Korea Enterprises Federation says equal bonus splits drive away top talent

Limits of company-wide equal bonuses

Stronger pay tied to individual, team performance

Base pay should reflect job value over seniority

RSU cases at Apple, Nvidia and others highlighted

Members of the Samsung Electronics Donghang union chant slogans outside the company's Suwon campus in Yeongtong-gu, Suwon, Gyeonggi Province, on July 16, protesting disparities in bonus payments. [Yonhap]

The practice of distributing bonuses to all employees at a uniform rate when company earnings are strong — commonly known as the "divide by N" approach — may actually accelerate the departure of top talent and erode motivation among younger workers, an industry group has warned. Rather than spreading a fixed compensation pool evenly, companies should weight individual and team contributions more heavily and concentrate rewards on key personnel and critical roles, the group said.

The Korea Enterprises Federation published the second-half 2026 issue of its periodical "Wage and HR Research" on Tuesday, themed "Redesigning the Total Compensation Paradigm for Sustainable Management." The federation said the need to overhaul existing pay structures has grown as AI and digital transformation reshape the skills and talent companies require, and as controversy over bonus practices has intensified.

Jeon Shin-gyu, a managing director at Korn Ferry, singled out the practice of distributing bonuses at the same rate to all employees based on company-wide earnings as a core problem. He said the approach deepens free-rider behavior and can lead to the loss of key talent, reduced motivation among younger employees and inefficient labor costs.

As an alternative, the report proposed clearly separating company-wide performance bonuses from individual performance bonuses, reducing the share distributed equally based on overall results while expanding differentiation tied to individual and team performance. It said companies should maintain adequate compensation for general employees while concentrating bonus resources on high-demand key talent and critical roles to secure market-leading competitiveness.

The report also argued that the basis for setting base pay should shift from seniority to the value of the work an employee currently performs. Park Sang-hee, a professor at Hanyang University's business school, said the starting point of any total compensation strategy is base pay. "Base pay should be determined by the value of the work an employee is doing now, not by years of service, and differences in skill and sustained contribution within the same role should be reflected," she said.

Samsung Electronics union members chant slogans at a rally outside the company's Pyeongtaek campus in Pyeongtaek, Gyeonggi Province. The union at the time demanded the abolition of the bonus cap and that 15 percent of operating profit be set aside as a bonus pool. [Yun Chang-bin]

The report also called for companies to move beyond cash-heavy pay structures and expand long-term equity compensation. Hong Soon-won, a managing director at Human Consulting Group, said long-term incentives are notably underdeveloped in the compensation structures of many Korean companies.

"Cash loses its motivational effect the moment it is received, and even a large bonus cannot guarantee an employee will stay after it is paid — in fact, a lump-sum payment can sometimes become the seed money for a job change or early retirement," Hong said. The report argued that long-term equity compensation should be used to let employees share in the company's medium- and long-term value growth while also curbing the loss of key talent.

The report included case studies on RSU programs at global companies including Apple, Nvidia and ASML. An RSU is a form of compensation in which a company grants shares to employees who remain for a set period or meet predetermined performance conditions.

Apple grants RSUs broadly to general employees while providing additional RSUs to some engineers in silicon design, hardware and software — areas with a high risk of talent attrition — as a way of retaining critical technical staff.

Nvidia was cited as an example of the so-called "golden handcuffs" effect: as the company's share price rose alongside the growth of the AI industry, the value of previously granted but unvested RSUs also grew, making employees reluctant to leave since departing would mean forfeiting those gains. ASML similarly incorporates both tenure and corporate performance into its long-term equity compensation.

The report also cautioned that the answer is not simply to increase bonuses without limit — companies must weigh their capacity to pay against their need to invest. Ku Jeong-mo, a professor at Mokwon University, said the size of the bonus pool should be determined by considering industry conditions, financial structure, cash flow and future investment needs together, and that once the pool is set, the criteria for distributing it should be designed around company-wide, team and individual performance and contribution. He said a sustainable system requires deciding in advance not only how to share gains in good times but also how to adjust bonuses during periods of underperformance or crisis.

Ha Sang-woo, a director at the Korea Enterprises Federation, said that as AI and digital transformation accelerate change in the business environment, companies need to move their compensation structures away from seniority and uniform distribution. "There is a need to build a sustainable total compensation framework that concentrates rewards on key talent and roles directly tied to future competitiveness, and that combines not only short-term cash compensation but also long-term and non-monetary rewards," he said.

kwater@heraldcorp.com