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You stated that the company had revenue of 5 to 10 million. Then did the math of 150 people suddenly increasing their pay by 70k.
70000 times 150 people equals 10500000.
What we do not know is how much the total pay for the company went up. If the total pay only went up by a million, the company would still be making money.
That's not people's salaries going up by $70,000. That's people's salaries being set at $70,000. In other word, if the average was previously $35,000, that's a $35,000 increase per employee. What I did the math of is of how much money the company will have to spend on salaries alone in a given year.
It's already been said that he had to use practically the entire profits from the previous year just to pay for raises up to $50,000 per year. No, the company is not making money if there is no profit margin.
That's not people's salaries going up by $70,000. That's people's salaries being set at $70,000. In other word, if the average was previously $35,000, that's a $35,000 increase per employee. What I did the math of is of how much money the company will have to spend on salaries alone in a given year.
It's already been said that he had to use practically the entire profits from the previous year just to pay for raises up to $50,000 per year. No, the company is not making money if there is no profit margin.
My point is that we don't know how much the ENTIRE salary of the company went up. Your math is using the assumption that it increased by 70k for everyone. If it only increased by a total of a million, then the company is still making a profit.
My point is that we don't know how much the ENTIRE salary of the company went up. Your math is using the assumption that it increased by 70k for everyone. If it only increased by a total of a million, then the company is still making a profit.
... No... Not at all. I'm basing this off of average salaries, not average raises.
Previous average employee salary: $35,000/year
2015 average employee salary = $50,000/year
2017 average employee salary = $70,000/year
Total number of employees = 150 Previous yearly expense on salaries = $5,250,000
2015 yearly expense on salaries = $7,500,000
2017 yearly expense on salaries = $10,500,000
Company Revenue (2014) = $10,000,000
Company profit (2014) = $2,200,000
It's clearly been stated that he's had to use pretty much the entire 2014 profit for his salary increases to a minimum of $50,000/year. My math above reflects exactly that. Salary costs went up by approx $2.2Million per year. Last year, he was spending about $5Million on salaries. By 2017, he'll be spending over $10,000,000 per year on salaries alone.
Give a man a fish and he eats for a day.. Teach a man to fish and he never goes hungry.
Or, what generally winds up happening.. Give a man a fish, he eats for a day, then comes back wanting more fish from you the next day.
I understand there are problems with the system, but I haven't heard any good solutions from either side. My point was to Pedro, who likened liberals to those who don't bring a food item to the party yet eat everyone else's...my point was liberals are the opposite of that. We are the ones who want to make sure there's enough for everyone, even the guy who comes in and mops the floor after the party. From a political philosophy viewpoint, liberals are anything but hoarders and takers. For some reason he is assuming liberals don't have a lot of money of their own or good jobs, that is a stupid and ignorant view that has no basis in reality and belies a lack of knowledge of what exactly liberals stand for politically.
... No... Not at all. I'm basing this off of average salaries, not average raises.
Previous average employee salary: $35,000/year
2015 average employee salary = $50,000/year
2017 average employee salary = $70,000/year
Total number of employees = 150 Previous yearly expense on salaries = $5,250,000
2015 yearly expense on salaries = $7,500,000
2017 yearly expense on salaries = $10,500,000
Company Revenue (2014) = $10,000,000
Company profit (2014) = $2,200,000
It's clearly been stated that he's had to use pretty much the entire 2014 profit for his salary increases to a minimum of $50,000/year. My math above reflects exactly that. Salary costs went up by approx $2.2Million per year. Last year, he was spending about $5Million on salaries. By 2017, he'll be spending over $10,000,000 per year on salaries alone.
Part of your problem is you assume revenue is flat for the next three years from 2014. Revenue can increase, decrease or even stay the same. If it stays at or goes below 10 million of course you are right. Last year they made 4,750,000 after salary expenses, should they make that same post salary expenses, the revenue would increase from 10m to 15.3m which isn't impossible in a single year, let alone three.
I understand there are problems with the system, but I haven't heard any good solutions from either side. My point was to Pedro, who likened liberals to those who don't bring a food item to the party yet eat everyone else's...my point was liberals are the opposite of that. We are the ones who want to make sure there's enough for everyone, even the guy who comes in and mops the floor after the party. From a political philosophy viewpoint, liberals are anything but hoarders and takers. For some reason he is assuming liberals don't have a lot of money of their own or good jobs, that is a stupid and ignorant view that has no basis in reality and belies a lack of knowledge of what exactly liberals stand for politically.
