Samsung Electronics has reached an agreement with the workers' union, averting a major strike that could have negatively impacted South Korea's exports and semiconductor production. The company's shares surged following this move.
Under the deal, employees can receive up to $416,000 in additional funds. The planned 18-day mass action involving about 48,000 workers has been canceled. The agreement will be put to a union member vote from May 22 to 27.
Samsung shares and the KOSPI index rose by about 10% in morning trading. Investors positively assessed the elimination of production halt risks, given Samsung accounts for a quarter of South Korea's exports.
Experts highlight that the agreement will significantly increase the company's labor costs. According to the terms, chip division workers will receive variable bonuses based on business financial results. The company will allocate about 10.5% of its semiconductor division's operating profit for employee payments.
Most rewards will be given in the form of shares to reduce short-term cash flow burden. This motivation program is planned for at least ten years.
