With cryptocurrency firmly entering the public consciousness, digital currency is no longer a fringe topic. Crypto holds a powerful allure for many, and is even tipped to become a default legal tender of the future.
While still sitting on the edge of the true mainstream (for now) an increasing number of countries are showing a greater acceptance level for crypto –– while others are already outright embracing it. This upswell of popularity is an excellent indicator of the way that cryptocurrency is becoming more established as a promising alternative to traditional tender.
Cryptocurrency has found its best match with the younger tech-savvy population – especially those working within technical industries (FinTech, Blockchain etc) – with many already confident traders. Attracted to the currency’s decentralized nature, these crypto advocates have a healthy appetite for progression and evolution. And importantly, this progress will likely become a need that companies simply cannot afford to ignore. But, can you pay salary in cryptocurrency? Let’s find out.
Time to futureproof your company
LA recent survey has shown that nearly half of professional investors believe that a mainstream future of blockchain and digital technologies is inevitable. In addition to this, one in five experts is confident that cryptocurrency can entirely transform the economy globally.
Future proofing a company means keeping abreast of trends and being prepared to adapt and modernize systems to implement these changes. Gaining a reputation as a forward-thinking and progressive employer will also go a long way toward attracting fresh tech talent – and introducing cryptocurrency as a payment option is undoubtedly a bold way of staying ahead of the curve.
Digital currency is more than an appealing option for employees. It is also becoming an increasingly convenient option for companies with an international team. It typically represents a much quicker payment method and avoids costly bank transfer fees, as well as the issues connected to making payments in multiple foreign currencies.
Many companies might question if cryptocurrency payment is possible, and if so, how? In this article, we explore the key considerations for companies interested in adopting cryptocurrency as a payment option for their workforce.
Is paying salaries in cryptocurrency legal?
The answer regarding the legality of crypto salary payments is relatively complicated. In short, it largely depends on where the employee is located. Acceptance levels of cryptocurrency vary significantly from country to country. Some countries are showing a complete acceptance of cryptocurrencies. El Salvador and the Central African Republic have even adopted it as their official currency.
In contrast, countries like Algeria and Bolivia have made their stance on cryptocurrency very clear, passing strict laws to prohibit any possible use of it.
Many other countries have a slightly more ambiguous and complicated relationship with cryptocurrency. Some allow it to be held and traded, but do not allow it to be used as a method of payment within that country. In cases such as this, a currency that cannot be used for purchases is consequently problematic when being used to pay day to day salaries.
However, the good news for companies and remote teams is that the list of nations that do allow workers to be paid in cryptocurrency is steadily growing – with the list includes major countries like Argentina, the United States and the United Kingdom. However, some countries do not make it completely straightforward, as in the US, where regulations regarding the payment of salaries in cryptocurrency even differ from state to state.
The most important undertaking for any company interested in offering cryptocurrency as a payment method is to do thorough research into the specific regional laws regarding this – to ensure it is a feasible method that can be compliantly implemented.
Should salaries be paid fully or partially in cryptocurrency?
Similarly, the answer to this also depends on the country or state where the employee is based. Different countries and states will have varying regulations regarding how much of an employee’s wages can be paid in cryptocurrency.
In certain US states, the law states that a minimum salary has to be paid in USD – and only payments above that can be paid in cryptocurrency.
It is also vital to consider the requirements of the employee in this regard. For example, not everyone might want (or feel comfortable having) their full salary paid out in crypto, in which case they may wish to opt for only a portion of their salary paid in this way.
Some companies can also choose to pay regular wages in the employee’s home currency while paying out bonuses in cryptocurrency – an attractive option for those looking to invest on top of receiving a regular salary.
What are the tax implications of paying salaries in cryptocurrency?
In those countries where cryptocurrency is permitted to be used to pay wages, the usual attention to legal regulations and tax compliance applies. However, once again, this will require careful research into the individual laws governing the areas where the employees are located.
The classifications of cryptocurrency can be entirely different depending on the country. For example, in the US, cryptocurrency is regarded as property and, therefore, is liable for capital gains tax, whereas, in the UK, cryptocurrency is taxed as regular income.
But for some, depending on where in the world they live and work, getting paid in cryptocurrency can, in fact, have very favorable tax consequences. In countries such as Portugal, the approach to the taxation of cryptocurrency is remarkably lenient, with the sale of cryptocurrency being tax-exempt. Similarly, countries such as Singapore, Switzerland, and Slovenia, to name a few, do not impose a capital gains tax on cryptocurrency sales. One can therefore confidently say that for team members living in these crypto-friendly countries, getting paid in cryptocurrency would be hugely beneficial.
It would be important to do thorough homework on these various regimes to design a payment system that is most practical and beneficial to employees – ensuring that they do not end up paying more tax than necessary while at the same time remaining compliant.
What goes up, must come down (and vice versa)
Cryptocurrency is known for its volatility, as experienced in recent years, with graphs displaying sharp spikes and dips across the board. Bitcoin is a perfect example of this, reaching an all-time high of $68,000 in November 2021 before plummeting to $33,000 only eight weeks later.
These fluctuations can happen quite rapidly, which can either leave an employee elated with a sudden salary increase or, conversely, experiencing an abrupt overnight drop.
Having said this, the allure of the potential gains will always be there – even if that means a longer-term investment. And a smart way to reduce the risk of any excessive loss would be for a company to negotiate a percentage of the salary to be paid out in crypto. So while the employee can rely on as much of their salary as they need to pay their day-to-day expenses, anything above this could be paid in crypto and ultimately can grow into a healthy investment.
What type of assistance is available in negotiating crypto salary payments?
There is no doubt that the popularity and interest in crypto payments are growing across many forward-thinking industries. With that, HR companies are discovering new ways to assist with the process. By partnering with an outsourced HR company, managing and paying a global workforce in cryptocurrency has been hugely simplified.
An outsourced HR agency can provide employers with an EOR (Employer of Record) service that, combined with advanced technology, can offer payroll to global employees in both fiat and cryptocurrencies.
This solution takes the burden off the employee to negotiate all of the regulations regarding crypto payments. An EOR is an organization that hires and pays an employee on behalf of a company, taking care of all formal employment tasks and ensuring compliance. So for any company looking to expand and modernize its offering, partnering with an outsourced HR agency provides ample solutions for this.
The way of the future? Very likely...
In summary, current and forecasted trends show us that evolution – no matter how fast or slowly it occurs – is guaranteed. Therefore, it would be foolish not to pay attention carefully to the potential of cryptocurrency, especially concerning future opportunities.
With remote, globally distributed teams steadily gaining popularity for companies and employees alike, a global digital and decentralized payment method makes sense on multiple levels. Cryptocurrency is not influenced by the same issues that hamper traditional currencies, and is also not subject to issues such as international transfer fees and currency conversions.
With the business landscape becoming more digitized by the day, it’s just a matter of time before cryptocurrency takes a firm foothold in the mainstream. Now is the time for companies to sit up and take notice to ensure they stay relevant and keep their offering sharp. Future proofing starts today.