It was the kind of high-profile, good-guy move that might have spelled doom for a small-time company like Gravity Payments. But seven months after CEO Dan Price slashed his salary to pay his employees at least $70,000 a year, his company is still going strong, and his workforce is happier than ever.
“We still have plenty of challenges,” Price told CTV News Channel on Tuesday, speaking via Skype from Seattle. “I’d say we’re as big of an underdog as we’ve ever been, but the human impact from this has just been tremendous to be a part of.”
Price surrendered most of his $1 million salary last April, in order to ensure all 120 employees at his credit card-processing company would earn at least $70,000.
He says the impact of that decision has been huge, allowing his employees to lead more comfortable lives at home, while contributing more at work.
“I have a theory that relieving that (financial) stress is actually going to remove distraction and allow us to work better together as a team,” Price said.
Price said it’s still too early to tell whether his wage experiment has paid off. But after seven months, Gravity Payments has weathered its fair share of ups downs, and is still in operation. “Those ups and downs are normal,” he said.
He added that several Harvard Business School students have set up shop at Gravity Payments, in order to research the long-term implications of Price’s generosity. Price predicted the results of his experiment probably won’t be available for another six to 12 months.
The 30-year-old entrepreneur decided to give most of his salary away last April, after reading a 2010 scholarly study about the link between happiness and annual income. The study found people grew happier the closer they came to earning a $75,000 salary, but their emotional well-being stopped improving beyond that mark.
“I really wanted people to just be able to live a normal life,” Price said.
He added that since implementing the wage increase, several employees have been able to reduce their commutes to work. One employee, who had been living in an apartment with no running water, was able to move into a better apartment, thanks to the pay bump.
After he announced the pay hike for his workers, many social media users labelled Price an “American hero,” while one magazine called him “the best boss in the world.”
But Price brushes those labels aside. “I’m a tough guy to work for, I have very high standards, I can get really passionate sometimes but I do really care about the people I work with,” he said. “Everybody at Gravity Payments is a partner in a way.”
Others were more critical of Price, suggesting his generosity might lead to financial ruin. “The criticism is something we try to listen to,” Price said, adding that he tries to find the truth behind the criticisms, and use that to improve his company.
He added that the negative reaction to his business model has blown out of proportion, because he operates a small, private company, and not a large, publicly-traded corporation.
Price has said he will dip into an estimated 70 to 80 per cent of the company’s profits in order to finance the raises for his employees. At the same time, he has dialed his own salary back to the new $70,000 minimum.
“We’re hopeful that we can actually create a long-term economic success out of this. But for now we’re really enjoying the human impact, and we’re working really hard,” he said.
