10 Years Later: How a $70k Minimum Wage Changed Gravity Payments
The Results Are In:
Summary
We are proof that paying living wages is good not just for employees but for businesses, as well. Since raising wages, our company’s revenue and profit soared, our employees started families and continued to provide great customer service, and our clients grew happier and stayed with us longer. It’s worked so well that we decided to double down with an $80k min wage and an employee profit-sharing program. Still, outside of our walls, it made no impact. No businesses followed suit and the broader pay gap between workers and CEOs remains massive.
Our Business Grew
- Revenue soared 650% since the minimum wage was enacted.
- Headcount roughly doubled, to over 200 full-time employees.
- We have been profitable every year and have $0 debt.
There are lots of reasons Gravity has grown, but there is no doubt the minimum wage played a huge part. It created a virtuous cycle: We attracted more clients (businesses that use our credit card processing services), which allowed us to hire more people, which increased our capacity to grow further.
The initial publicity around the news helped us attract new clients, but it was less beneficial than you might think because there was also a ton of negative publicity around the announcement. Although we never advocated for minimum wage laws or for companies to change their policies, a lot of people saw our decision as an attack on business owners and were eager to use it as a case study to prove why high wages don’t work. In fact, the opposite happened: Harvard Business School wrote a case study highlighting our success.
Our Team Expanded
- We saw 10x more applicants to job openings than before.
- Employee turnover fell from 22% a decade ago to 6% this year.
- Employee productivity, as measured by revenue per staffer, doubled.
- Our institutional knowledge and experience exploded: Half of our 6 initial employees are still here decades later. Over one-third of the 120 employees who were here in 2015 still work here.
There is a ton of data to suggest employees are more engaged when they feel valued, and that rang true here. Initially, staff members that got a huge pay bump – some doubled their salary – felt “imposter syndrome.” Over time, their confidence grew. We learned it’s not just about pay; we promote from within and give people real opportunities for advancement. We also save a ton of money on things like job ads, hiring costs, and training costs. This is something often left out of the discussion over higher pay: It is not a pure net cost increase. There are direct savings elsewhere on your balance sheet.
Employee Lives Improved
Since the new wage was announced, our staff altogether has had
- 75 marriages, a 20x increase.
- 85 houses purchased, a 12x increase.
- 115 kids, a 5x increase.
It’s worth noting that while we are a remote-first company, many of our staff live in high-cost Seattle and Honolulu. Before the minimum wage increase, most staff saw the possibility of starting a family here as nearly impossible.
Our CEO-to-median employee pay ratio was 22x in 2015. Now the CEO makes 2.8x the median employee. Founder Dan Price, who passed the CEO reins to long-time COO Tammi Kroll in 2022, still makes the minimum wage in his current role. Much of the initial funding for the wage increases came from Dan cutting his $1.1 million salary to $70k.
- This course increased our median pay.
- We have done zero layoffs, ever, and employees have peace of mind knowing we never will.
- Employee contributions to retirement plans grew 250% since 2015, from an average of $1,900 annually per employee to $6,700 now. That equates to a 7.5% contribution, up from 2.6% before. Whereas 62% of employees had a retirement plan before, now 84% do. We help by contributing 3% of their paycheck annually to their retirement no matter what (not a match).
- Average debt, as reported by employees, has plummeted.
The whole reason we started the wage increase was to improve the lives of employees, who frankly were being underpaid before. Our hope was to provide these benefits and still be revenue neutral. In reality it succeeded in ways we did not predict, which allowed us to expand these benefits to more people.
We Doubled Down
Encouraged by these results, we made several key changes:
- In 2017, we purchased a Boise company and folded it into Gravity, tripling the minimum wage for 49 staff members there.
- In March 2022, we raised the minimum wage to $80,000 a year.
- In 2023, we launched a profit-sharing plan where employees split our annual profit growth at the end of each year. Last year, employees took home over $8,000 each, putting the total minimum wage at $88,000.
One of the main criticisms we heard after the $70k announcement was how employees were not fully benefiting if the company succeeds. For years, we’ve explored an employee-ownership model but decided the potential pitfalls (and there are surprisingly many, as we learned) outweighed the potential benefits. But we still believe in employees sharing in profits – as well as the concept that people work best when they are directly rewarded for the effort they put in. So we decided on a profit-sharing plan that works like this:
- Every year, we multiply our annual growth rate (which is typically around 10%) by our actual profit.
