Samsung union, management to continue talks Wednesday in last-ditch effort to avert strike
National Labor Relations Commission Commissioner Park Su-keun speaks to reporters as he enters a mediation session between Samsung Electronics' labor and management at the commission's headquarters in Sejong, Tuesday. Joint Press Corps
Samsung Electronics’ labor and management will continue their negotiations in a government-arranged mediation session on Wednesday, which could be the last chance for a wage agreement before union members stage an 18-day strike on Thursday.
With the government poised to invoke a compulsory arbitration measure that could suspend the strike, labor, management and the government were exploring a compromise plan, with the allocation of the semiconductor division’s performance bonuses between the memory and foundry businesses remaining a key point of contention.
The National Labor Relations Commission (NLRC) said it adjourned the mediation session after midnight Tuesday and will continue discussions from 10 a.m. Wednesday.
The two sides had been negotiating through the NLRC-arranged session since Monday, but failed to conclude the talks by Tuesday as initially planned, despite overnight negotiations.
Earlier Tuesday evening, NLRC Commissioner Park Su-keun told reporters that the talks were making progress and that an outcome could be expected around 10 p.m. However, the two sides struggled to narrow differences on several key issues and decided to continue talks on Wednesday, the day before the planned strike.
According to sources, one of the remaining points of contention is the allocation of performance bonuses within the chipmaking Device Solutions (DS) division.
So far, the unions have been demanding that the company allocate 15 percent of its operating profit for performance bonuses. For the DS Division, the unions have proposed distributing 70 percent of the performance bonus pool equally across all semiconductor business departments, while allocating the remaining 30 percent differentially based on each department’s performance.
The higher the proportion allocated equally across divisions, the more favorable it becomes for loss-making businesses, while a larger performance-based portion concentrates compensation on divisions with stronger earnings.
Samsung Electronics Labor Union leader Choi Seung-ho enters a mediation session between Samsung Electronics' labor and management at the National Labor Relations Commission headquarters in Sejong, Tuesday. Joint Press Corps
Samsung Electronics’ DS Division posted 53.7 trillion won ($35.66 billion) in operating profit for the first quarter alone, but most of the profits were generated by the memory business, while its foundry and chip design businesses are still struggling to narrow losses.
The company is concerned that the more evenly the proportion is distributed across divisions, the higher the bonuses for employees in the foundry and chip design businesses when compared to those in the memory business, potentially undermining the company’s performance-based compensation principles.
Against this backdrop, the company proposed maintaining the existing bonus system, while additionally allocating 9 to 10 percent of operating profit as a bonus pool if the DS Division’s annual operating profit exceeds 200 trillion won. It would distribute 60 percent equally across the division and 40 percent based on each business unit’s performance, according to an unofficial proposal disclosed by the unions on Sunday.
Labor group officials stage a rally against the government's review of invoking a compulsory arbitration measure on Samsung Electronics' labor dispute during a press conference near Cheong Wa Dae in Seoul, Tuesday. Yonhap
Along with the distribution ratio, the system used to calculate performance bonuses remains a sticking point.
Samsung Electronics currently calculates performance bonuses using its own Economic Value Added (EVA)-based metric, which the unions argue is overly complex and lacking transparency, making it difficult for ordinary employees to predict their bonuses. The unions say it should be replaced with a system allocating 15 percent of operating profit.
EVA is a financial indicator developed in the United States in the late 1980s to gauge a company’s profitability more precisely. Simply put, it refers to an amount calculated by subtracting capital costs from net operating profit after tax. The formula for calculating capital costs is highly complex, as it considers factors such as interest rates, borrowing costs and shareholder dividends, which can all vary depending on market conditions.
Due to this, the unions have criticized EVA as a “black box bonus system in which no employee can understand how calculations are made.”
The company, however, has continued to defend the EVA-based system, arguing that using operating profit alone would fail to reflect factors such as financing costs tied to investments, expenses related to enhancing shareholder value and capital procurement costs.
While continuing the talks, Samsung Electronics told the unions that at least 7,087 employees should continue working on wafer deterioration prevention and safety-related operations during the strike period. A day earlier, the Suwon District Court ruled that the workforce for those sectors must be maintained during the strike.