Blockchain and Cryptocurrency in Payroll | Payroll Perspectives Newsletter

Welcome to the latest edition of Payroll Perspectives. In this issue,?Natalie Lloyd ?and I explore the transformative impact of #blockchain and #cryptocurrency on the #payroll landscape.

For 15 years, JGA Recruitment Group has been at the forefront of HR and payroll recruitment. We’ve witnessed the rising prominence of payroll professionals and seen AI shape the industry. Now, as cryptocurrency gains wider acceptance, we’re seeing a growing trend of employees opting to receive their pay and benefits in digital currencies like #Bitcoin.

Like AI, crypto in payroll has been around for years. Some companies have been leading the way since the mid-2010s. However, now, with the landscape changing, it’s becoming more mainstream, and we’re seeing public figures and everyday employees choosing to receive part or all of their compensation in cryptocurrency.

As blockchain technology matures and regulatory frameworks evolve, the adoption of Bitcoin and other cryptocurrencies for payroll will likely increase. So if you’re interested in getting paid in crypto, like Bitcoin, we’re here to explain how…

Cryptocurrency in Payroll

From US Mayors to your local Uber driver, the appeal of receiving salaries in cryptocurrency is expanding.

Major companies such as PayPal, Starbucks, and Microsoft are now accepting Bitcoin, making it a viable option for wages and fringe benefits like bonuses and retirement savings.

Many companies typically charge a 1% fee for processing payroll in cryptocurrency, but the option is often free for employees, making it an attractive benefit.

The rise of the gig economy and fractional work arrangements certainly contribute to the growth of blockchain in payroll. Paying contractors in Bitcoin and other cryptocurrencies are becoming increasingly prominent as the payments are immediate; contractors can work remotely from anywhere and receive payment with no additional transfer or expensive currency conversion fees.

Many contractors, especially in the tech and creative industries, are more familiar with and interested in cryptocurrencies, so offering payment in Bitcoin can be a way to attract and retain this talent. With employee experience now central to the payroll process, such considerations are becoming increasingly impactful.

We found some interesting statistics on cryptocurrency payroll adoption rates, too!

• Around 53% of global independent contractors have opted to withdraw their earnings in cryptocurrency after their employers funded payroll in fiat.
• Over half of Millennials (55%) and Generation Z (56%) are open to receiving part of their payroll in cryptocurrency.
• Over 20% of businesses expressed interest in exploring crypto payroll solutions within the next two years.

These statistics highlight a growing interest in crypto payroll, especially among younger generations and independent contractors. Is now the time to explore how crypto payroll solutions could benefit your business?

As with everything, while blockchain technology offers numerous payroll advantages, blockchain payments have pros and cons.

Some pros include:

• It’s secure!?Blockchain’s decentralised nature makes it highly resistant to hacking.
• It’s accountable!?Every transaction is publicly visible. Blockchain effectively provides an immutable and transparent audit trail.
• It’s quick!?Faster processing times reduce settlement delays and costs, streamline payroll processes, reduce errors and improve efficiency. Crypto payments are instant and eliminate the need for bank processing times.
• It’s cheaper!?Eliminating intermediaries significantly reduces payroll costs (Deloitte says by up to 20%) by reducing the need for third-party solution providers, auditors, and expensive currency exchange rates.
• It’s for everyone!?Enables participation in the global economy for those without access to traditional banking. You can pay employees across borders without high bank transfer fees.
• It’s attractive!?Crypto benefits can attract top talent, especially within the technology industry or highly skilled contractors. It’s also a great opportunity to position your organisation for the future digital economy—did someone say EVP?
• It’s customisable!?Employees can customise their own benefits package.
• It’s an investment!?Crypto has the potential to rise in value, so employees could collect far more than their base salary if the value of crypto appreciates. (Of course, it also has the potential to depreciate over time, which is always something to consider!)

Blockchain can also revolutionise various payroll functions, including:

• Secure and immutable storage of records.
• Automated T&A tracking to prevent time theft.
• Faster and more secure transactions.
• Efficient management of health insurance and retirement plans.
• Transparent and auditable payroll records.

And, of course, despite its potential, blockchain adoption in payroll faces challenges:

• Network traffic can slow things down and impact processing speeds.
• There can be regulatory issues. The legal landscape for paying salaries in cryptocurrency varies by country and state, requiring careful navigation.
• There are tax implications. Cryptocurrencies are subject to capital gains taxes, which can complicate payroll tax reporting.

So before opting for cryptocurrency payments, it’s important to consider the following:

• Volatility: Cryptocurrencies are highly volatile, and the value of your payments can fluctuate significantly. For instance, Bitcoin’s value dropped about 50% below its previous all-time high a few years ago.
• Tax Implications: Cryptocurrencies are considered “property” which subjects them to capital gains taxes rather than income tax rates.
• Security Risks: Fewer protections exist for cryptocurrencies, making you vulnerable to scams. Unlike traditional payments, there’s no regulatory system to report or cancel fraudulent transactions.

We all know crypto has been around for ages, but now that more and more employees choose to be paid in Bitcoin, let’s look at where it all started…

• 2013: Coinbase, a major cryptocurrency exchange, started offering its employees the option to receive their salaries in Bitcoin.
• 2014: Bitwage, a payroll and HR service company, was founded to facilitate Bitcoin payroll. By 2024, Bitwage serves over 4,500 companies and 90,000 users, processing over $400 million in payroll transactions annually. I recorded an episode of The Payroll Podcast with Bitwage CEO Jonathan Chester in 2021. Listen here
• 2019: Ohio became the first US state to allow businesses to pay taxes with Bitcoin, signalling growing governmental acceptance.
• 2021: The adoption of Bitcoin salaries became more mainstream. Companies like Twitter, the City of Miami, and the Sacramento Kings explored Bitcoin payroll options. This year also saw Bitcoin reaching an all-time high trading price, further boosting its appeal.
• 2023: More companies across various industries are integrating cryptocurrency into their payroll systems, driven by the benefits of faster, cheaper, and more efficient transactions.
• Now: Many platforms now offer the ability for workers worldwide to get paid in Bitcoin and other cryptocurrencies.

If you’re interested in staying at the forefront of this digital transformation, attracting top talent and optimising your payroll processes for the future, stay tuned for our next edition, where I’ll be exploring cryptocurrency payment service providers and working out for myself exactly how they work!

Of course, I want to remind you?that if you need expert help finding the best person to join your payroll or HR teams or are looking to progress in your career, contact us at JGA Recruitment Group today and let our passionate, knowledgeable, and award-winning team assist you in building a top-performing team.

If you’ve been keeping up to date on Payroll Perspectives and have a topic you’d love to see covered, let me know!

In the meantime, have you downloaded our "The Future of Payroll with Artificial Intelligence" eBook yet? Grab your copy here!

[email protected] | 01727 800 377

www.jgarecruitment.com

Until next time!

Natalie Lloyd and Nick Day ??

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