SEOUL, Feb. 26 (Korea Bizwire) – South Korea’s top tech firm Samsung Electronics Co. said Thursday it has decided to freeze pay for its employees for 2015, as the world’s No.1 handset maker struggles to bounce back from a slump in its mainstay mobile business that ate into overall profits.
A Samsung official earlier told Yonhap that the company plans to fix this year’s salaries, although overall performance incentives, which depend on profits, would not be affected.
A company spokesman confirmed, saying, “It is true that the management and employees have reached an agreement on fixing wages.”
Another corporate source said the decision was attributable to the slowing Chinese economy and the weak Japanese yen, which cast a gloomy outlook over local export-oriented firms like Samsung.
This will mark the first time since 2009 that the tech giant has frozen paychecks for all workers.
Samsung Group had said two months ago that it is freezing pay for around 2,000 executive-level staff members, including those from Samsung Electronics Co., throughout 2015.
The tech affiliate had taken other cost-saving measures in 2014, including having executives travel in economy class for flights under 10 hours and encouraging employees to use up vacation time instead of getting paid for unused time off.
It also relocated some employees in the finance, human resources and public relations divisions to sales, production management and other offices.
Samsung Electronics posted a net profit of 23.4 trillion won (US$21.2 billion) in 2014, falling a sharp 23.2 percent from the 30.5 trillion won the previous year.
Operating profits from the mobile business, the company’s mainstay, plunged 64 percent on-year to 1.96 trillion won in the fourth quarter, compared with 5.47 trillion won a year earlier.
The South Korean tech giant has been losing ground in the smartphone industry, due mainly to a rising number of Chinese rivals enlarging their market share with price-competitive models in the low-end sector. The high-end area is also tensely challenged by U.S. Apple Inc.
Apple said in its earnings report earlier that it sold 74.5 million handsets in the October-December period last year. Samsung did not give an exact number but said it sold 95 million units in the fourth quarter, with smartphones accounting for more than 70 percent. The figures implied the two rivals sold about the same number of smartphones in the cited period.
Samsung Electronics, meanwhile, will also adopt a flexible work hour system this year for all business divisions, except for manufacturing employees, the company official said.
Shares of Samsung Electronics moved down 0.29 percent to 1,375,000 won Thursday, while the benchmark KOSPI gained 0.13 percent.
Samsung’s smaller rival, LG Electronics Inc., on the other hand, said Thursday its management and workers agreed on an average 4 percent pay raise for this year.