Looking to improve the lives of their employees at all levels, Bay Area-based Heath Ceramics tried an experiment in more equitable benefits.
4 min read
How do we take action?
We asked ourselves that question all last year, as the pandemic triggered painful layoffs and worldwide protests against racial injustice got us thinking deeper about who we were as a company. As we dug into our own decisions at our business, looking for ways to improve our employees’ lives, we never expected the process would end where it did — by eliminating a 401(k) matching program we were always so proud of.
But once we crunched the numbers, it made sense. More of our employees would benefit if we did something different.
We’re the husband-and-wife owners of Heath Ceramics, a Bay Area business that designs and manufactures home goods, primarily ceramic dinnerware and tile. Our 160 employees serve as a microcosm of society: Although we have many executives and managers, more than half are hourly workers in manufacturing, distribution, or retail jobs. Our base pay for these team members was once $16 an hour — which we thought was good.
But last year, we decided to take a deeper dive into understanding socioeconomic equity. We turned to old colleagues at the Oakland nonprofit Inner City Advisors for help, and they told us that from 2000 to 2019, the mean pay for office jobs grew 88 percent, while pay in manufacturing grew 65 percent, and retail just 61 percent. We don’t trust the market to correct this balance on its own and decided that our new base pay for hourly workers would be $20 an hour — a living wage for the Bay Area.
That additional pay had to come from somewhere, and manufacturing is not a high-profit business. We talked with our finance director, hoping to find a way to shift funds around, and he pointed out some fascinating data about our 401(k) match program.
We’ve always matched up to 3.5 percent of an employee’s contribution. But we didn’t realize that the top 19 percent of earners at our company accounted for 50 percent of all matching contributions made by the business, while 30 percent of employees made no contributions at all. It was effectively “free money” for those who had the extra funds to contribute, as opposed to those who needed every part of their paycheck to make ends meet.
Counterintuitive as it may sound, we realized this was an opportunity to do better: We could eliminate the matching program and replace it with a new one that spread the funding more equitably. Some of this money would go to fund the raises for our lowest-paid workers, while some of it would be turned into smaller 401(k) contributions for all employees (who’d get more based on longevity). These changes would affect nearly everyone at Heath. Forty-nine percent of our team would see a pay increase; most of our higher earners would say goodbye to the 401(k) match. In short, it was not a decision we could make without the buy-in of our team.
Over several weeks, we spoke (via video) with all 160 Heath employees. Meeting in groups of four to eight people, we explained the reasons for the change and how it would work, and we asked for feedback. Company-wide, enthusiasm was strong. We heard incredibly thoughtful comments — many from folks we don’t hear from often. It was a unifying experience, one that made us grateful to work with people who recognized the importance of the collective good.
In many ways, our initiative is a response to everything we experienced in 2020 and beyond. Headlines loomed large, and we often felt too small to change them. But as we looked closer, within our own community and among our own team, we found ways to take bold, meaningful steps forward — together.