While cryptocurrency benefits and compensation might sound hot, there are serious complexities to iron out before this can happen securely. ~ Daniel Apke, Land Investing Online
As a business leader and/or Legal professional, what are your thoughts on Cryptocurrency in employee compensation and benefits? What is one consideration?
To help you decide whether or not to adopt cryptocurrency in employee compensation and benefits, we asked CEOs, legal professionals, and business leaders this question for their best insights. There are several constructive insights that weigh in on the challenges or otherwise of considering cryptocurrency in employee compensation and benefits.
Here are the insights these 13 leaders offered on cryptocurrency in employee compensation and benefits:
- Educate Your Leaders and Employees About Cryptocurrency First to Get a Pulse
- Crypto Compensation Provides Faster Access to Earned Wages
- Involve Employees Fully in Arriving at a Decision
- Give Employees the Choice to Opt in or Out
- The Legal and Tax Implications Are Complicated
- Regulatory Problems in Various Jurisdictions Are Challenging
- The Volatility of Crypto Undermines Financial Security of Employees
- Crypto Benefits Could Attract Talent
- Crypto Remains Unsecured
- There’s No Level Playing Field for Crypto in Employee Compensation
- Serious Complexities Need to be Addressed First
- Cryptocurrencies Have Market Risks and Acceptance Issue
- Consider the Legal Framework
Educate Your Leaders and Employees About Cryptocurrency First to Get a Pulse
The lack of regulation makes it a bit difficult to implement, but more nations are considering digital currency over the fiat variety. Getting ahead of future trends is one way to stay competitive, so it may actually help with attracting talent. One consideration is how knowledgeable your leaders are around this topic. Gauging employee interest in this unique form of compensation may help with your ultimate decision. If they have no idea about the possible benefits from cryptocurrency, don’t expect much buy-in. But if they’re younger you may find more awareness and openness to a trial run. Doing your homework on cryptocurrency providers that are already working with businesses can boost your case as well. Either way, make sure you understand any legal ramifications before starting down the path of adoption.
Jerry Han, PrizeRebel
Crypto Compensation Provides Faster Access to Earned Wages
Allowing employees to receive their wages in cryptocurrency gives them the flexibility to purchase products with the payment method that works best for them. This is especially important with a recession looming as checks and direct deposits can take a few hours or days to process. But crypto payments are practically instantaneous, reducing employees’ wait time to access their earnings. For this reason, crypto is preferred among nomad employees working from the road. And because there is a minimal transaction fee, employers can save on additional costs. Providing crypto compensation is a best practice that’s a win-win for businesses and their valued team members.
Chris Gadek, AdQuick
Involve Employees Fully in Arriving at a Decision
Arguments related to the inclusion of cryptocurrency as a standard mode of compensation aside, what’s even more important is that a business should not take this decision alone. A company must continually update employees on any changes in its compensation and benefits policy. More importantly, employees must be given a choice to participate or refrain from this practice. Without the approval of employees, it would be wrong for an organization to enforce such a shift. One way forward could be to give employees a choice so those who wish to deal in cryptocurrency can do so and others who do not can exercise their right to stay away.
Riley Beam, Douglas R. Beam, P.A.
Give Employees the Choice to Opt in or Out
Cryptocurrency in employee compensation and benefits is a very innovative way to motivate your employees and reward them for their hard work and achievements. Further, it is a great way to attract new and innovative employees who are interested in this emerging industry. Cryptocurrency, in its current state, however, is to many people, too volatile to be considered a currency. As such, compensating employees with it would need to be something they could opt into, rather than a required form of compensation.
Matthew Ramirez, Paraphrase Tool
The Legal and Tax Implications Are Complicated
I do not recommend using cryptocurrency to compensate employees due to the tax complications that would follow. Cryptocurrency is considered property, not currency (despite what the name implies). This makes it difficult to report crypto transactions on annual tax returns, since taxpayers have to convert their crypto value into dollar amounts based on the date of the transaction. Employees are typically paid weekly or biweekly, meaning there would be many transactions to convert. This would complicate the tax filing process and potentially lead to mistakes on documents submitted to the IRS. If the IRS suspects your numbers are far off, you may be audited or be put through a tedious process of correcting the values on your return.
David Aylor, David Aylor Law Offices
Regulatory Problems in Various Jurisdictions Are Challenging
As digital currencies continue to curve into the mainstream, compensating employees with cryptocurrency may be advantageous. In particular, Bitcoin has many uses, like paying for groceries at some stores, buying coffee, paying for subscriptions, donating to charities, and more. Since most people own cryptocurrency wallets, some organizations have considered this a compensation payment vehicle. Companies that do benefit because they save money and time. It seems a good option, but if you run a global workforce, you must first learn how cryptocurrencies are regulated in each country. Some nations have strict laws about digital currency use, while others have banned it. For example, compensating workers living in China, India, or Russia — countries with conflicting regulations on cryptocurrency use — might get you into trouble. While the US supports its use, it’s best to know the limitations.
