Klarna is squeezed by increasing wages – One staff member earns over $1 million.
Revenue for the Swedish payment solution company Klarna increased by 26 percent last year. In total, Klarna earned over $300 million with a reported profit of $20 million.
In 2015, Klarna submitted an application for a banking license with the Swedish financial supervisory authority Finansinspektionen. The company also invested a lot time and money promoting themselves on the US market, resulting in higher provisions for loan losses.
2015 also saw co-founder Niklas Adalberth departing his operational role as vice-president.
That responsibility was taken over by Knut Frängsmyr, a lawyer who previously held the title of “Chief Culture Officer”. According to Klarna’s annual report, the promotion is well-evidenced on Frängsmyr’s paycheck.
Frängsmyr, who was previously with media giant MTG, earned nearly twice the salary of Klarna’s CEO and co-founder Sebastian Siemiatkowski.
Earning $650,000 in 2015, Frängsmyr is Klarna’s highest paid exec. This is clear from Klarna’s annual report, which unlike many other companies, details the salaries of senior executives.
Mr. Siemiatkowski had to settle for a salary of $340,000, while Adalberth earned $320,000.
However, the shares in the company held by the two co-founders are likely to be worth millions of dollars in a sale or IPO.
The annual report also reveals that one person in management received an “employment bonus” of $640,000 – and that another employee received compensation “exceeding one million Euros.”
When Breakit asked about the payments, Klarna’s communications officer Erik Engellau-Nilsson replied, “we don’t comment on individual employees.”
The US launch has left a mark on Klarna’s financial statements. For the second half of 2015, earnings were close to zero. However, a strong first half allowed Klarna to report record earnings of $20 million.
It is not only individual top managers who have gotten fatter paychecks. In addition to costs related to the US launch, another more permanent factor affecting Klarna’s profit margin is salaries.
In 2015, the number of employees at Klarna Group grew by 5.6 percent. At the same time, Klarna’s salary costs for regular employees increased by 31 percent. The average salary at Klarna is now $75,000, an increase of 24 percent from the previous year.
With social security and pension obligations, Klarna’s cost per employee increased by 21.5 percent to $100,000. With over 1,000 employees, the continuing wage hikes could have a negative effect on the company’s profit margin.
Erik Nilsson-Engellau pointed to two main reasons for the increase in salary averages. The first is linked to Klarna’s international expansion. Secondly, the company has chosen to hire people who have a higher salary level.
“We are recruiting more senior employees from around the world,” said Erik Engellau-Nilsson.
According to their annual report, Klarna’s focus in 2016 is “growth” and “optimized margins” in the UK and USA, with policies that will lead to reduced costs.