There are growing concerns that the performance bonus plan recently agreed to by labor and management at Samsung Electronics will trigger a massive aftershock across industry. Business circles note there has been no precedent for tens of thousands of employees with stable jobs to receive performance pay amounting to hundreds of millions of won regardless of individual performance and without bearing managerial responsibility for investments, and warn that if the same standard is applied at other corporations, it will reduce investment capacity and lead to weakened competitiveness.
According to business circles on the 22nd, labor and management at Samsung Electronics agreed on the 20th to fix compensation funds at a rate in the 10% range of business performance. As a result, employees in the semiconductor (DS) institutional sector are expected to receive performance bonuses of up to 600 million won (pre-tax, based on a 100 million won annual salary) this year.
As of the end of last year, the number of domestic employees in the Samsung Electronics DS institutional sector was 78,064. According to the business report Samsung Electronics submitted to the Financial Supervisory Service, the average annual salary of all employees was 158 million won.
◇ Number of executives earning 500 million won or more a year is only in the 0.1% range among all listed companies
There has been no case in Korea's industrial sector where large numbers of employees, including those in production roles, received such massive performance bonuses. Among all listed corporations, the share of people receiving hundreds of millions of won in compensation is limited to a small group of top-tier executives.
According to a report recently published by the Capital Market Research Institute, as of 2024, the share of executives among all executives at Korea Exchange main board–listed corporations who received annual compensation of 500 million won or more barely exceeded 0.15%. Looking at KOSDAQ-listed companies, the share of executives who received 500 million won or more did not even reach 0.1%.
The share of corporations that had at least one executive receiving 500 million won or more in compensation was 0.5% among main board–listed companies and in the 0.2% range among KOSDAQ-listed companies.
Given that executives' salaries and performance bonuses are larger than those of employees, if those surveyed are expanded to include all employees, the share of people at domestic corporations who earned 500 million won or more annually can only be even lower.
◇ Executives are contract workers who also bear responsibility… "Only benefits without risk"
In particular, executives who receive large salaries and performance bonuses have short tenures and suffer from job insecurity. Unlike regular employees with guaranteed job stability, most executives are converted to contract status and must leave their positions or accept cuts to salary and performance bonuses depending on performance during their term.
In some industries such as securities firms, non-executive employees also receive large performance bonuses depending on results. However, they likewise must deliver high individual results in sales and other areas, so they too have to bear risks in employment and compensation. In such jobs, because performance pay accounts for a large portion based on results, base salaries are often not high.
A business community official said, "Executives receiving large sums amounting to hundreds of millions of won and some star employees cannot help but suffer each year from the risk that their position will be shaken depending on individual performance."
The official added, "By contrast, in this Samsung Electronics DS institutional sector case, tens of thousands of employees with guaranteed jobs ended up pocketing hundreds of millions of won in performance pay, and SK hynix is also holding a similar 'money feast,'" and said, "There has been no such precedent in the history of the Korean economy."
Moreover, ordinary Samsung Electronics employees do not bear responsibility for company management, such as failed investments. This means that even if the company's circumstances worsen, the contracted base salary is paid as is.
◇ More people say they feel hollowed out and deprived… Concern it could spread across business circles
Business circles are concerned that Samsung Electronics' performance bonus agreement could become the "new normal." Other corporations are also highly likely to have unions lead employees to demand performance bonuses fixed at a certain percentage linked to job security and the company's results.
In fact, after news of Samsung Electronics' performance bonus agreement spread, more office workers say they feel hollowed out or relatively deprived. Even within Samsung Electronics, employees in organizations other than the DS institutional sector are being left out of the large performance bonus feast and are opposing the agreement. In the Device eXperience (DX) institutional sector, employee compensation is expected to be limited to 6 million won.
The National Samsung Electronics Union (NSEU) Suwon Chapter and the Donghaeng union held an emergency press conference in front of the main gate of the Samsung Electronics Suwon campus on the 22nd, saying, "This agreement was a hasty and poor deal that degenerated into performance bonus bargaining for the semiconductor memory division," and announced they would launch a full-scale campaign to vote it down.
Other large-company unions are already pouring out demands, as at Samsung Electronics, to fix a certain percentage of net profit as performance bonuses. There are concerns that at these corporations as well, they will cite the Samsung Electronics case to ramp up the intensity of their struggle.
Ahead of this year's wage talks, the Hyundai Motor union sent management a demand that included paying 30% of last year's net profit as performance bonuses. The integrated union at HD Hyundai Heavy Industries also demanded that 30% or more of operating profit be distributed as performance pay and argued that the operating-profit-linked performance bonus standard must be codified in the collective agreement. In addition, Doosan Enerbility, Samsung Biologics and LG Uplus have also demanded compensation linked to results.
A business community official said, "Corporations' investments are made reflecting many external variables and risks," and added, "Even if results improve one year, in the following year they often have to pursue tightening and expense cuts." The official expressed concern that "if a fixed percentage of results is paid out as compensation every year, corporations could suffer capital shortages when funds are actually needed and find themselves in crisis, which in the long term can only lead to weakened competitiveness."