One good turn deserves another. That should be the case for Dan Price, of Seattle, a millionaire who founded the credit-card processing company Gravity Payments and announced in April that over the next three years he would raise the salaries of the lowest paid persons in his company to $70,000 and lower his own million dollar salary to $75,000.
His rationale? He had read that the happiest people earn around $70,000.
Everyone celebrated. The employees talked of paying off debts with the largess. The business world rocked in shock at the idea of giving the least paid employees that pay increase over the next three years.
The happily ever after story quickly soured a Price quickly learned, “No good deed goes unpunished.”
First, his brother, Lucas Price, sued Dan Price for taking millions of dollars out of the company while denying him the benefits that his 30 percent ownership deserve. Lucas has not been involved in the company in the past few years. He began the lawsuit at least a month before the equalizing pay announcement. The new salary scale cut into profits at a time when legal fees tapped a drain on Gravity funds.
The news triggered a flood of emails, letters, Facebooks postings and phone calls – which distracted and drained the company’s resources. Requests for Dan Price to appear on talk shows to discuss his decision also require time away from his business.
The whole idea began when Price read how tough it was to make ends meet even on the above minimum salaries he paid. The least paid person made around $35,000 a year. He decided he could personally do something about that.
Initially, Gravity Financial Manager Maisey McMaster, 26, enthusiastically agreed with Price. Within weeks of the announcement, however, she resigned because people with the least skills received huge raises (with more promised over the next three years to reach the ideal salary) and those with the most years, experience and commitment received little or no pay increase. Approaching burnout from five years of dedicated service in management, McMaster quit — as did other valued employees — each spurred in part by their view that it was unfair to double the pay of relatively new hires while the longest-serving staff members received small or no raises, reported the New York Times.
The story made national news and caught the attention of businesses across the country and nearby. Just with that information, some businesses contracted with Gravity to enroll with the service. By June, signing up new clients increased from 200 a month to 350. Good news, but Price said it will take him at least a year to realize a profit from these new clients.
Meanwhile, some of his established customers have dropped the service anticipating an increase in rates to cover the new salaries. Others considered the equalizing pay increase a political statement and discontinued the service.
Good news and bad news. Everyone across the country loves him, smaller businesses heard the story and at least a couple tried to emulate the concept, albeit on a much smaller pay increase.
Besides being flooded with well wishers’ comments, Price, with his self-imposed lower salary, finds himself struggling financially and working harder than he has in a decade. He may be worth about $3 million, but he began renting his house to make ends meet and says he manages on the scaled back income simply because he does not have a family.
He does, or did, have friends. Some of them have backed away fearing that Price’s actions made them look like Scrooge in front of their own employees.
His good deed inspired the owner of Jaxson’s Ice Cream Parlor in Dania Beach, Fla., to give all of his employees raises. The salaries paled compared to the benefits Gravity employees saw, but increased enough to add a couple hundred dollars to weekly pay checks. For many, the pay increase encouraged them to stay on the job longer.
Andrew Green of Green Solutions of Fort Lauderdale, Fla., also followed suit. He gave his handful of employees a 30 to 50 percent pay increase. He anticipates it will cut his profits by more than 12 percent.
With all eyes on his decision and some copying it, Price feels the pressure to succeed even as his best, most, trusted employees resign, he receives a lawsuit from his brother and co-founder and suffers the loss of customers not trusting his decision.
Will he come out of this smelling like the proverbial rose? Only time will tell. Three months after the announcement the saga continues with the mixed results that followed Price’s good deed.