[Editorial] N% Performance Bonus Must Be the Starting Point for Labor Reform

The debate over the “N% performance bonus,” which began at Samsung Electronics and SK hynix, marks the starting point for unavoidable labor structure reform. While rewarding performance should be respected, this moment should also serve as an opportunity to design a labor market structure and risk-sharing principles that match such rewards.

The controversy is now spreading beyond semiconductors to a broad range of industries. However, much of the focus remains solely on “how much and how to divide the rewards.” In the July 20 feature article of The Asia Business Daily, ‘What the N% Performance Bonus Left Behind,’ labor, management, and economic experts voiced objections to legally mandated systems, but also argued that the issue can no longer be left to individual company negotiations alone. They also offered various alternatives, including setting performance bonus caps, establishing industry-wide standards, and methods for sharing rewards with partner companies. Ultimately, there was consensus that it is necessary to redefine the fundamental principles for performance distribution.

There is a principle that must be established in this process: Just as expanding bonuses during boom times is assumed, standards must also be set for how labor and management will share the burdens when the business environment deteriorates. Opening only the upside and leaving the burdens of business downturns solely to companies and shareholders is not sustainable. This does not mean advocating for easy layoffs. Instead, the labor market must be redesigned to reinforce safety nets through measures such as job reassignment and retraining. Another idea is to consider flexibly applying work hour regulations to highly skilled professionals, similar to the U.S.-style white-collar exemption system.

The discussion on performance distribution must not be limited to increasing the share for a specific group. The structure in which high compensation and stability focused on regular employees at large corporations become disconnected from the labor market for small and medium-sized enterprises and non-regular workers has long been a challenge for the Korean economy. A company’s achievements are generated not only by workers but also by shareholders, partner firms, consumers, and the local community—each a contributing stakeholder and factor. Criteria should be established to ensure that the success of leading companies strengthens the competitiveness of the entire ecosystem. It is in this context that SK Group Chairman Chey Tae-won recently stated, “The happiness of our members can only be sustained when it is shared with stakeholders.”

The government and labor-management representatives must immediately begin social discussions that go beyond short-term gains and losses to encompass both reward and responsibility, stability, and flexibility. The future of Korea’s labor market hinges on how this debate is resolved, and all parties must approach the discussion with a sense of mission and responsibility.

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