In April 2015, US businessman Dan Price, owner of Gravity Payments in Seattle, announced that in the next three years he would increase all employees' salaries to $70,000 per year. He was inspired by a study from leading economists which found that $70,000 per year is the salary level which gives people a feeling of happiness and well-being.
This step won him great popularity and publicity around the world, including our previous article here. However, it has turned out that the situation in the company is far from rosy: some key employees and customers have left, while the owner's brother Lucas Price has also filed a lawsuit on the company because of damage to his rights as a minority shareholder and is demanding substantial compensation.
So the question is: Was the increase of salaries a good idea? LinkedIn Talent Blog analysed the situation and concluded that the company made the following mistakes.
1. Salaries should not be made public
Salary should remain a matter between company and employee. Everyone knows how much people earn at Gravity Payments. This gradually provoked a certain resentment among both employees and clients. Some clients left for fear the company would raise its prices.
2. All employees should not be paid the same salary
Companies do not pay all staff equally for a good reason: everywhere there are some employees who are worth more than others. Most Gravity Payments employees were earning less than $70,000 a year. Some employees left even despite receiving a pay rise as they resented others' salaries being increased more and undeservedly.
3. Salaries should be set by corporate strategy, not politics
Renumeration should be a strategic issue. Dan Price acted politically, based on his own beliefs, but not as a manager and entrepreneur.
What is your opinion?
-kk-