Samsung Electronics has implemented the Overall Performance Incentive (OPI) reward system for over 20 years. In response to employee demands and to retain talent, the company is reportedly planning a comprehensive reform to enhance transparency and predictability in bonus calculations.
Citing industry sources, the Korea Economic Daily reported that on July 29, Samsung began work to improve its performance bonus system. This effort will be carried out by management, HR, and finance divisions like the Management Support Office, with input from internal and external board members on the proposed reforms.
Currently, Samsung issues performance bonuses based on the "annual operating profit target" set by each division and business unit. Depending on how much profits exceed the target, employees can receive between 0% and 50% of their annual salary as a bonus.
However, since calculating operating profit targets involves business secrets like investment plans, Samsung has never disclosed the details. This has long been a source of dissatisfaction among employees.
For example, at the beginning of 2024, the Device Solutions (DS) division announced the "2025 performance bonus criteria" to its employees, setting the operating profit target for 2024 at KRW11.5 trillion (approx. US$8.3 billion). Meeting this target would result in a performance bonus of 0% to 3% of the annual salary.
If profits reached KRW29 trillion, the bonus would be 50%. Interviewed employees found it unreasonable that making over KRW11 trillion for the company would only yield a 0% to 3% bonus.
Why reform OPI system now?
Introduced in 2001, the OPI initially system used 20% of excess profits for the year as performance bonuses and was seen as a better reward standard than other global enterprises. However, as Samsung expanded its business globally, especially with an annual investment of nearly KRW50 trillion in the semiconductor sector, the OPI standard became more complex, involving factors like taxes, capex, and fundraising, hence why it's considered a "business secret" now.
Now, Samsung has decided to increase the transparency of performance bonus distribution standards and reduce the fluctuations in bonus amounts. The company is considering overseas examples, such as those from Silicon Valley, and plans to increase the weight of personal performance. This move is in response to employee demands and aims to prevent the exodus of semiconductor talents.
Samsung's largest union, the National Samsung Electronics Union (NSEU), began an indefinite general strike on July 8. One of their demands is to " improve the OPI system." Samsung management and the union began final negotiations on July 29, which lasted three days. The decision to start adjusting the OPI system is seen as a move to help ease labor relations, though its effectiveness remains to be seen.
Reportedly, Samsung employees hope bonuses can be issued based on "operating profit" rather than the company-set "operating profit target." For instance, SK Hynix revised its performance bonus system at the end of 2021 to pay out bonuses within "10% of operating profits." The twice-per-year production incentives (PI) are also tied to operating profit margins, with a maximum payment of 150% of an employee's monthly base salary.
However, Samsung appears to find this approach challenging. Unlike SK Hynix, which only operates the memory business, Samsung's diverse business operations and annual capex of nearly KRW50 trillion make it difficult to directly compare or adopt the same system.
