Samsung Electronics labor unions put off strike plan, set to hold members’ vote

Samsung Electronics Labor Union leader Choi Seung-ho, right, shakes hands with Yeo Myung-koo, head of the People Team at Samsung Electronics Device Solutions (DS) Division, after they signed a tentative wage and collective bargaining agreement at Gyeonggi District Employment and Labor Office in Suwon, Gyeonggi Province, Wednesday. Joint Press Corps

Samsung Electronics labor unions said Wednesday they decided to suspend their plan to go on strike for 18 days scheduled for Thursday. They will launch a vote by union members on their tentative agreement reached with the company’s management over the bonus payment system.

The unions said members will cast their votes from 2 p.m. on Friday through 10 a.m. on May 27.

The decision came about six hours after the unions and management of the company resumed talks over performance-based bonus payment systems, with Labor Minister Kim Young-hoon attending the negotiation session.

The two sides reached the tentative agreement after long-stalled negotiations that had continued since November last year.

The likelihood of a strike had surged after a mediation session hosted by the National Labor Relations Commission (NLRC) ended without an agreement just one day before the planned walkout. However, the government, labor and management continued negotiations in an extra session and ultimately reached a tentative deal.

“We apologize to the public for causing concern,” Samsung Electronics Labor Union leader Choi Seung-ho said at a press conference after signing the tentative agreement. “For now, we will do our best to manage the voting process, and we will continue working to stabilize labor-management relations at Samsung Electronics going forward.”

Yeo Myung-koo, head of the People Team at Samsung Electronics Device Solutions (DS) Division, also apologized to the public and thanked employees who waited for the negotiations to be concluded.

“We also extend our gratitude to the unions and government officials who worked to help reach an agreement,” Yeo said. “We will make this tentative agreement a starting point for building a mutually beneficial labor-management culture.”

The tentative agreement includes the creation of a special management performance bonus for the chip-making DS division, funded with 10.5 percent of jointly selected business performance indicators. Combined with an agreement to raise the basic incentive to 1.5 percent, the total payout ratio will reach 12 percent.

The special management performance bonus, however, will be paid entirely in treasury shares after tax, with part of the shares subject to a lock-up period. The two sides also agreed to maintain the scheme for 10 years, and the special bonuses will be paid when the company achieves a minimum level of operating profit.

As for the distribution ratio for the DS division, the two sides agreed to allocate 40 percent across the entire DS division and 60 percent based on each business department’s performance. Loss-making divisions will receive smaller payouts, although the agreement includes a one-year grace period before the differential treatment takes effect.

The distribution ratio was the last remaining point of contention in the negotiations. The unions had been demanding that the DS division distribute 70 percent of the performance bonus pool equally across all semiconductor departments, while allocating the remaining 30 percent based on each department’s performance.

The company opposed the proposal, saying the division’s foundry and chip design businesses are still struggling to narrow losses, and that increasing the ratio of equal distribution would undermine the company’s performance-based compensation principles.

“Rewarding areas that deliver results is a fundamental compensation principle,” Yeo said. “Although we reached a tentative agreement with the unions, we believe we were able to preserve the principle that compensation should follow performance while finding an optimal solution through dialogue and new ideas.”

Samsung Electronics Labor Union leader Choi Seung-ho, right, shakes hands with Samsung Electronics Device Solutions (DS) Division's People Team Head Yeo Myung-koo, left, and Minister of Employment and Labor Kim Young-hoon, center, after the company's labor and management signed a tentative wage and collective bargaining agreement at Gyeonggi District Employment and Labor Office in Suwon, Gyeonggi Province, Wednesday. Joint Press Corps

The unions will put the agreement to a vote by their members. If approved, the wage negotiations will come to an end.

The unions had planned to stage an 18-day walkout starting May 21, and as of Wednesday night, 48,000 union members had expressed their intention to participate. In the event of a strike, losses were estimated to reach as high as 100 trillion won ($66.32 billion).

Although the tentative agreement was reached, an internal conflict between Samsung Electronics’ divisions exposed during the negotiations remains a challenge the company will have to address going forward.

The unions that led the negotiations were mostly composed of employees from the DS division, while union members from the Device Experience division, which oversees smartphones and home appliances, protested that their demands had been ignored during the talks. Some even filed an injunction seeking to suspend the negotiations.