"Earn as You Work" vs "Share Equally": Samsung Incentive Dispute Reaches Critical Juncture

Second Day of Post-Adjustment Talks: Labor and Management Clash Over Incentive Distribution

Gap Narrows on Size of Operating Profit Pool

Key Issue: "70:30 or 60:40" for Incentive Allocation

Court Partially Grants Injunction Against Strike

Experts: "Benchmark Is Regular Weekdays... Strike Impact Halved"

As Samsung Electronics' labor and management approach the general strike scheduled for May 21, they have effectively entered the final stage of negotiations. While there are signs that both sides may be willing to make concessions regarding the size of the incentive pool, a significant gap remains on the core issue: how the pool should be distributed between the profitable memory division and the loss-making business units. If an agreement cannot be reached today, a strike appears inevitable. However, the union's bargaining power has weakened since the court ruled that essential security and safety personnel must be maintained during the strike period.

On May 19, Samsung Electronics' labor and management, under the mediation of the Central Labor Commission, entered the second post-adjustment meeting, following the previous day's session. According to industry sources, during the first day of talks, which lasted from 10 a.m. to 7 p.m., both sides remained at an impasse over how the incentive pool should be allocated. Today's meeting, which is also expected to run past the Central Labor Commission's scheduled end time of 7 p.m., has become a race against the clock; if no compromise is found, the general strike on the 21st will proceed as planned.

Choi Seungho, chairman of the Samsung Group Cross-Enterprise Labor Union Samsung Electronics Branch, is attending the second day of the second post-adjustment meeting held at the Central Labor Commission in the Sejong Government Complex on the 19th, two days before the scheduled general strike. Yonhap News.

The gap on the size of the incentive pool is narrowing. The union initially demanded 15% of operating profits but is reportedly now considering a compromise at around 12%, which aligns with the Central Labor Commission's proposal during the first post-adjustment meeting. Management, which initially considered 9-10%, may also accept a range between 10% and 12%, given its previous mention of '10%+alpha' and the government mediator's suggestion of 12%. However, this is contingent on reaching consensus over the distribution ratio.

The sharper conflict lies not in the pool's size but in how it is divided. Even within the Device Solutions (DS) division, there is a profitable memory business and loss-making System LSI and foundry (semiconductor contract manufacturing) businesses. The more the pool is shared across divisions, the more loss-making units receive similar compensation; the more rewards are differentiated by unit performance, the greater the share for profitable segments.

The union's stance is to allocate 15% of operating profit as the incentive pool, distributing 70% equally across all business units and the remaining 30% according to performance. This mirrors the previous era when there was a 50% cap on operating profit allocation, aiming to ensure that employees in loss-making units also receive a sufficient bonus.

In contrast, management has suggested that if DS division operating profit exceeds 200 trillion won, an additional 9-10% of operating profit would be set aside, with 60% allocated to the entire memory segment and 40% to the memory business unit. A management official explained, "Shareholders do not oppose adequately rewarding the profitable memory business unit," but added, "It is against our principles to reduce shareholder dividends or future investment funds to provide large sums to loss-making units." Management's position is that even if the pool exceeds 10%, a structure that favors the memory segment is necessary for acceptance, which essentially runs counter to the union's demands.

Disagreements over abolishing the 50% cap and the calculation criteria have relatively narrowed. Management has given the union the choice between operating profit (10%) and economic value added (EVA, 20%) as benchmarks. They are also open to institutionalizing the 50% cap if it is applied temporarily.

Experts: "Strike Impact Cut in Half"

On the 19th, the second day of post-negotiation between Samsung Electronics labor and management, banners related to the Samsung Electronics labor union strike were hung around Samsung Electronics' Pyeongtaek Campus in Gyeonggi Province. Photo by Yonhap News.

The external environment is now more favorable for management. On the previous day, the Suwon District Court's Civil Agreement Division 31 (Presiding Judge Shin Woo-jeong) partially approved Samsung Electronics’ injunction request to ban illegal industrial action by the union. The court ruled that "the same level of personnel and operational scale as on regular weekdays or weekends/holidays" must be maintained during industrial action. According to Samsung Electronics, the essential workforce specified by the court is about 7,000 people, meaning the strike's impact could be reduced by half.

Experts largely agree that the court has sided with management. Park Jisoon, professor at Korea University School of Law, explained, "Since there is no difference in operations between weekdays and weekends, the court's order to maintain normal operations means production lines must run seamlessly regardless of the day." He added, "This does not mean safety and security staff can be reduced on weekends." He continued, "With this injunction, safety and security facilities and related work have been bundled together, cutting the strike's impact by half. With fewer actual participants, the union will also be constrained in demonstrating its organizational strength through rallies." Another legal expert noted, "Normally, weekdays are the benchmark for 'regular operations,' so weekdays and weekends should be interpreted separately. Restrictions on strike participation will bind the union's momentum."

The company has thus avoided the worst-case scenario. Had over 40,000 employees joined the strike, there was concern about a potential semiconductor plant shutdown, and if the strike lasted 18 days, production losses -- including restarting automated lines -- could have reached as much as 100 trillion won. With the court's decision, the company can secure a minimum workforce, reducing production disruptions and reinstatement costs. However, if the strike proceeds, production setbacks remain unavoidable, so the situation remains tense.

Some experts suggest that compromise considering the company's long-term future is needed, going beyond mere differences over incentive distribution. Oh Gyetaek, head of the Labor Relations Research Division at the Korea Labor Institute, said, "While the court's ruling is important, in labor-management relations, considerations beyond individual interests are needed." He added, "For Samsung Electronics to remain a beloved company among the public, the union should look beyond short-term gain, and management should present a desirable long-term vision and persuade employees accordingly."

This content was produced with the assistance of AI translation services.