Pedro is a shill for trickle-down economics where the pie is 95% for the owner and other upper management, leaving 5% for all other employees. The only way I can see it is those who can't find work who are "sucking off gubmint's teet" truly being "takers" (though unless they never worked a day in their lives, they would have put skin in the game.)
That's not people's salaries going up by $70,000. That's people's salaries being set at $70,000. In other word, if the average was previously $35,000, that's a $35,000 increase per employee. What I did the math of is of how much money the company will have to spend on salaries alone in a given year.
I understand your math, and.. While possibly slightly confusing, there's nothing wrong with it.. But, you're leaving a whole bunch out... Not that you could know everything about this guy's company, but.. Being thorough here.
You're basing your numbers on the salary.. What the owner of the company would also have to take into account.. Let's say he has a 5% match on 401k contributions.. Now, those folks who were contributing 5% of their salary at $35k, which would have been $1750 a year... They're now contributing $3500 a year, and he has to match that.
What about taxes? his side of the SS tax is 6.2%.. That went from $2170/year for the $35k employee.. To $4340 per year.
Someone who is a tax lawyer might be able to answer this, but if the money were paid out as a bonus.. Does he owe his side of the SS tax, or is that employee responsibility?
He has a lot more liabilities by doing this than just the salary increase.
The original reporting is from the New York Times, so we should use that and not some right wing non-sense. It seemed that Gravity Payments can handle the pay raises. http://www.nytimes.com/2015/08/02/bu...ared.html?_r=0
From what I've read, what's bothering the company the most is a $3 million lawsuit from the co-founder. It can handle the raises OR the lawsuit but maybe not both when you're in break-even mode.
Otherwise it sounds like the raises put the company in break-even mode until those new clients start to pay off in about 18 months. Not everyone got a such a high raise, according to the article the lowest paid people were around $41,000. So on the extreme side, some people are getting a raise of about 40% (over time). Not sure what everyone's raises are, but obviously some of the people up the ladder were butt-hurt about their raises not being enough.
Goes to show that people like a hierarchy. What struck my about the article was this quote -
Quote:
The new pay scale also helped push Grant Moran, 29, Gravity’s web developer, to leave. “I had a lot of mixed emotions,” he said. His own salary was bumped up to $50,000 from $41,000 (the first stage of the raise), but the policy was nevertheless disconcerting. “Now the people who were just clocking in and out were making the same as me,” he complained. “It shackles high performers to less motivated team members.”
So he was making a good salary, but he was butt-hurt that his salary was not high enough relative to the "less motivated team members."
If he made a business mistake - it was trying to make this into a PR fiesta - that is clearly the problem he's having both internally and externally. If he really wanted to act on his principles he should have just started raising the salaries of his lower end workers, and also raising those on the higher end but not as much and not talk about it. Another way he could have done it is through attrition and incrementally. Over 10 years no one would have noticed.
The problem he's having is that now everyone knows what others are getting paid and they're resentful because some think they deserve more than others. This is why a lot of employers don't let the employees discuss salary (publicly). We all think we're worth more than Bob down the hall.
Last edited by redguard57; 08-04-2015 at 05:53 PM..
It would probably work better as a continuing annual bonus out of profits, something like what the Kingston Technology CEO did when his company was sold, except on an annual basis:
Japanese workers on the lower levels are very conscious of working for what they refer to as a "good company". Your annual bonus may easily equal your basic pay, even for, or especially for regular workers. You get it all at once, like Canada Savings Bonds, so you used to see lots of young Japanese travelers who had worked for seven or eight years. You didn't see that from other countries.
So he was making a good salary, but he was butt-hurt that his salary was not high enough relative to the "less motivated team members."
The problem he's having is that now everyone knows what others are getting paid and they're resentful because some think they deserve more than others. This is why a lot of employers don't let the employees discuss salary (publicly). We all think we're worth more than Bob down the hall.
Ok.. Back to the widgets..
So, I work for you.. I crank out 100 widgets per day, on average.
Overall employee average is 60 per day.
I'm in the top 5 percent of production..
Now, you say.. You're all the same. You all get paid $50 day, whether you're outputting 20 widgets per day or 100.
Where is my incentive to produce 100 per day? Bob down the hall only puts out 20.. Has his 5 smoke breaks a day.. And he gets the same recognition and compensation that I do. why should I bust my butt when it makes no difference whatsoever?
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Works well in Japan, or at least used to
