches KRW 25 trillion this year, the pool for performance bonuses will amount to KRW 2.5 trillion, equivalent to 10% of operating profit. Based on a simple average across the company's approximately 35,000 employees, the pre-tax performance bonus per employee would be around KRW 700 million (approximately RMB 3.3768 million).
Under the new distribution structure, based on the aforementioned per-capita amount, approximately KRW 280 million will be received in cash, while another KRW 420 million will be issued in stock. Actual individual compensation will vary depending on job grade and performance evaluation results. The agreement also includes other provisions, such as an increase in employee welfare points.
Risk of Employee Backlash Remains; Final Approval Pending Vote
Although a preliminary agreement has been reached on the framework, uncertainty remains regarding its successful passage in the representative vote. Analysts point out that the 10-year system, which was only formalized as an agreement last year, is already subject to revision after just one year. Furthermore, the use of equity-based compensation directly links actual pay outcomes to stock price performance, leading some employees to express reservations. Internal pushback is expected to persist in the near term.
The labor union plans to expedite the representative voting process to formally finalize the terms of the agreement.
Editor/lambor