SK hynix, Yonhap News
SK hynix (000660.KS) and its unions have reached a tentative wage and collective bargaining agreement after roughly two months of talks, centered on paying 60% of performance bonuses in company shares, drawing attention to the ratification votes to come. With both sides making concessions to reach a workable compromise and no industrial action, the deal is seen as likely to pass.
Production-line unions at the memory chipmaker’s Icheon and Cheongju plants will hold ratification votes on the 2026 tentative agreement from the 24th to the 25th, industry sources said on the 23rd. The union for technical and office workers is also expected to complete its voting process early this week.
If either union rejects the agreement, that union must return to the bargaining table with management. SK hynix unions rejected tentative agreements in ratification votes in both 2023 and 2024, leading to renegotiations. This year, however, expectations for approval are higher because the two sides jointly prepared several supplementary measures on how bonuses are paid.
The core of the agreement is to pay 40% of the profit-sharing (PS) bonus in cash and the remaining 60% in company shares. The shares equal to 40% of the total PS can be sold in the year they are paid. The remaining 20% in shares is to be paid out at 10% per year over the following two years.
For the 2026 PS to be paid early next year, the deal exceptionally widens the choices available. Employees who wish may receive the 40% share portion that can be sold in that year as cash instead. As a result, employees can receive up to 80% in cash in the first year.
The wage increase of 6.3% is also higher than last year’s 6.0%. It is 0.1 percentage point higher than the 6.2% wage increase this year at rival Samsung Electronics.
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SK hynix says the overhaul is meant to create a structure in which employees and shareholders grow together and to raise value for stakeholders. As expanding investment in artificial intelligence (AI) infrastructure has sharply boosted the company’s revenue and profit, attention has grown to both employee compensation and shareholder returns. SK hynix faces the task of using the cash it generates to meet employees’ demands for compensation while also enhancing shareholder value.
The tentative agreement reached in these circumstances is seen as a realistic compromise produced through lengthy negotiations. That the two sides found common ground through their own bargaining, without a strike or outside arbitration, is cited as a positive factor. Analysts say union members may view the deal’s practical benefits favorably when they weigh the wage increase, the bonus payment method and the cash option together.
Separately from the labor agreement, SK hynix has recently proposed acquiring and fully retiring 40 trillion won ($28.9 billion) worth of its own shares and using more than 50% of its free cash flow (FCF) for shareholder returns over the next three years.
Also notable is that management actively expanded welfare programs in the tentative agreement. SK hynix focused on tangible improvements in treatment, increasing in-house welfare points and creating or strengthening congratulatory and condolence payments and funeral support. It also accepted a plan to expand an in-house mortgage of up to 200 million won, previously offered only to employees with multiple children, to all married employees.
The deal also includes safeguards to minimize situations where share-price swings put employees at a disadvantage when bonuses are paid in shares. In calculating the number of shares to be paid, the lowest of the closing prices on three dates — the day earnings are announced, the day the cash portion of the PS is paid, and the day the shares are paid — will be applied. The measure is meant to prevent a rising share price from reducing the number of shares paid to employees.
One wild card, however, is that some union members are still voicing dissatisfaction that the bonus system agreed last year has been revised after just one year. Last year, SK hynix and its unions agreed to remove the PS cap, funded by 10% of operating profit, and to keep that bonus structure for 10 years. At the time, 80% of the PS was to be paid in cash in the given year and the remaining 20% in cash at 10% per year over two years.
This system change gives employees with financial plans a cash option in the first year of implementation, but workers are concerned that the share portion could grow in the future and that the perceived value of their compensation could vary with the stock price.
Meanwhile, the “fourth union,” the SK hynix Integrated Union launched on the 13th, is also expected to prepare its stance on the tentative agreement. The Integrated Union has about 3,000 members, and its membership has been rising recently. Observers say the union’s moves could also become a variable in future labor-management relations.