[E-Daily Reporter Shin Yeong-bin ] The proposal to overhaul the performance compensation and evaluation system being pushed by Samsung SDS (SAMSUNG SDS CO., LTD.(018260)) was rejected in a vote by employees. As a result, the current personnel system will remain in place. Amid recent employee backlash over the proposed reforms to the personnel and compensation systems—which led to the formation of the company’s first-ever labor union—the union has now declared that it has secured majority status, and formal labor-management dialogue is expected to begin in earnest.

According to industry sources on the 8th, Samsung SDS recently announced the results of a staff vote on the proposed HR system overhaul. A total of 55.6% of all employees participated in the vote, and 71.9% of those who voted approved the proposal. However, the final approval rate based on the total workforce was only 40%.

Since Samsung SDS failed to meet the requirement of obtaining approval from a majority of all employees—which is necessary for implementing the system—the company has decided not to proceed with this personnel system reform.

The core of the reform plan was to replace the existing cash-based performance bonus system with a system of company stock grants and to adjust the evaluation system from two annual performance and competency evaluations to one annual evaluation. While the company’s intention was to increase the transparency of compensation standards by using publicly disclosed metrics and to expand performance-based rewards, the plan was ultimately scrapped after failing to secure the approval of a majority of the entire workforce.

Samsung SDS had previously extended the voting period until the day before, reflecting employee feedback that sufficient time for review was necessary, given that this personnel system reform represented a significant change affecting employee compensation and evaluations.

This reform has also been interpreted as a follow-up measure implemented following a Supreme Court ruling last January that recognized the wage nature of SamsungElectronics’ Target Achievement Incentive (TAI). At that time, the Supreme Court ruled in a severance pay lawsuit filed by retired SamsungElectronics employees that the TAI should be considered wages—compensation for work—and therefore included in the calculation of severance pay. Subsequently, the need to restructure performance-based bonus systems was raised across Samsung affiliates.

Meanwhile, on the 6th, the Samsung SDS branch of the Inter-Company Labor Union was launched amid concerns that there had been insufficient communication with employees during the process of reforming the personnel and compensation systems. The union declared that it had secured majority union status, stating that approximately 5,800 employees had applied for membership within just one day of its launch.

At the time, the union stated, “The fact that thousands of colleagues acted in unison is a clear indication of how deep the lack of communication and the desire for change have been accumulating in the workplace,” and demanded that the company suspend the announcement of the voting results and follow-up procedures related to the personnel system overhaul and engage in formal dialogue with the majority union.

Following the rejection of the reform proposal, the union issued a statement that day, saying, “Today’s company-wide vote on changes to the employment rules concluded with a final rejection,” and added, “We are relieved that this rejection will allow us to avoid a wasteful legal battle with the company.”

The union continued, “We deeply appreciate the spirit of solidarity that brought together the will of over 6,000 employees to form a clear majority union just one day after our launch,” and added, “Please entrust our union with future official negotiations and communication with management, including matters related to the rejected proposed changes to the employment rules.”

The union added, “We will engage in dialogue with the company based on law and principle, using equal and reasonable logic,” and stated, “We will build a dignified labor-management culture where both the company and its employees can thrive together.”

Although this reorganization plan has been put to rest for now following its rejection, the need to restructure the performance-based compensation system and the issue of communication between labor and management are expected to remain major points of contention in the future. Given that the union is asserting its status as the majority union, whether management consults with the union during future changes to personnel and compensation systems is likely to emerge as a key variable.