Paying Employees in Crypto: Legal, Financial, and HR Considerations for Global Teams

As more businesses expand globally and adopt remote work, paying employees in cryptocurrency becomes a more attractive alternative to traditional payroll.  Cryptocurrencies are a fast, transparent, and secure way to transfer assets, making them a great choice for salaries.  There are also a few downsides stemming from the fact that cryptos can lose or gain value based on market forces.

In this article, we’ll cover the considerations an employer needs to consider when introducing salary payments in cryptocurrency.  These include legal, financial, and HR issues that may arise.

The Mainstream Acceptance of Crypto

 Cryptocurrencies have found immediate applications in certain industries.  For instance, some of the best crash gambling sites allowed crypto payments as soon as the option was available.  These games of luck require a player to choose when to fold their wager and multiply their win before it crashes.

Mainstream financial institutions, including businesses, banks, and insurance companies, soon began to accept cryptocurrencies, as they recognized their potential for fast and secure asset transfers.  As the general public began to accept cryptocurrency, many businesses offered the option of paying salaries in this form of payment.

Benefits of Using Crypto

There are numerous benefits to using crypto for both the company and employees who receive their salary in this manner.  We’ll go over a few:

• It enables fast and secure transfers across borders.  It’s becoming an increasingly important feature as more businesses transition to remote work and hire employees from different time zones.
• Paying in crypto may provide additional profit for employees as they can decide to sell the coins once their value rises.
• A company that pays in crypto, in a way, showcases that it’s oriented towards tech and financial innovation, which establishes its culture and image.

Legal and Compliance Challenges

Several legal challenges must be considered by companies offering cryptocurrency payments.  Some of these issues stem from the fact that crypto is still relatively new, and many countries have not adapted their legislation to this new feature.

Is Crypto a Valid Compensation?

Some countries have laws that specify the currency in which a person can be paid.  In most cases, it’s either the national currency of the country the company is located in or the Euro.  Such a formulation doesn’t even take crypto into account.

There are legal ways to get around such laws.  The simplest approach is to provide a portion of the salary in fiat currency and offer cryptocurrency as a bonus.

Taxing Crypto Income

Cryptocurrencies aren’t taxed as currency, but rather as an investment, given that their value fluctuates over time.  This presents a problem in terms of tax reporting.  The issue comes in deciding when to report income, since its value is determined at the moment the employee receives the funds.  The company is usually the one that tracks this data.

Employee Consent

Employees must consent to receiving their salary in this manner and must do so in writing via a contract.  It should include information on how much of their salary would be paid in fiat money and how much in crypto.

Payroll Challenges

Some of the challenges with issuing payments in crypto are related to payroll mechanisms.  These aren’t particularly difficult to overcome, but in many cases, businesses lack the necessary equipment to handle crypto.  Companies also grow in size, and the payroll management gets increasingly complicated as they do.

Choosing the Right Infrastructure

Some companies manage crypto payments manually.  This means they keep track of wallet addresses, conversions, conversion rates, and transaction data.  Simple spreadsheets mostly do it as the process is easy to follow.  However, as the company grows larger and has more employees, mistakes are more likely to occur.

There are cryptocurrency payment platforms available that automate this process.  More such businesses emerge every day, and each system has its kinks; no single payroll management system works perfectly with every business.

Managing the Conversion and Volatility

Cryptocurrencies are volatile, and their values fluctuate based on market forces.  Sometimes these swings can happen within days or within just a few hours.  This has happened recently, when all cryptocurrencies experienced a nosedive due to the tariffs implemented by the White House.

To avoid these problems, the company can calculate salaries in fiat money, often based on a pay-per-hour basis, and then convert those numbers into cryptocurrency at the moment the salaries are calculated.  Sometimes, an employee’s compensation may be more or less based on the performance of the crypto.

Another option is to use stablecoins, which have all the features of cryptocurrencies but are tied to the value of the US dollar; therefore, they are less volatile than traditional cryptocurrencies.  These are gaining traction in many industries, but some still don’t consider them to be real cryptocurrencies.

Auditing and Transparency

Crypto payments must be transparent and recorded, just like any other payment, for auditing purposes.  When it comes to paying salaries in this manner, the business would need to record the following information: payment amounts, crypto asset type, market value at the time of transfer, and recipient wallet addresses.

HR Considerations and Employee Experience

 Making payments using cryptocurrency is also an HR issue, as it’s a practice that benefits employees.  As is the case with any other HR practice, using cryptocurrency for payments should be used to make employees feel welcome and provide value to them.  It’s also imperative that a business utilizes this feature to treat all its employees equally.

Voluntary Participation and Education

Crypto payments should be one of the options, not the only option.  As more businesses accept cryptocurrencies, we may reach a time when the entire company is paid in crypto.  We’re not there yet, and some employees will only accept payments in fiat currency.  A good employer will provide.

This is why education plays a crucial role in HR.  When offering employees the option to choose between crypto and fiat salaries, an HR department should also educate them on the advantages and disadvantages of both.

Benefits, Bonuses, and Retirement

Most employee perks, such as benefits, bonuses, and retirement plans, are tied to their main salary and are based on it.  The system as a whole is, in turn, based on fiat money.  Introducing cryptos therefore complicates the whole process.

Most companies still use fiat money to handle the most common employee benefits such as 401(k) matching, pension contributions, and stock options.  This is done by converting crypto into fiat money before making such contributions.

Communication

Communication is key when it comes to any employee relationship, and especially those related to salary.  That’s why it’s essential to maintain open communication lines and inform employees about the changes in crypto regulations and their potential impact on salaries.

Risk Management and Best Practices

 There are certain risks associated with using cryptocurrency for regular payments, due to its highly speculative nature.  Therefore, some businesses have already developed practices to address these issues.  We’ll delve into a few of them.

Diversify Payment Methods

A business should offer a variety of payment methods to its employees.  Hybrid systems that combine fiat and crypto enable employees to transition to a new method and compare the benefits of each.  It’s an additional expense for a business, but it pays off in the long run.

Legal and Financial Advisors

Crypto regulations are a rapidly evolving field, as governments continue to adapt and further regulate.  That’s why having a financial and legal advisor who’s familiar with the world of crypto can be a huge asset for a business introducing crypto payments.  In the long run, their advice could save the business huge amounts.

Security Measures

Transferring funds using crypto is safer than doing so with fiat money, but there are still security measures a business should undertake to protect its employees.  These include storing payroll funds in safe and offline crypto wallets, training employees operating the fund in best practices for crypto security, and implementing top-of-the-line key management systems.

Internal Policies and Documentation

A business should also develop a clear crypto policy.  It should cover how employees choose to receive payment via cryptocurrency and how many do.  The policy should also detail when and how the value of cryptocurrency is measured and calculated, and it should specify how the cryptocurrency is stored and transferred.  This policy document should be shared with the relevant tax authorities.

Conclusion

Some businesses are providing payments to their employees using crypto instead of fiat money.  There are many benefits from doing so, including safety, speed, and a potential financial gain for the employees.  However, there are also potential issues.

These could be categorized into legal, financial, and HR areas.  Using cryptocurrency in this manner is still a relatively new practice, and many governments don’t treat it as a currency, but rather as a speculative asset.  Many employees are also uneasy with such a payment option.  A business that wants to embrace them should therefore address all the mentioned concerns through a comprehensive policy.