Company Raises It's Minimum Wage to $70,000 and All Hell Breaks Loose

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Tenks

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It would be awkward to buy his company because the parent company certainly wouldn't mandate the 70k salaries. So now the company they're acquiring at best they'll have to overpay for positions and at worse layoff the expensive staff and suffer a PR nightmare.
 

Khane

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It would be awkward to buy his company because the parent company certainly wouldn't mandate the 70k salaries. So now the company they're acquiring at best they'll have to overpay for positions and at worse layoff the expensive staff and suffer a PR nightmare.
I guess you've never been part of an acquisition. None of that really matters.
 

Palum

what Suineg set it to
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He already answered your question
Except it still doesn't entirely make sense. Part of the money he 'invested' is a loan he put on personal property AFTER he took a paycut. I can't fault him for renting out a home he isn't using, of course, but he did say he's doing it to 'make ends meet'. Typically one does not make that statement along with liquidate all retirement accounts if one isn't gambling. On top of that, he is still in a lawsuit with his brother. He could very well 'lose' or have to settle it and lose on his investments.

My guess is he can't make it work expanding the company and fighting the lawsuit and he has doubled down praying on a return and a favorable legal outcome. We'll see.
 

Eomer

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Is anyone surprised that Phoenix is confused how a successful and growing start-up might need a cash injection, for whatever reason? That being said, it is pretty odd that Price was paying himself a salary of over a million dollars up until recently. This whole thing is somewhat fishy. And in any case, the main reason that the company's growth rate has ticked up significantly has far more to do with the publicity than it does with better engagement from employees or some other crap. From that perspective, it's been a great marketing investment.
 

Khane

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This whole thing is somewhat fishy. And in any case, the main reason that the company's growth rate has ticked up significantly has far more to do with the publicity than it does with better engagement from employees or some other crap. From that perspective, it's been a great marketing investment.
Possible, but it's a little disingenuous to pretend you know exactly why they have grown and retained so much business. After all, this isn't some ridiculous social media services company that relies on hype, it's a credit card processing company. They do business with other businesses which are far less lenient when they don't get results and don't typically care about how you treat your employees.

One of the main arguments against doing something like this is existing employees who were at or near the new minimum wage getting pissed and leaving and businesses faltering as a result. Only 2 employees left the company over the ordeal.
 

Borzak

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He also says he's pretty sure they lost some business due to this. Probably along the lines of "Why would I do business with you if you're spending this much on ...?"
 

Big Phoenix

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Is anyone surprised that Phoenix is confused how a successful and growing start-up might need a cash injection, for whatever reason? That being said, it is pretty odd that Price was paying himself a salary of over a million dollars up until recently. This whole thing is somewhat fishy. And in any case, the main reason that the company's growth rate has ticked up significantly has far more to do with the publicity than it does with better engagement from employees or some other crap. From that perspective, it's been a great marketing investment.
I get they would need money, just that the source of that money is the owners retirement and house seems a little odd. Those are drastic actions that I don't think you would need to take if your business is doing oh so well.
 

Khane

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I get they would need money, just that the source of that money is the owners retirement and house seems a little odd. Those are drastic actions that I don't think you would need to take if your business is doing oh so well.
It's not necessarily a smart move, but like he already pointed out, he believes his ROI through investing in his company will exceed the ROI of his other investments. Either that or it's smoke and mirrors like some of you are suggesting and the business is only staying afloat because he took a massive paycut and is cookin the books, requiring more capital to stay afloat (which would make him pretty much braindead in terms of entrepreneurship)
 

Palum

what Suineg set it to
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Well several months ago he was bemoaning how he was unsure how he could continue because of the costs of fighting the lawsuit with his brother. Then he risks real property (not just investment funny money) on a company where at the very least his own stake in it is at risk?

Why not just get business credit so at least if the worst happens the liability is on the corporation and his brother's controlling interest and not his own property. None of this really makes sense together.
 

Vaclav

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Why not just get business credit so at least if the worst happens the liability is on the corporation and his brother's controlling interest and not his own property. None of this really makes sense together.
Don't they normally ask about the payroll numbers and demand the need for oversight on some general financials with such loans? I know I was getting the fifth degree about making sure I know what I'm aiming at for payroll and such when I was shopping around for who was going to help me fund my business - and that they needed to see those numbers.

Sure, it's a startup vs. something established - but I can't see why they'd stop bothering with such deeper in.
 

Big Phoenix

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Hmm you think that explains why he sold off his house and cashed out his "retirement" instead of taking out a loan?

IMO this whole 70k salary was nothing more than a gamble to drum up some media attention to prop up his dwindling business. If he gave truly gave a shit about his workers he wouldnt of been getting scrooge mcduck compensation before hand and would of done the raises in a much smarter way. The fact the guy is going whole hog by liquidating all of his assets and dumping them into his company should remove the smoke and mirrors.
 

Vaclav

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Hmm you think that explains why he sold off his house and cashed out his "retirement" instead of taking out a loan?

