SEOUL, August 20 (AJP) - SK hynix and its labor union have tentatively agreed to pay 60 percent of performance bonuses in company shares, reshaping employee compensation as the AI memory boom sends the chipmaker's profits and bonus payouts to unprecedented levels.
Under the tentative collective bargaining agreement announced Thursday, 40 percent of the company's profit-sharing bonus, known as PS, will be paid in cash in the year of payment, while another 40 percent will be distributed in SK hynix shares.
The remaining 20 percent will be deferred and paid in shares over the following two years, with 10 percent distributed each year.
Employees will be able to increase the share-based portion to as much as 100 percent. During the first year of the new system, however, employees will also be allowed to opt for an all-cash payment under certain circumstances.
The agreement represents a significant change from the compensation framework reached last year, when SK hynix and its unions abolished a cap on PS and agreed to allocate 10 percent of annual operating profit to the bonus pool for 10 years.
Under that arrangement, 80 percent of the bonus was to be paid in cash in the year of payment, with the remaining 20 percent deferred over the following two years.
The shift toward stock comes as SK hynix's earnings have surged on demand for high-bandwidth memory, or HBM, used in artificial intelligence accelerators, sharply increasing the potential size of employee bonuses.
To limit employees' exposure to share-price fluctuations, the number of shares awarded will be calculated using the lowest closing price among three reference points: the date preliminary annual earnings are disclosed, the cash bonus payment date and the share distribution date.
The tentative agreement also includes a 6.3 percent wage increase.
In return for sharing more directly in profits during strong years, employees would also participate in cost-saving measures during downturns. If SK hynix posts a loss, up to 3 percent of wages could be deferred under measures aimed at protecting employment and helping the company recover, with the deferred amount paid after the company returns to profit.
The arrangement echoes measures taken during the 2023 memory downturn, when employees deferred part of their wages before receiving the money after SK hynix returned to profitability.
The deal also includes a voluntary matching program under which the company will match employee donations made from performance bonuses on a one-to-one basis.
The proposed overhaul comes amid heightened debate inside SK hynix over how its rapidly growing AI-driven profits should be distributed among employees, shareholders and future investment.
A newly established unified union has separately made preserving cash-based PS payments one of its priorities, potentially adding another variable as the tentative agreement moves toward approval.
The agreement still requires approval through a vote by union delegates before taking effect.
"The starting point of this agreement is that labor and management found a breakthrough on their own without relying on external mediation or institutional intervention," SK hynix said. "We have established a mature model of labor-management cooperation that enables society, employees, the union and the company to pursue sustainable growth together."
AJP Takeaways
- SK hynix and its union tentatively agreed to shift 60 percent of performance bonuses into company shares, replacing a predominantly cash-based structure agreed last year.
- Employees would receive 40 percent in cash and 40 percent in shares in the year of payment, followed by another 20 percent in shares over two years, while an all-cash option will be available under certain circumstances in the first year.
- The overhaul comes as the AI-driven HBM boom dramatically expands SK hynix's profits and bonus pool, while a newly formed unified union has pushed to preserve cash-based performance pay.
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