TSMC employee bonus remains unresolved

TSMC employee bonus

TSMC Employee Bonus System

One-third of TSMC stock given to employees

In 2019, Morris Chang pointed out that TSMC used to distribute 28% to 29% of its stock to employees, but now employee ownership is only 1.7%, with most employees selling their shares to buy houses, invest in real estate, or other stocks.

Nearly one-third of TSMC’s stock is actually given to employees, which is an extremely high percentage. I remember this issue being raised by foreign institutional investors during an investor conference fifteen years ago (before bonuses were expensed, I can’t recall the exact date).

What about US-listed companies?

The term Morris Chang refers to in the US stock market is “Equity Overhang”: the percentage of accumulated employee bonuses relative to issued shares.

The median potential equity dilution (“Equity Overhang”) of Russell 3000 index companies is approximately 10%, but there are significant differences across industries. The healthcare industry has the highest median percentage at 18% (primarily driven by the pharmaceutical/biotechnology sector), while utilities have the lowest at 3%. The highest percentages are typically found in technology growth companies (granted + reserved), often exceeding 10-20%.

As a US-listed company, TSMC’s 28% to 29% is considered an “extremely high” case. Wall Street typically reacts negatively to companies with excessively high percentages, questioning whether they are exploiting shareholders and being unfair to investors.

Expensing employee stock bonuses

Taiwan’s “Expensing employee stock bonuses” system began in 2008. Starting in the first quarter of 2008, listed companies were required to expensify employee bonus, whether in cash or stock, as “operating expenses” based on the market value on the distribution date. This ended the era where employee stock bonus were taxed only at par value (NT$10 per share).

Current system primarily is cash payments

After the Expensing employee stock bonuses in 2008, TSMC’s employee compensation for dividends has primarily been paid in cash; this is the current system.

Starting in 2022, TSMC employees can purchase TSMC stock at a rate of 15% of their salary and job level, payable monthly starting in October. However, compared to cash bonus, the difference is too large, offering little practical benefit to employees.

Backlash from lower-level employees

The crux of the problem

TSMC employees are questioning why the bonus of lower-level employees haven’t increased with the company’s earnings per share (EPS), while the compensation of senior management has grown several times ! This is the crux of the problem.

Management disconnect to lower-level employees

Senior management bonuses have grown exponentially. According to financial reports, TSMC’s declared compensation for senior managers show that their income has increased exponentially in recent years. However, lower-level employees’ cash bonus only increase by an uncertain percentage each year.

CEO C. C. Wei income jumped from NT$946 million in 2024 to NT$2.423 billion in 2025, a growth of 156%; the growth rate of average employee bonuses was far less.

The company is clearly very profitable

Everyone knows that in recent years, due to the surge in demand for chips driven by artificial intelligence, TSMC has achieved near-monopoly market share in advanced process technologies, resulting in huge profits and soaring stock prices.

However, under intense work pressure, frontline employees do not seem to have enjoyed a proportional increase in their earnings compared to the company’s revenue and net profit growth.

TSMC’s net profit has more than doubled in the past five years, but employee bonuses have only increased by less than 100%!

Real-world case conversion

According to a report compiled by Taiwan Business Weekly:

In 2020, employee bonuses accounted for approximately 6.71% of after-tax net profit, and this is projected to shrink to approximately 6% by 2025. May 2026 is the month for distributing first-quarter performance bonuses. Employees are accustomed to calculating their annual income by multiplying this amount by eight—half of the performance bonus is paid out quarterly, with the other half (profit sharing) paid out in July of the following year. In the first quarter of 2026, TSMC’s net profit increased by 13.2% compared to the previous quarter, but many employees found that their bonuses only increased by 3% quarter-on-quarter, resulting in a discrepancy between expectations and reality.

Samsung and SK Hynix

South Korean workers have always been known for their strong will. In the case of Samsung Electronics, the union dared to threaten strikes to secure better profit-sharing arrangements, making TSMC employees envious. SK Hynix went even further, having long ago secured a system where profit-sharing is directly distributed as a percentage of annual operating profit, formalizing this in writing.

Comparison among TSMC, Samsung, and SK Hynix

The following information is compiled from a report by Taiwan Business Weekly:

  • TSMC: Profit sharing is allocated from net profit, with the percentage determined unilaterally by the board of directors annually. The bylaws stipulate a minimum of 1% of net profit, but this is not institutionalized or contractually stipulated. Bonuses are paid quarterly, and profit sharing is paid out in July of the following year. There is no labor union.
  • Samsung Electronics: Bonuses based on excess profits, plus a direct performance bonus of 10% of the annual operating profit; in accordance with the labor-management agreement. Labor-management negotiations are possible, with strikes allowed, capped at 50% of annual salary; primarily cash, plus special bonuses vesting in stock over 3 years.
  • SK Hynix: 10% of annual operating profit directly distributed, with no upper limit, stipulated in a 10-year contract, which employees can anticipate; primarily cash, up to 50%; options include stock conversion.

