SK Hynix's tentative agreement on this year's wage and collective bargaining, reached after two months of negotiations, was rejected by union members by a margin of 25 votes. Despite a proposed 6.3% wage increase and expanded benefits, the plan to allocate 60% of the performance bonus, known as the excess profit distribution (PS), in company stock failed to gain approval.
According to industry sources, the electronic vote on the tentative agreement, which closed at 9 a.m. on the 25th, saw 7,535 votes against, accounting for 50.08%, while 7,510 members voted in favor, or 49.92%. Out of 16,083 total union members, 15,045 participated in the vote, resulting in a turnout of 93.81%.
The rejection appears to stem more from the method of bonus distribution than the wage increase itself. Previously, the parties had agreed to a tentative plan that included a 6.3% wage increase, with 40% of the PS paid in cash and 60% in company stock. Of the stock, 40% could be sold in the current year, while 20% would be deferred over two years.
Notably, the PS for the year 2026, to be paid early next year, included an exception allowing the 40% of stock eligible for immediate sale to be chosen as cash, potentially allowing for up to 80% to be received in cash. Nevertheless, the overall tentative agreement was still rejected.
It is believed that there was significant concern within the union regarding the stock payment. Cash bonuses provide certainty at the time of payment, while stock values fluctuate based on market performance. Additionally, some stocks have restrictions on selling for a certain period. Conversely, from the company's perspective, using stock aligns the interests of employees and shareholders while reducing cash outflow. This is where the interests of both sides collide.
This proposal marked a significant change from the bonus structure agreed upon last year. In 2022, SK Hynix and the union established that 10% of operating profit would fund the PS, eliminating payment caps. They agreed to maintain this system for ten years, which previously allowed for 80% of the PS to be paid in cash and 20% to be deferred over two years.
This year's negotiations took place against the backdrop of a significant increase in performance due to the boom in AI semiconductors, prompting a reevaluation of the bonus distribution method. The company proposed a model linking employee compensation to shareholder value. For the union, as the size of the bonus increases, the method of payment—cash or stock—can significantly impact the actual compensation received.
In the upcoming renegotiations, the method of PS distribution is likely to be the central issue rather than the overall framework of the tentative agreement. Discussions may focus on reducing the proportion of stock payments or expanding cash options. However, given that the company has already made considerable concessions, it remains uncertain whether they will agree to increase the cash component to the level the union demands.
Particularly noteworthy is the narrow vote outcome, with 49.92% in favor and 50.08% against, indicating a divided opinion within the union. This division complicates the renegotiation process, making it difficult to solely reflect one side's demands. A potential compromise may involve adding some amendments to the existing agreement.
SK Hynix has a history of renegotiating after tentative agreements have been rejected. In both 2023 and 2024, tentative agreements were also voted down, leading to further negotiations between labor and management.
The upcoming renegotiation is expected to focus on the sustainability of the performance compensation system rather than wage levels. As demand for AI memory increases, SK Hynix's performance and bonus size have grown, making it crucial to balance the union's demands for cash compensation with the company's need to enhance shareholder value and manage cash flow.
* This article has been translated by AI.
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