South Korea’s Supreme Court ruled that SK Hynix Inc. is not required to treat its management performance bonuses as wages, handing the chip maker a decisive victory in a long-running dispute with former employees and removing a layer of uncertainty over future labor costs.
In a decision delivered Wednesday, the court rejected appeals from retirees who had sought to have the company’s productivity incentives and profit-sharing payments reflected in the calculation of severance pay. Lower courts had already sided with the company.
The ruling effectively closes the door on similar claims tied to the memory-chip giant and is expected to give management greater room to concentrate on operations and investment at a time when the semiconductor industry is navigating sharp cycles and heavy spending demands.
At issue were two types of bonuses commonly known as PI and PS. Plaintiffs argued that the payments had been made repeatedly over the years and should therefore be considered part of ordinary wages, which would raise the benchmark for retirement allowances.
The Supreme Court disagreed. It said SK Hynix could not be seen as having a binding obligation to pay the bonuses on a continuous and regular basis under employment rules, collective agreements or established labor practices.
Company regulations for monthly-paid workers contained no provisions on the incentives. While an annual-salary guideline mentioned management bonuses, it did not specify their meaning or calculation standards, the court said.
Since the late 1990s, the company and its production-worker union had determined each year whether to pay such bonuses and on what terms. Payment formulas, rates and conditions changed from year to year, and in some years there was no agreement and no payout at all. The company also applied similar standards at its discretion to other employees who were not covered by the union deal.
Given those circumstances, the justices said, the annual negotiations were valid only for the relevant year, and management remained free to refuse an agreement depending on business conditions. That made it difficult to conclude the company had assumed a lasting duty to pay a fixed amount or ratio.
The court also emphasized that profit-sharing metrics such as operating income or economic value added are shaped not only by employees’ labor but also by capital investment, spending levels, cost controls, market environments and managerial decisions.
Bonus rates in fact swung widely, ranging from zero to as much as half of annual salary, even when there was little evidence that the quantity or quality of labor had shifted to the same degree, the ruling noted.
If the standards used to determine payment are more heavily influenced by factors workers can hardly control, the sums are hard to view as direct compensation for labor, the court said.
The decision reaffirms legal principles the Supreme Court laid out in a recent case involving Samsung Electronics, signaling a consistent judicial stance toward performance-based pay across the technology sector.
For SK Hynix, the clarity arrives at a crucial moment. The company is pouring resources into advanced memory used in artificial-intelligence servers and competing globally for scale and speed. By limiting the risk that variable bonuses might be retroactively reclassified as fixed wages, the verdict reduces potential liabilities and helps management plan with greater confidence.
Industry officials expect the judgment will wind down parallel disputes and allow the chip maker to focus more squarely on strengthening competitiveness rather than fighting courtroom battles.