Jeffrey Zhou, Fig Loans
The Volatility of Crypto Undermines Financial Security of Employees
The volatility of crypto makes it too dangerous for the average employee to absorb. Imagine earning a $2000 paycheck just to have it drop by 30% a few short hours later. Though the opposite could happen, that risk is too big for most people to take right now. Losing 30% of your money when you need to pay your bills in two days isn’t manageable, especially with inflation high and 64% of Americans living paycheck to paycheck. Issues arise for the employer as well, as unless their business operates 100% on crypto, they’re left to buy crypto to employees at whatever its current rate – that could be huge losses for employers if they’ve agreed to pay out a lump sum of crypto to employees during each pay period.
Ruben Gamez, SignWell
Crypto Benefits Could Attract Talent
I think that it can be an innovative approach to perks, but as a benefit or compensation alternative, I think crypto is a high risk for the employees in question. When a company offers stock options, at least the company growth benefits the employees who have helped it grow. Cryptocurrency however is much more volatile and vulnerable to outside factors, making it a potentially worthless perk on any given day. It is high risk, high reward for the employees, so it depends on the base compensation and benefits packages that exist at the company already. If the crypto benefit is available to those who want it, it could be a unique bargaining chip for employees who want to gamble on someone else’s dime. As a replacement for benefits and fair compensation? No way.
Volodymyr Shchegel, Clario
Crypto Remains Unsecured
Currently Crypto remains unsecured, and while threats have been a common notion with crypto experts, you can’t expect employees to handle this or provide their own protection against hackers. Scammers have been targeting crypto wallets ever since inception, and even with tech experts, it’s difficult to create walls that will protect you from crypto theft.
When this happens, your employee loses all the compensation they have and if their job is what keeps them financially stable, they will certainly face downfall with such an incident. Fairly or unfairly it’s likely the employer will be blamed.
Alex Mastin, Home Grounds
There’s No Level Playing Field for Crypto in Employee Compensation
Whilst payment in cryptocurrency may appeal to some people, in particular the Gen Z generation, many of whom already invest in various cryptocurrencies and are educated on the intricacies of it, the complications and variations of tax liabilities would be of concern to our business. We have employees in many different countries and the taxation rules vary so widely that although it would be possible to calculate each employee’s liability, the variation in value would be too great to be considered a fair or consistent method of payment. While some countries do not count cryptocurrency payments as taxable income, others charge up to 30% on income earned through digital assets. In the interests of fairness to all employees regardless of their geographical location, until the laws offer a level playing field and, to maintain harmony in the workplace, we will not be considering cryptocurrency payments.
Colin Palfrey, Crediful
Serious Complexities Need to be Addressed First
While cryptocurrency benefits and compensation might sound hot, there are serious complexities to iron out before this can happen securely. In addition to the obvious concerns of market volatility, there are also major questions to address in relation to the storage and ‘ownership’ of cryptocurrency assets here.
Typically one of the main benefits of cryptocurrencies is the ability for the recipient to have complete ownership over the asset. For employees to be able to responsibly manage and own their cryptocurrency, however, companies will need to provide informed education regarding the use of hot and cold crypto wallets, passwords, recovery phrases etc. The loss of cryptocurrency assets via poor security habits is extremely common, and businesses will need to secure these grey areas around ownership and storage in addition to providing full-scale education.
Daniel Apke, Land Investing Online
Cryptocurrencies Have Market Risks and Acceptance Issue
Cryptocurrencies possess a highly fluctuating value that is fully dependent on market values. This may act as a threat to the financial security of the employees as, In case of depreciation of its value, employees may have a much lower value which may bring financial insecurity. Cryptocurrencies also pose a problem in terms of their acceptance by different governments as this mode of transaction is strictly restricted in many countries. This volatility in their values may pose a major threat to people in terms of their economic and mental stability which is a must-have for the integral growth and development of the company.
Charlie Southall, Dragonfly
Consider the Legal Framework
Major businesses now accept Bitcoin as payment for goods and services, and some corporations have chosen to pay their employees in bitcoin, all significant indications that cryptocurrencies are entering the mainstream economy. The advantages, disadvantages, and practicalities of paying employees in cryptocurrencies need to be carefully weighed against one another and might vary greatly depending on where you are and what kind of workforce you have.
For a large, globally scattered workforce lacking strong tech understanding and enthusiasm, disadvantages may exceed benefits. Paying employees via bitcoin may be impractical or impossible for workers residing in nations with stringent controls on cryptocurrencies. Contrarily, a business might employ tech-savvy personnel who have their own Bitcoin wallets and reside in nations with generally supportive legal frameworks for cryptocurrencies. It might be more efficient to pay them in cryptocurrencies while increasing employee engagement.
Steve Sacona, Top10lawyers