Back in 2015, Dan Price of the credit card processing company Gravity Payments decided to pay everyone at his company a minimum salary of $70,000 a year, including himself. In the immediate aftermath, only two long-time employees left the company (out of 120 people), and Rush Limbaugh called it, "a case study in MBA programs on how socialism does not work."
While Price himself cut his salary down from $1 million to match the $70,000 he was paying his employees, it turned out he was also about to be embroiled in a lawsuit with his business partner and brother, who claimed that Price was receiving "excessive" compensation. (Although Price prevailed in the lawsuit, there was undoubtedly at least some PR motivation behind the move.)
Five years later, the company still has an impressive employee retention rate of over 90 percent, and is still profitable. Then coronavirus messed everything up, like it did for everyone, with small business transactions—the bulk of Gravity's business—dropping by more than 50 percent practically overnight. And that's where the story of a socialist Seattle credit card processing company gets more interesting.
From The Toronto Star:
In a short time, Gravity lost about half of its revenue, which mainly comes from small businesses, hardest hit by the crisis.
In early April, Dan Price, one of the company founders and its CEO, convened the 200 employees for an urgent Zoom call, sharing with them the fact that the company was burning $1.5 million a month in cash. If it continued like this and no action was taken, Price warned, the company would run out of cash in just four months.
"Ninety-eight per cent of the employees agreed to cut their wages," he tells me in a Zoom interview from Seattle. "Ten wrote that they were willing to work for free, and several dozen offered a 50 per cent reduction in their wages.
"When I saw it, I was so moved, that tears flowed from my eyes."
Gravity adopted the solution proposed by the workers, with slight modifications. No employee's salary was reduced by more than half, and for those who earned less than $100,000, the maximum reduction was 30 per cent.
By July 2020, the company had stabilized, and began paying back all the employees who had sacrificed their income.
In any other business, I'd be creeped out by the notion of workers sacrificing for the boss like that. But it sounds like Price may have really succeeded in building a team who believed in their mission, and viewed their company as a worker-owned co-op. And that is pretty impressive, especially since they're working at a financial transaction company run by a guy named Price.
Dan Price announced a minimum salary of $70,000 to all of his 120 employees back in 2015. It paid off big time [Amir Barnea / Toronto Star]
Gravity Payments employees volunteer to take pay cut as revenue drops 50% during COVID-19 crisis [Kurt Schlosser / GeekWire]
The CEO Paying Everyone $70,000 Salaries Has Something to Hide [Karen Weise / Bloomberg]
Image: Whym/Wikimedia Commons (CC-BY-SA 3.0)