Key facts
- SK Hynix and its South Korean workers have reached a tentative wage agreement.
- Under the deal, at least 60% of this year's bonuses will be paid in company stock.
- Workers will receive 40% of bonuses in cash and 40% in stock that can be cashed out immediately.
- The remaining 20% of bonuses will be paid as deferred stock compensation.
- The agreement includes a 6.3% increase in base wages.
- Workers can defer up to 3% of wages if SK Hynix incurs losses.
SK Hynix has reached a tentative wage agreement with its South Korean workers, which includes a significant shift in how bonuses will be paid. Under the new deal, at least 60% of this year's bonuses will be distributed in company stock, a departure from the all-cash payouts received previously. This move comes amid soaring earnings for SK Hynix, driven by the AI boom, which has led to substantial bonuses for employees, with an average of 779 million won ($547,000) expected for 2026.
The agreement stipulates that 40% of bonuses will be paid in cash, and another 40% in stock that can be immediately cashed out. The remaining 20% will be paid as deferred stock compensation, with half vesting after one year and the other half after two years. This structure aims to balance the company's cash reserves with worker compensation, as noted by management professor Kim Yong-jin, who described it as a "win-win solution" that avoids draining company cash and potential public backlash over large cash payouts.
In addition to the bonus structure, the deal incorporates a 6.3% increase in base wages. It also includes a clause allowing SK Hynix to defer up to 3% of wages if the company records losses. The agreement is contingent on a vote by union members.
This year's bonus arrangement contrasts with last year's agreement, where SK Hynix committed to sharing 10% of its annual operating profit with workers in cash over a 10-year period. Management's proposal for a majority stock payout faced some opposition from workers concerned about share price volatility, especially after the stock experienced a significant slump following a June record high, driven by AI boom excitement.
SK Hynix also announced plans to buy back and cancel 40 trillion won ($28.6 billion) of its treasury shares. Furthermore, the company intends to allocate more than 50% of its free cash flow generated between 2025 and 2027 towards enhancing shareholder returns, a move that contributed to a 13% jump in its stock price on Thursday.