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Korean tech employees complain about insufficient bonuses from profit-sharing programs

By Song Su-hyun

Published : Feb. 5, 2021 - 15:59

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Tech industry employees in South Korea are outraged at the opaque payment systems that some companies use when administering profit-sharing programs.

Employees at leading tech companies such as Samsung Electronics and LG Energy Solution were observed Friday to have posted complaints on online communities and social media about their bonuses and how they were calculated.

The conflict came in the wake of an announcement by SK hynix that it would provide profit-sharing bonuses equivalent to 20 percent of its employees’ annual salaries, which led unionists to blame the company for paying lower-than-expected incentives. The world’s second-largest memory-chip maker saw its operating profit soar by more than 84 percent on-year in 2020.

The unions also asked management to transparently share the company’s method of calculating “economic value added,” a measure of how much profit remains after a company’s capital spending costs are deducted from its operating profit.

“I offer my sincere apology as CEO for failing to communicate with the employees and to understand how they feel,” said SK hynix CEO Lee Seok-hee in a statement Friday.

To improve the calculation system, the chipmaker said it will start using annual operating profit as a key indicator when setting the bonus rate instead of using economic value added.

Earlier this week SK hynix workers protested the bonus that the company unilaterally announced last month, worth 20 percent of the annual salary.

SK hynix has given out annual bonus checks since 2004, whenever the chipmaker achieved its performance targets, without disclosing the method it used to calculate economic value added.

Although the company achieved 5 trillion won ($4.45 billion) in operating profit last year, up 84 percent from 2019, the chipmaker paid only a 20 percent bonus for 2021 -- the same as last year.

Some workers raised strong complaints, even sending an email to the top brass.

On Monday, during an event to celebrate the company’s new memory plant, SK Group Chairman Chey Tae-won vowed to donate some 3 billion won of the money he earns from the chipmaker as a director of the SK affiliate.

The vow was made to appease the outraged employees, but it apparently failed. As a result, the management and labor held negotiations.

SK Telecom faced a similar bonus controversy after announcing its 2020 earnings on Wednesday.

Although the mobile carrier’s annual operating profit grew 21.8 percent on-year, its trade union raised concerns of a possible reduction in the annual bonus.

SKT’s labor union demanded that management overhaul the current bonus calculation system by ditching the economic value added indicator just like SK hynix.

Samsung Electronics has had issues with its overall performance incentive program each year.

Under the program, up to 50 percent of the annual salary is doled out to employees within the 20 percent range of the firm’s excess profit every January.

Samsung’s chip business, which brought in about half of the company’s total operating profit, provided 47 percent bonus checks to its employees, while its smartphone and TV businesses gave 50 percent.

Some employees in the chip division cried foul, saying it was unfair to be paid less than their counterparts in the smartphone unit.

Samsung’s semiconductor business recorded 18.8 trillion won in operating profit last year, while the smartphone unit recorded 11.5 trillion won and the consumer electronics unit recorded 3.5 trillion won.

Employees of LG Energy Solution are complaining of a lower incentive rate after the battery business was spun off from LG Chem last year.

They used to receive 300 percent to 400 percent of their base pay at LG Chem, but this was cut to 245 percent, although the rate varies.

But some company officials say incentives from a firm’s excess earnings are not subject to negotiations between management and labor.

“The original purpose of profit sharing has been misunderstood,” an industry insider said. “The ratio is not determined through negotiations.”

By Song Su-hyun (song@heraldcorp.com)