Seattle CEO Takes Pay Huge Cut to Give Employees Huge Raise
The 120 employees of Seattle-based Gravity Payments received a welcome change on Monday when their CEO, Dan Price, informed them that the salaries of all employees would be raised to a minimum of $70,000 a year over the course of the next three years.
In addition, the 30-year-old Price announced that he was cutting his own annual salary of $1 million to $70,000. The moves garnered positive PR for both the company and Price, where the average Gravity employee makes an estimated $48,000 a year.
Steady Increases
The company will gradually implement the increases, with a $5,000 raise to start or a minimum salary of $50,000, whichever is more. The $70,000 threshold is expected to be reached by the end of 2017.
The $70,000 that Price earns now won’t change until the company regains the profit that it had been making prior to Monday’s announcement. That amount was in the range of $2.2 million.
A Still-Growing Company
Gravity offers businesses a less expensive way to handle transactions, and was created in 2004 after the owner of a Seattle coffee shop complained to Price about the high credit card fees.
During the 2008 economic collapse, Gravity saw two major clients file for bankruptcy, which quickly wiped out 20 percent of the firm’s revenue. Despite the financial havoc caused, the company remained afloat without adjusting prices or having to lay off employees.
High Cost of Living
One of the main reasons that Price chose to do this was because he had heard from others struggling to make ends meet, even though they made more than minimum wage. The fact that this took place in Seattle, where a $15 an hour minimum wage took effect on April 1, helped Price make the decision to change his salary structure.
Research
Price decided on the $70,000 amount after reading about the 2010 research paper written Princeton economist Angus Deaton and Nobel-winning psychologist Daniel Kahneman. The duo found that a person’s “emotional wellbeing” improves as their income increases. However, the limit toward that happiness ends at roughly $75,000.
A Name to Watch
The Seattle business community has had prominent CEOs like Bill Gates at Microsoft and Howard Schultz at Starbucks, but with this positive PR, Dan Price has made a name for himself.
Jonah Engler is a finance expert and entrepreneur from New York City.