Following a windfall of profits from the AI boom and an apparent attempt to more closely tie employee incentives to performance soon, SK Hynix has reached a tentative pay deal with the union that will pay the bulk of this year’s performance bonus in the form of company shares rather than cash. announced on 20 August, the agreement heralds a return to the usage of a share-based incentive system that was overhauled last year, and comes at a time when the South Korean memory chip firm is riding a wave of demand for high-bandwidth chips to feed aggressive AI adoption.
In the new system 40 percent of employees profit-sharing bonus in cash and 60 percent in SK Hynix shares.
Out of the 60 percent share component, 40 percent of total bonus shares could be sold off immediately while 20 percent will be deferred and payable in 2 equal installments in the next 2 years. Employees willing to take higher share exposure can also opt to take the maximum of 100 percent of bonus in stock.
During the first year of implementation, employees with specific personal financial need can still opt for the larger cash payout. The order for a shift to work in a state of record earnings. Many analysts estimate SK Hynix will generate as much as 250 trillion won of operating profit in 2010, and at a profit-sharing scheme that allocates 10 percent to staff bonuses, that would amount to a bounty of around 25 trillion won. This averaged out to an almost 700 million-Won pre-tax bonus per employee in the 35,000-strong workforce, or about US$ 500,000. With a new split, average workers would get about 280 million won in cash, and 420 in company shares.
Base wages will, in the coming year, be increased by 6.3 percent, compared to an increase of around 6 percent in the previous year. A redeem clause allows the firm to of up to 3 percent of the wages in case of a negative result and make the payments later on once the company is back in black. Both sides speak proudly of a ‘home grown’ solution that was established without outside intervention. To many employees the transition has great potentialand much to lose.
Although SK Hynix has seen meteoric stock gains, largely driven by its stake in AI, the rewards have been lumpy. To foster a longer-term employee outlook and to alleviate cash drain connected to a full cash disbursement the company has shifted much of the bonus give away into stocks. Management worried that if fully paid out in cash, the transaction could have put pressure on both the balance sheet and the stock. The agreement is still subject to ratification by the union delegates. There has been some concern among employees over share-price volatility and there are reports that some are in the process of organizing a new union in protest at the new arrangements.
