SK hynix Inc. has proposed raising its maximum performance-based bonus cap to 1,700 percent of base salary, a significant increase from the previous 1,000 percent.

The move comes as part of efforts to resolve lingering labor-management tensions over incentive payouts earlier this year.

The South Korean chipmaker also suggested returning any unused bonus funds to employees through savings or annuity-style disbursement plans.

According to industry sources Friday, SK hynix presented this proposal during the eighth round of wage negotiations held Thursday at its Cheongju campus with its union representing office and technical staff.

Performance Sharing (PS), SK hynix’s annual incentive program, is tied to company earnings and can pay up to 50 percent of an employee’s annual salary (equivalent to 1,000 percent of monthly base pay).

Since 2021, the company has used 10 percent of the prior year’s operating profit as a PS funding pool, which is then distributed based on individual performance.

Under the newly proposed plan, the PS cap would rise to 1,700 percent. Any remaining funds from the 10 percent profit pool would be split, with half going back to employees and the rest reserved for future investments.

For example, if the company earns 30 trillion won ($22.1 billion) in operating profit, 3 trillion won would be allocated to the incentive pool. After distributing bonuses up to the 1,700 percent limit, the unused portion would be divided—half to employees, half to strategic uses.

SK hynix also introduced two specific payout mechanisms for surplus funds: a five-year savings plan and a two-plus-three-year annuity plan.

Under the savings plan, bonuses would be topped up to 1,700 percent if PS falls below a certain threshold within five years, with the balance paid out at the end of the term.

The annuity model would set aside the reserve for two years, then distribute it in equal installments over the next three years.

SK hynix delivered record-breaking earnings of 23.47 trillion won last year. However, despite awarding 1,500 percent in base salary bonuses and 30 shares of company stock earlier this year, employee dissatisfaction over the level of special bonuses led to internal friction.

In mid-June, the company gathered feedback from employees at both its Cheongju and Icheon campuses on new bonus distribution frameworks. Negotiations are expected to continue based on the latest proposal.

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