Investors who carefully compare the profit-sharing packages of the three companies can easily distinguish the advantages and disadvantages, no wonder it has sparked discontent among TSMC employees.

How did TSMC respond?

Media start to report

TSMC has recently been rumored to be adjusting its employee profit-sharing system. Social media reports suggest that this year’s profit-sharing may be reduced by about 15% compared to the original expectations, sparking discontent among some employees. Some have even suggested emulating Samsung’s union and launching a strike.

As the situation escalated beyond control, TSMC employees rallied on social media, media coverage ensued, and Samsung Electronics employees shared similar demands, nearly triggering a strike that impacted global memory supply and demand and the stock market. Samsung Electronics employees eventually secured their due rights.

Employee Meeting Explanation

According to media reports, TSMC’s CEO canceled a scheduled business trip and held an online employee meeting on May 27th. He explained the company’s actions to employees:

Problems Remain Unsolved

Many unresolved issues remain, including the lack of a committed profit-sharing ratio, a written commitment, and a formalized arrangement. This has led to employee anxiety, media follow-up reports, and skepticism from a few more attentive media outlets.

My View on the Outcome

Employees are in a vulnerable position

TSMC does not have a union, and Morris Chang himself is anti-union. For details, please see my post of “TSMC Morris Chang’s controversial words and deeds“

Employees have no better options

The fundamental reason why TSMC employees have no better options is that, in Taiwan, TSMC employees are paid much more than those of other companies, making it impossible for most TSMC employees to leave and find better-paying jobs, especially the 89.4% of entry-level employees, including non-management engineers, entry-level operators, and technicians.

Bloomberg article that discussed how employees at Taiwan Semiconductor Manufacturing Company are often reluctant to leave because compensation at TSMC is significantly higher than most alternatives available in Taiwan’s labor market.

TSMC’s annual report shows that as of the end of 2025, TSMC’s total global workforce will be 90,557, including 9,582 managers, 44,690 professionals, 11,368 assistants, and 24,917 technical staff.

The Permissiveness of Taiwanese Society

This problem, in essence, stems from long-standing issues within Taiwanese society, the workplace, and labor rights. Taiwanese society still harbors a negative view of labor unions, implicitly believing that employees must obey any company arrangements, and that company management never considers employee rights in its business decisions.

Taiwanese people need to ask themselves: have they spoiled the employers? They have a right to blame. TSMC is a representative of the Taiwanese workplace, so there’s nothing to complain about. Taiwanese workers are not qualified to be compared with Korean workers. Korean workers dare to strike, and Korean society supports them. But Korean have also gone through decades of evolution, and their current rights are the result of their actions.

Regulations Lean Towards Employers

The Taiwanese government, however, takes a passive approach, rarely actively intervening to help workers. The legislative spirit of the Labor Standards Act remains biased towards employers. When conflicts of interest arise between companies and workers, the responsibility is invariably shifted to “negotiation between the two parties,” which is the root of the problem. The question is: without government and legal support, what can Taiwanese workers use to negotiate with employers? The result is that those who want to stay must silently accept all unreasonable demands from employers, or they have no choice but to leave.

Y.C. Wang was the legend

Formosa Plastics union is powerful

Besides Formosa Plastics, no other private enterprise in Taiwan has ever had a strong labor union. Y.C. Wang (王永慶) was the only conscientious business leader who allowed the Formosa Plastics Group to establish an internal union on May 15, 1966, and allowed it to negotiate annual salaries and profit-sharing ratios with the group’s management.

Besides Formosa Plastics, I honestly can’t recall any other well-known and large-scale listed company in Taiwan that has had a similar arrangement.

EVA Air case

Just look at how the key figures in the EVA Air employee strike were dealt with afterwards, embroiled in lawsuits, and what their fate was. Moreover, the main figure in the incident, Kuo Chih-yen, joined and served as a director of the Taoyuan Flight Attendants Union, not the EVA Air internal enterprise union.

Note: EVA Air was known for its strict management culture of “zero unions” in its early days; the reason was that the founder, Chang Yung-fa, rejected unions. However, in June 2016, the China Airlines flight attendants’ strike spurred some EVA Air flight attendants to not only join the Taoyuan City Flight Attendants Union externally, but also establish the EVA Air Enterprise Union internally in July of the same year.

TSMC employee bonus

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Author: Andy Lin

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