Poor Performance Consequences
The Samsung Group is expected to freeze or cut wages for 10 percent of its employees after the company decided to freeze wages for about 2,000 executives due to a huge drop in earnings.
On Dec. 21, the Samsung Group finished employee performance evaluations based on a rating scale of 1 to 5 (with 5 being the lowest) and ordered all of its affiliates to rate 10 percent of its employees at 4 or 5 points. The evaluations will affect employee wages depending on the profits of its affiliated companies. However, those who were rated with 4 or 5 points are unlikely to get increased wages, and those who are at the bottom 10 percent are likely to get wage freezes or pay cuts.
As most affiliates of the business group, including Samsung Electronics, have struggled with the decline in earnings, it is expected that the they will also drastically cut incentives and bonuses.
Samsung Electronics suffered a 19.7 percent drop to 47.45 trillion won (US$43.16 billion) in sales for Q3 from the same period in the previous year, while its operating profits dropped 60.5 percent to 4.06 trillion won (US$3.69 billion).
The operating profits of Samsung Display and Samsung SDI, which are heavily dependent on Samsung Electronics, fell by 94 percent and 83 percent, respectively, compared with the previous year. Samsung Electro-Mechanics recorded 69.1 billion won (US$62.85 million) in operating losses in the third quarter of this year.
An official from the industry said, “Since wages for its executives were frozen, it is highly unlikely to get the same incentives and bonuses like there used to be.”
Samsung previously decided to freeze wages for its employees most recently in Feb. 2009, a year after the global financial crisis.