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Gravity Payments’ CEO Dan Price had a $1 million annual salary before the raises.
According to an Inc. Magazine report, Gravity Payments, the credit card payment processing company that now pays all its employees $70,000 doubles profit and revenue in six months. Half a year ago, CEO Dan Price announced that he would slash his salary to provide all its staffers with at least $70,000 per year.
Back then, the news stirred hot debates about some companies’ greed and the economic and social benefits of rising employee pay. CEOs with hefty salaries felt shamed and many people hoped that Gravity would go bankrupt and the three-year experiment would end in a bitter tone.
But despite all criticism, the business seems to thrive. CEO Price said he felt motivated to offer higher wages after realizing that he paid his staffers bellow of what they deserved or even needed to live. In April, the average salary in the company was $48,000 per year.
Inc. Magazine recently reported that the company doubled revenue and profit in only six months. Moreover, turnover was next to zero and customer and employee retention rates were up. Critics argued that employee retention rate would be severely impacted when senior staffers learn that they would receive the same salary as their entry-level colleagues, which didn’t happen.
But what happens at Gravity is unique although there are companies that give a fixed salary to their employees. So far, no other CEO decided to slash their salary to share it with the company’s staffers. According to official reports, the average household income is $53,657, while the federal minimum wage is $7.25 per hour.
Economists do not know whether other companies would follow in Gravity’s footsteps after the recession is finally over. So far, an employee can only negotiate his or her salary or move to another company if negotiations fail.
Employees that have debts can also keep an eye on where their money are going, and ditch credit cards, which would improve their credit score and budget. And having a safety net is not a bad idea either.
Even Gravity CEO Price announced that it had mortgaged his home and sold most of his assets to build a $3 million safety net to back any gap created by the raises. He recently told reporters that he wanted a ‘larger margin of error’ despite financial results looking positive.
“Victory is far from secure, but the trends are positive,”
he added.
Plus, he must now face a lawsuit started by his brother over the salary raises. If the two brothers fail to reach a settlement the suit may cost the company $1 million.
Image Source: Wikimedia