- We divide that number by the total employees and provide it as a bonus in their last paycheck of the year. The bonus has grown from $1,000 in 2023 to $8,000 in 2024, and we are optimistic for 2025.
- Long-tenured employees get extra: Those who have been here 4-6 years get an extra 10%; employees of 7-9 years get an extra 20%, and so on.
Bottom line: We think employees deserve to share in our success because they are the reason for our success.
We’re Not Stopping
Among the other changes:
- We became a remote-first company for every employee starting in 2020, with in-office options in Seattle, Boise, and Honolulu.
- We added an HSA plan where we match up to half the elected contribution, with 82% of employees getting the maximum match.
- We added 12 weeks of paid leave for all new parents.
- We added 10 paid days off automatically for every new hire.
- We adopted flexible scheduling plans.
Every year, we evaluate employee benefits and conduct a staff survey that explores what people want most. These benefits are a direct result of those employee requests. For instance, when it became safe to return to the office during the pandemic, we asked employees what they wanted to do going forward. 93% said they wanted to stay remote or hybrid, so that’s what we did.
Case Study: Employees Saving Each Other
When the pandemic hit, our revenue plummeted 55% overnight as people stopped shopping at the businesses we serve. We were losing $1.5 million a month. We had about 3 to 6 months of cash on hand to keep going before we would have to make drastic changes. We’ve never had layoffs or pay cuts in our two-decade history, and the pandemic crash was not the right time to jack up rates for the businesses we exist to protect.
One of our core principles is transparency; we share our detailed financial information with employees constantly. So we immediately brought our financial situation to our 200 employees and laid out where we were in an all-hands Zoom meeting on March 19, 2020.
Without prompting, employees suggested taking temporary pay cuts to survive until businesses reopened and our revenue recovered. Amazingly, 98% of our staff volunteered to cut their pay, with the average person giving up $4,300, or about 20% of their paycheck. By July, our revenue recovered and we were able to make each employee whole by paying back their temporary pay cut. We survived with no layoffs or price increases and ended the year in the black. We have grown without cuts every year since.
This sort of solidarity – both with colleagues and for the company – is not typical. But we believe these bonds were formed after years of including staff in conversations about how to run the company and how people should be compensated. There is a good chance this sacrifice by staff saved our business. If we had made mass layoffs at that time, we would not have been in position to bounce back strongly and swiftly when shopping came back, not to mention expand in subsequent years.
Broader Impact: Almost Nothing
CEOs are now paid a median of $23 million, or 281x more than their median employee. Layoffs continue to rise along with the long-term unemployed and underemployed. The average company has used rising profits on things like stock buybacks, which hit a record $1 trillion in the past year, and dividends, which hit a record $640 billion in the past year.
We haven’t heard from a single representative of a single company inquiring about our wage increases and the results it’s had on our business.
Explaining Why
A main reason we are different: We are 100% privately owned with no need to pacify stockholders or outside investors like private equity. Simply put: If our leadership decides to do something, we can do it. At most big companies the idea of raising wages is seen purely as a cost increase with no thought given to any potential long-term gain. When public companies announce layoffs, their stock typically rises in the short term – and the pay of those in charge rises along with it. The prevailing short-term decision making views raising wages as an overwhelming net negative.
Even at locally-owned businesses, the cash on hand to survive is typically so small that a bump in wages may not be fiscally possible in the short term, even if they believe in the long-term benefits. We were somewhat unique in that Gravity A) had almost a decade to build up a solid, growing business before bumping wages, and B) had a big expense to cut (the CEO’s pay falling 91%) to offset pay rising elsewhere.
Still, the underlying truth is that most businesses simply do not want to try something like this and think it will bankrupt their business. We are here to prove otherwise.
Our Mission
We exist to stand with those who believe in the American dream and are willing to work to achieve it.
Join Our Team
We believe in putting purpose over profit: This foundation of Gravity’s culture means prioritizing independent businesses and remaining committed to the success of our teams who serve them.
Why Choose Gravity?
Inside and out, Gravity is committed to positive change, which means a radical level of care for independent businesses and our team. Let us show you how we can support your business.