CEO Who Put All Employees on $70k Minimum Salary Explains How It Went
It has been five years since Dan Price, CEO of Gravity Payments, introduced a $70,000 minimum salary for his staff of 120 people and took a pay cut of $1 million. A lot has changed since then in the lives of his employees; however, he still is on minimum salary with no regrets -- and most of all, he feels more fulfilled than ever before.
The change came after Price talked with a friend of his, who was struggling to pay her bills after having served 11 years in the military.
This put things into perspective for Price. He was a millionaire at the age of 31, with a million-dollar company with 2,000 costumers. However, he realized that most of his employees had to be struggling, just like his friend was.
After reading a paper that stated earning $75,000 a year can make people's emotional well-being better, he decided to increase the minimum salary to $70,000 for all of his 120 employees and slashed his $1 million salary by 90% to make this happen.
His decision was made at a time where Seattle was debating an increase to the minimum wage to $15. That increase would make it the highest in the U.S; however, it was opposed by small business owners since they thought it would make them bankrupt.
When his decision made it to the media, radio pundit Rush Limbaugh said, "I hope this company is a case study in MBA programmes on how socialism does not work, because it's going to fail."
Moreover, two of his senior employees resigned in protest since they didn't like that the salaries of the junior staff jumping overnight. According to them, this would "make them lazy, and the company uncompetitive."
Most recently, on August 22, 2020, Dan Price took to Twitter to share how well his company has been doing since the fateful decision.
He wrote that since 2015, his company has tripled and the turnover dropped in half. The staff who own homes had grown 10 times with 76% of staff being more engaged at work which is double the national average.
When the company faced a 50% revenue loss, there were no layoffs, instead, the employees volunteered for temporary pay cuts which were paid back after 5 months. He wrote, "Amazing what treating your employees like people can do[.]"
Moreover, according to BBC, the headcount has doubled with the value of payments processed by the company going from $3.8 billion a year to $10.2 billion.
Another unexpected outcome was the baby count. Price said, "Before the $70,000 minimum wage, we were having between zero and two babies born per year amongst the team. And since the announcement - and it's been only about four-and-a-half years - we've had more than 40 babies."
According to him, that's the best thing to come out of his decision. He stated, "I can’t think of anything better that I could get in return out of it than that, and that’s the impact. That’s the legacy. Because, those babies, they carry with them almost infinite potential, solving some of the existential crises of humanity, curing cancer, solving things like global warming. You name it. Who knows what those babies are going to do, and probably I won’t be around to find out all the cascading effects that will come from that."
While Price had hoped that his decision would catch up in the U.S. business, that hasn't been the case yet.
Five years have passed, and Price is still on Gravity's minimum salary. He says that he still has moments of doubt and the greedy things can be tempting. However, according to Price, "[his] life is so much better."
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