Seattle CEO forgoes salary to secure staff jobs in the coronavirus crisis

Dan Price first slashed his income in 2015 to provide a $70,000 minimum wage for workers at his company, Gravity Payments

SEATTLE, WA - JUNE 03:  Gravity Payments CEO Dan Price attends the Canoche Benefit for the RC22 Foundation hosted by Robinson Cano at the Paramount Theatre on June 3, 2015 in Seattle, Washington.  (Photo by Mat Hayward/FilmMagic/Getty Images)

Falling asleep at his laptop every night and brushing his teeth over morning emails is a routine CEO Dan Price knows well from the founding days of Gravity Payments.

It’s not a pattern he expected to repeat, but self-isolating during the coronavirus outbreak has brought back memories for the former millionaire.

The old days are a brief distraction from pressures weighing on the 35-year-old, who shocked the Seattle business community in 2015 by raising the minimum salary at his financial services company to $70,000. To pay for it, he slashed his $1.1 million (Dh4m) income, dropping to $70,000 a year.

Now he's gone a step further. As job losses mount in an economy reeling from coronavirus lockdowns, Mr Price has relinquished his entire income to avoid letting go of staff. "Getting laid off and not having a job right now would be just devastating… all the unemployment offices are full," he said in a Zoom interview with The National.

In the last week, a record 6.65 million people filed jobless claims in the US, up from 3.28 million the week before.

Small businesses in particular, like the 20,000 restaurants, coffee shops, clothing boutiques, salons and other enterprises Gravity serves, have been sapped by shutdowns since the US government took steps to contain the coronavirus last month.

Gravity lost 50 to 55 per cent of its revenue in less than three weeks but Mr Price has said he won’t lay off staff or raise prices, despite the toll on his company.

“We agree with putting our health first, but it's also true that these measures have just been crushing for small businesses,” he said.

Quote
We agree with putting our health first, but it's also true that these measures have just been crushing for small businesses

Mr Price is not alone in making sacrifices to sustain Gravity’s business model. Most of his staff volunteered to take a temporary pay cut to keep the company afloat and support small businesses while many of their competitors raise prices.

“It's really proven the team's dedication to our clients because they would rather take a pay cut and put themselves in harm's way,” Mr Price said.

His own decision was inspired by his staff’s determination to “protect the little guy”. Of 200 people working at the company, 98 per cent offered to reduce their salary.

Positive messages have flooded in from grateful clients. “As much as this is a terrible situation, it's also a situation where what we do really matters – helping these small businesses save money,” he said. “We really need to look after each other because what hurts you hurts all of us, right?”

Growing up in rural Idaho, Mr Price saw how much high transaction fees could suffocate local businesses. The first client he helped was Heather, who owned the Moxie Java coffee shop where he played gigs with his Christian rock band as a teenager in the early 2000s.

Processing credit card payments cost Heather almost as much as rent and only marginally less than her staff pay roll, which the 16-year-old Price found jarring. “Independent businesses and everyday people in general who are fighting for the American dream are just being so squeezed,” Mr Price says.

Dan Price, CEO of Gravity Payments, chats with employees during a celebration opening Gravity Payments' new Boise office. Price announced that all Boise employees, who are currently earning a minimum of $40,000, will be given an immediate raise to $50,000 and will be phased to $70,000 over the next four years. (Katherine Jones/Idaho Statesman/Tribune News Service via Getty Images)

He started with one, and then a few clients, before honing his business model and expanding over several years, amassing significant personal wealth in the process. Before long, he was part of Seattle’s tech millionaire scene, with the big house and expensive lifestyle of a hipster twenty-something riding his start-up success.

The about-turn came after he turned 30 and the struggles of his staff to survive on an average wage in Seattle were spelled out by a friend. He took drastic action, phasing in a $70,000 minimum wage at Gravity – automatically doubling the income of a third of his employees – and cutting his own salary down to $70,000 to pay for it.

The decision drew criticism and praise. Right-wing radio presenter Rush Limbaugh called him a communist and customers complained about what they saw as a political statement. Others assured him the experiment would fail.

Instead, business and staff flourished. The employee headcount increased by 70 per cent, the company's customer base doubled and the number of dollars processed almost tripled from $3.8 billion in 2014 to $11.2bn last year.

The repercussions have been far-reaching among his employees, too. More than 70 per cent of Gravity's staff have been able to pay off debts. Others have bought homes or started families. “We’ve had 50 babies born in the past five years… it proves the naysayers wrong – they said people would just waste the money and spend it in ways that are not meaningful.”

Cary Chin works Wednesday, April 15, 2015, at the front desk of Gravity Payments, a credit card payment processor based in Seattle. Gravity CEO Dan Price told his employees this week that he was cutting his roughly $1 million salary and using company profits so they would each earn a base salary of $70,000, to be phased in over three years. (AP Photo/Ted S. Warren)

Initially, he hoped his move would help change the US business mindset and slow the advance of income inequality. This hasn’t happened. “In terms of our society at large and the systemic issues that are created by wealth and income inequality, it has not really addressed those,” he said.

But there have been smaller victories. Several companies followed his lead in 2015 and in recent weeks he’s heard from about two dozen CEOs who have cut their pay, in many cases down to zero. Have the naysayers returned? He doesn’t know. “We've been so focused on trying to find a way to stay together that we haven't had any time to think about what our competitors would think.”

It’s not sustainable in the long run. For Gravity to absorb a 50 per cent income drop without raising its prices the company would need to boost its client base by about 15,000. “And we need our economy to recover in the next, I would say, six to 12 months,” Mr Price said.

In the meantime, it’s back to long hours over his laptop at home to ensure the survival of the company, the salaries of his staff and service for the small businesses they support across America.

He’s optimistic, despite the crisis. “I think that there's going to be a lot of small businesses… that are going to call us and use our service because they know that they can trust us.”

As for the personal salary cut, he’s not concerned. The first worked out well. “Prior to Covid-19, I had never been happier in my entire life.”

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