Cryptocurrency is one of those topics that is becoming popular nowadays. Each passing day we see a new coin that comes out and blows the market. However, many people are switching to cryptocurrency in this situation because it comes with many pros. For instance, some employers are interested in using cryptocurrency for wage and salary payments. But these things are still in the initial process; that’s why we need to figure out how to use them for employees. So, in this writing guide, we will write down a complete guide with pros and cons.
What is cryptocurrency? A complete guide:
A small but growing audience is asking for payments in crypto. However, due to this, it’s vital to learn about this mode of payment. A cryptocurrency is a digital model of income that is secured by cryptography. One of the main advantages of cryptocurrency is that it’s nearly impossible to do fraud in this. If we look at the data, cryptocurrency is decentralized based on blockchain technology. It means that cryptocurrency isn’t issued and dealt with by any central or official authority. According to Investopedia, cryptocurrency comes with many advantages & disadvantages. Still, it’s the talk of the town, and many employees are ready to accept this as a wage payment medium.
Facts about wage payments in crypto:
“Around 36% of employees want to get a paycheck in crypto, and 42% want to receive a performance reward in NFT.”
(According to SoFi)
We have seen many employees who are interested in taking payments in crypto. But the real question is:
- Can employers pay wages in cryptocurrency?
According to Aaron Rodgers, they partnered with a cash app to pay employees in bitcoin. However, these top companies allow the workforce to receive part of their paychecks in cryptocurrency. Apart from this, the representative of the USA labor department questioned whether employers could pay in crypto. However, employers can pay wages in cash or other negotiable instruments according to the rules. But there is a condition that wages must be unconditional, accessible, and transparent. Above all, here are a few rules that employers should consider before paying in cryptocurrency:
|Risk of loss||Exchange rate||Employees’ voluntary request to get paid in cryptocurrency|
|Know compliances and rules||Know your employees, anti-money-laundering laws||Wage payment as per federal and state laws|
But you should keep in mind that crypto isn’t easy to understand, and it’s a label for more than 5000 electronic coins and tokens.
Cryptocurrency & wage payments: Pros and cons:
Countries like the UK, USA, and El Salvador are paying wages in crypto if we look around. But these numbers are on a limited level, and in some countries like China, Egypt, and Qatar, crypto is completely banned. Still, many nations are considering paying in crypto. However, this mode of payment comes with the following pros & cons:
Pros of the wage payment in cryptocurrency:
According to the results of the global poll, crypto could become more common in salary negotiations for younger workers. For instance, millennials and half of generation Z would be happy to receive a salary in bitcoin and other forms of coins. So, as an employer, you can take advantage of these benefits:
You cut down the need for a middleman like banks and other financial institutes in crypto payments. You don’t need to wait for working days. Banks take many days for check clearance and direct deposits. But in crypto, everything happens in a blink of an eye and takes only a few seconds. It means that crypto transactions are immediate, speedy, and settled instantly. On the other hand, conventional methods could take days and weeks to process.
You have independence:
We discussed that bitcoin and cryptocurrencies are decentralized and run-on peer-to-peer systems. In simple words, crypto doesn’t need a central bank or other agency. So, payments go directly into the account without any involvement of a third party like governments and banks. These things have positive importance, and with this method, you can even pay remote employees.
If you are paying in crypto, it could be tax efficient as an employer. But it is based on your country taxing the crypto. For instance, if crypto is taxed as property in the USA, it can save GST because the value increases over time. In addition to this, if you mention it as an income by using any best paystub generator, it would be taxed only once. However, you can save the currency for later and sell it when the price increases.
But these pros aren’t limited here, and it has many other good features that make this mode of payment a future.
|It has investment potential.||It appeals to employees.||Crypto payments can do a good branding|
|It helps to say Goodbye to conventional methods||The value increases over time|
Apart from this, NFTs are also becoming popular, and employees are also ready to receive payments in this.
Cons of Cryptocurrency & wage payments:
“Federal government doesn’t accept cryptocurrency for the payment of virtual taxes.”
(According to the IRS (April 8th, 2022)
We need to understand that cryptocurrency isn’t a bed of roses. However, crypto isn’t widely accepted and has few risks. So, before you start considering crypto payments consider these cons:
Has high volatility:
Even with the high inflation, $1 remains the same and doesn’t change in a few days. But crypto can change the value in minutes and hours. However, the volatility is stomach-churning, and if it happens with cash, it means the economy is collapsing.
Reputation & acceptance:
The decentralization and lack of government regulation make it less reputed. However, as a result, people don’t accept this widely. Apart from this, financial scammers are everywhere in the market due to a lack of rules. So, these things give this digital currency a poor reputation, and consumers try to stay away from this.
Apart from this, a few other points could significantly cause adverse effects. So, consider these points before accepting this as a wage payment mode:
|Compliance issues as different countries have their own rules||Unstable global economic integration|
|Cybersecurity threats||Safety issues|
So, if you want to accept crypto as a mode of payment, then select a platform that prioritizes safety and security. However, go for a platform that offers insurance of assets and acts as a barrier against money laundering. If you want to adopt this method, carefully watch individual wage tax and benefit-related issues. Furthermore, you can check official websites like the IRS to learn more about crypto laws.