CEO Dan Price Took $1M Paycut So His Employees Could Have A $70K Minimum Salary And He Explains How It Affected His Business
Aside from good products, reliable services and loyal customers, what essentially keeps a company running is its employees. Indeed, human resources are an integral asset of any company. Unfortunately, blinded by profits, many employers seem to have forgotten what truly lies at the heart of their business. Well, lucky for the employees of the Seattle-based credit card processing company Gravity Payments, their CEO is a notable exception. Meet the CEO Dan Price, one of America‘s “best bosses” who gained worldwide fame for raising his staff’s annual minimum salary to $70K.
At 31, CEO Dan Price used to fit the typical description of a young tech millionaire. He lived in a luxurious house in Seattle overlooking Puget Sound. He even probably dined only in the most lavish restaurants in the city. Having founded his company in his teens, Dan was simply reaping what he has sown, so to speak. However, a hiking adventure with his friend Valerie had changed all this.
After hearing a friend’s financial woes, tech millionaire and Gravity Payments CEO Dan Price decided to raise all of his employees’ annual minimum salary to $70K
As they were walking, Valerie exposed Dan to a reality that’s unknown to him. She detailed how her life has been miserable lately. Apparently, her landlord decided to raise her monthly rent to $200. Unfortunately, even though Valerie was earning around $40K a year, she was still struggling to make ends meet. After serving in the military for 11 years, Valerie now works two jobs, with a total of 50 hours per week. Knowing all her hard work and struggles just to earn enough, this made Dan angry.
“She is somebody for whom service, honor and hard work just defines who she is as a person.”
Valerie’s story made Dan realize that a lot of his employees might be struggling too. And for someone who was earning $1.1M a year at that time, he knew he needed to do something. So, he went out of his way to do something that many employers won’t—raise his staff’s minimum salary. What’s more, he raised it to a whopping $70K for each of his 120 staff. And to make it happen, he even cut his personal earnings by over 90% and mortgaged his house.
Although many people applauded his benevolent act, it had its share of doubtful critics as well
When I started a $70k minimum wage for my company in 2015, Rush Limbaugh said: “I hope this company is a case study in MBA programs on how socialism does not work, because it’s gonna fail”
Since then our company tripled & we’re a successful case study at Harvard Business School.
Apparently, Dan’s computation was also backed by a study by Angus Deaton and Daniel Kahneman, which looked into the correlation between income and life evaluation. The Noble prize-winning economists estimated that people need an annual income of $75K to achieve optimal emotional well-being. Although $5,000 short, CEO Dan Price still managed to double one-third of his employees’ salaries.
After doing so, Dan’s company drastically improved before his eyes. Not only has the company’s manpower doubled. The overall payments that they process per year have increased from $3.8B to a staggering $10.2B as well. From less than 1%, more than 10% of the company now has a house in one of the US’s most expensive cities to live in. More importantly, his staff’s overall well-being has significantly improved. In an interview, the company’s director of sales, Rosita Barlow, mentioned:
“When money is not at the forefront of your mind when you’re doing your job, it allows you to be more passionate about what motivates you.”
Nevertheless, CEO Dan Price knew he did the right thing when he started seeing how his company drastically improved
Since my company started a $70k min wage in 2015:
*Our business tripled
*Staff who own homes grew 10x
*401(k) contributions doubled
*70% of employees paid off debt
*Staff having kids soared 10x
*Turnover dropped in half
*76% of staff are engaged at work, 2x the national average
the problem is Amazon doesn’t have this mentality, and neither do any of their peers. It’s been 5.5 years since we started the $70k min wage, my story has been out there a ton – and virtually 0 companies followed suit. Most just dismissively pat me on the back & say “that’s nice”
Happy employees who aren’t scared for their futures or worried about paying bills focus more clearly & dedicate themselves more freely to their employers. This has always been the case. Employees haven’t changed. Employers have. You should be the rule, not the exception.
absolutely. Our internal surveys show the level of employee stress has gone way down since the pay bump, and they’ve been able to buy more homes, have kids, pay off debt, etc. When someone can actually focus on work without outside stresses, the company also benefits.
Dan Price’s tweets have ultimately gone viral, stirring up discussions on how employers should treat their employees
This isn’t really socialism. It’s all people working equally as hard and getting compensated equally for equal work and efforts. Most people think of socialism simply as some people working hard and having to give their compensation to others who don’t work.
1) From a UK perspective, Americans seemed brainwashed into thinking that if you get something back classified as ‘free’ from YOUR hard earned $ & haven’t had to step on someone to get it, then it’s bad. America has too many life critical companies with conflict of interests.
I used to work in HR, recruiting and onboarding 500 interns from across the globe. Designed and led classes for all levels and strategic planning. Sadly, I never earned more than 40k and left. I know the cost of turnover.
Many expressed their hopes that more companies would follow suit
Thank you for modeling what ALL CEOs should be doing…but will say is “impossible” only to keep others down. Of course it’s not impossible! We need an army of those like you, out in public, calling out their lies and excuses.
This isn’t a new concept, businesses in Europe pay people well and their employees work hard and care about their jobs
It’s not an American way of running business bc the American way is to pay low wages for high profits. & they complain that people quit all the time & wonder why
I’m always baffled when companies feel paying someone more to handle cost of living adjustments or surprise expenses is a bad thing. Instead they will spend money trying to find out why people are unhappy or provide a Foosball table no one uses lol.