Samsung agreement expected to trigger other unions' demands for profit sharing

Samsung Electronics Labor Union leader Choi Seung-ho, right, holds hands with Yeo Myung-koo, head of the People Team at Samsung Electronics' Device Solutions division, after signing a tentative bonus agreement at Gyeonggi District Employment and Labor Office in Suwon, Gyeonggi Province, Wednesday. Joint Press Corps

Samsung Electronics' labor and management reached a last-minute agreement on a bonus system just hours before the company’s labor unions were set to stage a massive strike. But the deal is expected to create ripple effects across industries, with unions at other companies likely to raise similar demands for sharing operating profit.

The two sides signed a tentative agreement Wednesday night institutionalizing a "special performance bonus system” for the chip-making Device Solutions division, funded with 10.5 percent of “a jointly selected business performance indicator.”

The agreement did not clarify what the jointly selected business performance indicator would be, and the two sides have yet to disclose details. However, sources said it is expected to be based on operating profit or a similar indicator. They added that it is unlikely to rely on the company’s existing formula based on added economic value, which the unions have criticized for lacking transparency.

Although the agreement includes several conditions, the two sides fundamentally agreed to institutionalize the scheme for 10 years, setting a precedent for sharing operating profits with employees through performance bonuses.

Given Samsung Electronics’ standing in the Korean economy, industry officials expect the deal to serve as a reference point across broader corporate sectors, with other labor unions also likely to demand that portions of operating profit be distributed as performance bonuses in similar ways.

“If the union members accept the tentative agreement, unions at companies generating strong profits are likely to use Samsung Electronics’ agreement as a reference point and make similar demands,” a conglomerate official said. “The agreement is expected to lead to further labor disputes across industries.”

The Korea Enterprises Federation, a lobby group representing employers, also said in a statement, “This agreement reflects Samsung Electronics’ unique circumstances, and labor groups should not generalize it and spread excessive demands for performance bonuses across broader industries.”

Members of Kakao labor unions stage a protest in Seongnam, Gyeonggi Province, Wednesday, announcing their plan to launch a strike. Yonhap

The labor union at Hyundai Motor is already demanding in this year’s wage negotiations that 30 percent of last year’s net profit be distributed as performance bonuses. The union had clashed with management last year over the same demand, and industry officials expect the union to take a tougher stance, referencing Samsung Electronics’ agreement.

The labor union at HD Hyundai Heavy Industries has also included in this year’s demands a proposal to allocate 30 percent of operating profit as a source for “performance sharing,” while calling for the benefits to also be extended to subcontracted and migrant workers.

Kakao Group is also bracing for a labor dispute, as unions at six of its affiliates have decided to go on strike. According to industry sources, the unions demanded 13 to 15 percent of Kakao’s operating profit be distributed as performance bonuses, although union leaders said the proposal was only one of several options under consideration.

Expectations are growing that demands for performance bonuses could spread among unions at subcontractors and partner companies.

Hanwha Ocean is already facing conflict over demands to provide subcontracted workers with performance bonuses equal to those of its direct employees, while P&S Logis, a subcontractor for SK hynix, has submitted a bargaining request demanding performance bonuses from the chipmaker.

The Samsung agreement is also raising concerns about potential shareholder backlash. A shareholder group of Samsung Electronics said Thursday that the labor-management agreement linking pretax operating profit to performance bonuses is unlawful and would be invalid unless approved at a shareholders' meeting. It added that it plans to file a lawsuit against the company.