IMO this whole 70k salary was nothing more than a gamble to drum up some media attention to prop up his dwindling business. If he gave truly gave a shit about his workers he wouldnt of been getting scrooge mcduck compensation before hand and would of done the raises in a much smarter way. The fact the guy is going whole hog by liquidating all of his assets and dumping them into his company should remove the smoke and mirrors.
Might want to grab a history book - a number of the big names in pioneering new ideas in business took similar risks with drastic adjustments when the lightning struck.
 

Palum

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Might want to grab a history book - a number of the big names in pioneering new ideas in business took similar risks with drastic adjustments when the lightning struck.
He certainly has the boldest company pay scale. Hope he never runs into a situation where he only needs a $15/hr task completed.
 

Vaclav

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He certainly has the boldest company pay scale. Hope he never runs into a situation where he only needs a $15/hr task completed.
I'd consider the places that effectively got rid of management and let employees determine their own salaries and responsibilities a bit bolder myself. Raising salary is a pretty simple thing to run logistically, just financing might be tricky - completely "unmanaged" on the other hand seems like a logistical nightmare.

Heck, I'm boggled by how my friend Tony out here has his position justified by his company - he's a programmer AND tech for the company, usually just a programmer, but when they need him to do tech in person they fly him 800 miles or so out to Dallas + put him up in a hotel for the week or so he's out there. They do the same for company meetings, etc. Boggles my mind that the increase in productivity for his programming duties from being at home (800 miles away) trumps all those costs and lack of productivity with the travel/etc.
 

Palum

what Suineg set it to
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Well clearly that is part of the problem.

Despite the complexity or sometimes the inability to calculate specific values in revenue and profit for certain positions, there is a number. It's pretty easy to estimate for some industries like service or retail even though there will always been outside factors involved.

It's not that he simply raised salaries, indeed there are plenty of companies that probably should/could universally raise salaries and still survive. That said, they should do it commensurate to the value brought to the organization and this has always been what points to this being a stunt more than a well planned change. Fundamentally it highlights overpriced services as well - if a company can pay ALL employees 70K+ and simply cut CEO pay... what happens when the next company comes along that pays 65K and has 5% cheaper services? 50K and 10% cheaper?
 

Vaclav

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Well clearly that is part of the problem.

Despite the complexity or sometimes the inability to calculate specific values in revenue and profit for certain positions, there is a number. It's pretty easy to estimate for some industries like service or retail even though there will always been outside factors involved.

It's not that he simply raised salaries, indeed there are plenty of companies that probably should/could universally raise salaries and still survive. That said, they should do it commensurate to the value brought to the organization and this has always been what points to this being a stunt more than a well planned change. Fundamentally it highlights overpriced services as well - if a company can pay ALL employees 70K+ and simply cut CEO pay... what happens when the next company comes along that pays 65K and has 5% cheaper services? 50K and 10% cheaper?
Well when it comes to the math I've seen in the past, he actually made the total cost of service cheaper since his reduction in salary was saving more than the raise increases that the staff got - IIRC the lowest paid were getting $45k beforehand, so $25k max per person versus him dropping his own salary by $1.23m IIRC - Wiki quotes the business as having 100-200 employees, assuming 200 making the lowest rate previous that's $500k in extra cost vs. CEO pay of $1.23m less - a $0.73m savings unless I'm glitching on how much he was paid previously. (Wiki says $0.93m pay cut for him - still $0.43m ahead)

And regardless it would depend on the industry in question how much effect that would have on the cost of services - salaries make up a highly variable amount of end cost depending on the industry and the volume that the company handles. [I'd tend to think with them being a credit card handler that payroll is a very minor concern when it comes to the cost of service - I'd imagine most of the service is automated that the humans are there to make exceptions and fix glitches primarily + account management]

As for "What happens?" that's American Business 101 - they'd have competition and they'd have to prove that they're worth it - which personally I'd be curious to see where the "break point" in employee morale is when it comes to salary myself where the value of increased employee morale and happiness starts to win out or lose out against payroll efficiency.

Remember healthy/happy employees are more productive than sick/unhappy ones - just a question of where you hit diminishing returns on the investment into payroll.
 

Eomer

Trakanon Raider
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I get they would need money, just that the source of that money is the owners retirement and house seems a little odd. Those are drastic actions that I don't think you would need to take if your business is doing oh so well.
Meh, everything I've read about this company and the owner leads me to believe he's more than a little bit out there. Hardcore christian upbringing (that he's mostly walked away from), unshakable optimism to the point of naivete, and so on. It wouldn't surprise me if he makes goofy decisions. That being said, it's not unusual for an entrepreneur to plow absolutely everything they own in to their business. A lot of them are just wired differently. And if they weren't, they wouldn't take the risks that they do and therefore wouldn't build some occasionally pretty amazing things. This guy's company though isn't anything special or unique. It's a payment processing company, as far as I understand it. That's a slim margin business. I doubt they can be competitive if they have a much higher cost structure than their competitors.