SK Hynix to pay 60% of bonuses in shares, with cash protection if stock falls

SK Hynix and its union have overhauled the company's performance bonus system, shifting from full cash payouts to a structure that includes a significant share component. Recognizing that employees may feel shortchanged when bonuses are paid in stock, the two sides built in a safeguard: if the share price falls after distribution, the company will make up the difference in cash. The share price used to calculate the payout is also set at the lowest closing price among several reference dates, a design intended to favor employees.

The SK Hynix union held an emergency extraordinary delegates' meeting Thursday afternoon to brief members on the tentative agreement for the 2026 wage and bonus negotiations.

Last year, management and the union agreed to set the profit-sharing (PS) pool at 10% of operating profit and to remove the existing payout cap. They also agreed to maintain that bonus calculation framework for the next 10 years.

This year's tentative agreement, however, introduces stock as a form of payment. Under the plan, 40% of the PS payout will be made in cash and the remaining 60% in SK Hynix shares.

The two sides also put in place safeguards to reduce employees' exposure to share price volatility.

The share price used to determine how many shares employees receive will be the lowest closing price among three reference dates: the January business performance announcement date, the February PS cash payment date, and the April share distribution date. Because a lower reference price means more shares for the same bonus amount, the structure works in employees' favor.

An additional layer of protection applies if the share price falls immediately after distribution. If the total value of the shares received — measured against the closing price on the first day of distribution — falls below the original bonus amount, the company will pay the shortfall in cash.

The intent is to guarantee that employees receive at least the full value of their bonus as of the distribution date, even if the share price declines during the payout process.

The mechanism is designed to ease employee concerns about receiving a large portion of their PS in shares. While a cash bonus locks in a fixed amount, a stock-based payout leaves the actual asset value subject to market movements.

The company's cash compensation is benchmarked only against the closing price on the first day of share distribution, however, meaning any further decline after that date will not be covered.

The tentative agreement also includes a 6.3 percent wage increase and a provision to pay next year's performance bonus entirely in cash. Notably, employees who retire at the mandatory retirement age will receive 50 percent of the performance bonus for their retirement year in cash.

The housing loan limit for married employees will also be raised to 200 million won ($143,000), and welfare points will increase from 2.4 million won to 3.6 million won.

The union plans to put the tentative agreement to a delegate vote for final ratification in the near future. SK Hynix currently operates under a multiple-union structure, with three separate unions — the Icheon and Cheongju full-time employee union and the technical and office staff union — each negotiating independently with management. The Icheon and Cheongju full-time employee union has traditionally decided on tentative wage agreements through delegate votes.

Employee pushback continues, however. Workers are uneasy that the payment method has changed just one year after management and the union agreed to lock in the PS calculation framework for a decade, and they are concerned that a larger share component means their actual compensation will vary depending on the stock's performance.