In 2015, Dan Price—the CEO of a small company called Gravity Payments, which offers credit card processing—announced that all employees’ annual pay would be raised to a minimum of $70,000 per year and that his $1 million in annual pay would be temporarily lowered to $70,000 to help cover the increased labor costs associated with the initiative. Price’s inspiration for the change stemmed from a confrontation with an employee regarding pay and from a study by Kahneman and Deaton. In that study, the researchers found that emotional well-being increased steadily along with increased pay until an annual income of about $75,000 was reached, at which point additional pay did not result in higher emotional well-being.

In the days that followed, Price’s announcement was met with a mixture of praise, consternation, and criticism. On one hand, Gravity Payments received an influx of résumés, interest from business scholars, and praise from some clients and even an elected official. On the other hand, the company faced criticism from clients who feared that the price of Gravity Payments’ services would increase, from current employees who were concerned about the potential internal inequity of having positions of different worth being compensated at similar rates, and from members of the general public who thought the announcement was nothing but a publicity stunt.
Six months later, only two employees had left the company, alleviating potential concerns by some of a mass exodus due to perceived pay inequity.
Around 18 months later, the company had seen a 67% increase in new clients and a 75% increase in revenues, and by about 2 years later, 10% of Gravity Payments’ employees had purchased a home or planned to do so in the near future—a purchase that previously had seemed out of reach for many. In the end, what began as an initiative to improve the emotional wellbeing of those who earned less than $70,000 ended up helping the company’s bottom line.

Case Discussion Questions 

1. If you were a Gravity Payments’ employee who made $50,000 per year, how would you have reacted to the new $70,000 per year pay minimum? What if you were an employee who made $90,000 per year?
2. Were you surprised by the different reactions of employees and of the general public? If so, how?
3. To improve the perceptions of employees and the general public, what could the Gravity Payments’ CEO have done differently when communicating the new pay policy?