Defying Gravity, CEO Hikes Minimum Wage to $70,000 Again

 Should more companies follow Gravity Payments in redistributing profits to employees?

Stephen Miller, CEBS By Stephen Miller, CEBS September 30, 2019
Defying Gravity, CEO Hikes Minimum Wage to $70,000 Again

Dan Price, the head of Seattle-based credit card processing firm Gravity Payments, is back in the news. Price gained fans, and some detractors, in 2015 when he increased the salaries for all of his 120 employees in Seattle to at least $70,000, implemented in phases starting that year. He slashed his own $1 million salary by nearly 90 percent and the pay of other executives to fund these raises. Now, Price has announced that all of the employees in the company's newly acquired Boise, Idaho, office will also earn a minimum annual salary of $70,000 by 2024.

We've rounded up articles from SHRM Online and other trusted news sources on Price's bold approach to employee pay levels and how it has played out in his company. 

A Bold Move

In 2015, Price's move doubled the pay of about 30 of his Seattle workers and gave an additional 40 significant raises. He decided to hike employees' pay after he read a study about happiness that said additional income can make a significant difference in a person's emotional well-being up to the point when they earn $75,000 a year.

(CNN Business

A Family Benefit

Since the 2015 pay raises, employment at the Seattle branch has grown from roughly 120 to nearly 200 employees. The office has also seen a baby boom, Price said, "from having zero to two babies born per year [among the workforce] to having over 30 babies born" annually. More workers—above 10 percent—are purchasing homes for the first time, according to the company, while more than 70 percent of employees with debt have been able to pay some of it down. In addition, employees' 401(k) contributions have more than doubled.

(Fox Business

Lower Executive Pay

Price said, "I took between an 80 and 90 percent pay cut, and our chief operating officer took about an 80 percent pay cut, and our executive team absolutely makes less than what other companies would pay.… It absolutely is coming out of executive pay, it's an investment, I think we've proven that it can work…. We're succeeding as a business doing this."

He called it "surprising and a bit disturbing" that more companies haven't followed suit in redistributing profits. "I'm just shocked at the lack of willingness to do this, especially in big companies in corporate America," he said. "We've proven that this can work."

(ABC News)

Full Steam Ahead

After the 2015 pay raises in Seattle, a couple of Gravity Payments employees quit. They were upset that other employees were suddenly being handsomely compensated and that it appeared their own efforts were not being rewarded. But the company has continued to prosper in the four years since the higher wages were ushered in, and employee turnover has gone down significantly, Price said.

Last year, Gravity Payments and its 200 Seattle employees processed $10.2 billion in payments. In 2014, before the announcement of the pay increase, it processed $3.8 billion.

(Idaho Statesman) 

[SHRM members-only how-to guide: How to Establish Salary Ranges] 

Align Wages with Pay Strategy

The dramatic increase in the minimum wage at Gravity Payments could be a challenge for other companies to match. However, if organizations have well-defined pay philosophies that are reflected in their compensation structures, they will be able to see more clearly—and more quickly—any impact a competitor's wage increases might produce.

These organizations "may not have to immediately run out and respond to announcements of pay increases if they are already following a good strategy," said Ken Spencer, president and CEO of HR Service Inc., in Sandy, Utah. Instead, they may have more time to conduct an interim pay evaluation and adjust their strategy, if that's necessary to compete for talent.

Employers should ask themselves if higher wages would be aligned with their pay strategy, Spencer said, asking themselves "are we going to lead, lag or pay at the market, and what does that mean in each case?"

(SHRM Online)


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