Samsung Electronics reached a tentative bonus-pay agreement with its union late Wednesday, suspending an 18-day strike by nearly 48,000 workers that had been scheduled to begin Thursday at the world's largest memory-chip maker.
Nearly 48,000 union members will vote on the agreement, which scraps Samsung's existing bonus cap and ties pay to operating profit
Jung Yeon-je / AFP via Getty Images
Samsung Electronics reached a tentative bonus-pay agreement with its union late Wednesday, suspending an 18-day strike by nearly 48,000 workers that had been scheduled to begin Thursday at the world's largest memory-chip maker.
After earlier talks fell apart, Labor Minister Kim Young-hoon convened a final round of evening negotiations, and the two parties had a deal in hand with about 90 minutes to spare before midnight, Bloomberg reported. A company statement confirmed the breakthrough, and union members are set to cast their votes on the proposed agreement between May 22 and May 27.
Among the key concessions, Samsung will eliminate a longstanding rule capping bonuses at half of annual salary. In its place, the chip division will gain access to a new profit-linked bonus pool drawing on 10.5% of operating profit, Reuters reported.
Of that pool, individual business units would claim 60%, with the remaining 40% going to the division as a whole. Payouts will take the form of equity rather than cash. Employees may liquidate a third of their awarded shares right away but must retain the balance for as long as two years, Bloomberg reported. The package also includes a 6.2% average salary increase for the year, plus enhancements to child support benefits and employee housing loans.
Triggering the full bonus will depend on the semiconductor division hitting steep earnings thresholds — above 200 trillion won ($133 billion) per year through 2028, then 100 trillion won annually from 2029 to 2035.
Choi Seung-ho, the union's leader, expressed confidence that workers would ratify the agreement.
"We will do our utmost to stabilize labor-management relations at Samsung Electronics going forward," he told reporters, according to Reuters.
The settlement ends a prolonged standoff that drew intervention from South Korea's president, prime minister, and labor minister, all of whom warned of severe economic consequences if a walkout proceeded. A strike that shuts down chip production could bleed the economy of as much as 1 trillion won ($663 million) daily, the prime minister warned, adding that losses could multiply to 100 trillion won if assembly-line interruptions rendered in-progress wafers unusable. The company's outsize role in the national economy — its shipments represent nearly a quarter of all South Korean exports — had made a resolution a priority for government officials at every level.
At the heart of the standoff was a disagreement over profit distribution. Workers wanted their bonuses anchored to operating results rather than salary, and sought the removal of a cap they viewed as artificially depressing their compensation. Courts also weighed in, with a local judge siding partly with Samsung's request for an injunction and ordering the union to keep staffing levels at certain critical facilities even if a strike went forward.
Samsung stock closed 0.2% higher on Wednesday.
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.