SK hynix to adopt merit-based salaries
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By Kim Yoo-chul
SK hynix said Tuesday that it will overhaul its salary system for company employees at manufacturing lines to stay productive amid challenging market circumstances.
“SK hynix is introducing various incentive systems for wages to remain adaptive in the face of growing challenges to the firm’s key businesses,” the SK Group affiliate said in a statement.
The company said it will fix the details of its new salary system after thorough discussions with representatives of its union. But it added the new measure intended to do more than cut fixed costs.
Out of the estimated 22,000 employees of SK hynix in Korea, about 12,000 will be affected by the new system, excluding 10,000 in administrative positions.
“Basically, an employee whose given tasks exceed management’s expectations and targets will get more incentives than those who’ve been less productive, said the memory chip manufacturer. “The annual salary difference will be up to 10 percent between employees.”
Since last year, SK’s management has teamed up with its union to seek out measures for improving efficiency and lifting employee productivity at its domestic manufacturing facilities.
SK hynix operates massive DRAM plants in Icheon, Gyeonggi Province, while it produces NAND flash memory chips at facilities in Cheongju, North Chungcheong Province.
SK hynix’s plan is considered a rare move, as most manufacturing companies in Korea maintain a distinct hierarchy for employees, each of which comes with a prescribed title.
But the plan has been in line with Seoul’s initiatives to encourage companies to offer more job openings, as more flexibility in the labor market is expected to help boost productivity, which has slowed markedly since 2012.
Employees at SK hynix had been receiving their paychecks on a seniority-based structure. Employees with more experience have so far been paid more than newer employees despite any special skills and individual performance.
Too ambitious?
But it remains to be seen whether SK’s move to kill the hierarchy system for salaries will pay off as the new system will make senior employees feel inferior.
“Because employees working at manufacturing facilities don’t need much creativity, it seems likely that the new salary system will disempower employees. Seniority was one reason why SK hynix can move quickly and achieve good production yields,” said one employee at the company’s Icheon plant by telephone.
SK hynix, however, said the new system will give employees a “can-do spirit” and encourage them to “do more” with a greater sense of labor flexibility.
With the wage overhaul, SK hynix said it also plans to simplify its eight-tier ranking system down to five and expand programs to help its employees remain competitive in the wake of growing threats from Chinese companies.
“Employees at SK’s manufacturing facilities could learn about core technologies required in each manufacturing process via educational kits. The company will also operate a role model system, helping junior employees to learn technology knowhow from senior employees,” said company spokesman Kim Jae-soon, adding SK hynix will pay additional benefits to employees serving as role models.
For greater job security, SK hynix agreed with the labor union to introduce preemptive measures protecting its employees from sudden layoffs.
“SK hynix won’t turn its back on employees as we will accelerate efforts to defend the best interests of our employees,” said the spokesman.
For example, the Asian Financial Crisis of the late 1990s shook things up as layoffs changed the relationship between company management and unions.
So did increasing competition from new entrants in the memory chip sector that SK hynix has long been considered the sector leader, prompting it to evolve, said Kim.