Bitcoin reached an all-time high of over $68,000 in November 2021 despite starting 2021 at under $30,000. There is no doubt that cryptocurrency is a volatile market as the rates can drop and rise at any moment, so why is cryptocurrency at the forefront of most investment discussions and should employers consider paying employees in such a way?
Whilst the concept of paying employees in cryptocurrency is still in its infancy, some major businesses including PayPal, Starbucks, and Microsoft have started to embrace the use of cryptocurrency for the payment of apps and games. The Starbucks app also allows customers to reload their Starbucks card with bitcoin and other cryptocurrency, so will others follow suit?
It is possible for companies to pay their workforce in cryptocurrencies however, unless an individual has an extremely strong stomach and a positive outlook on risk, it is unlikely any employee would accept 100% of their wages in cryptocurrency, however that’s not to say paying partial salary and/or bonuses in cryptocurrency would be dismissed as easily.
There are benefits to paying employees in crypto:
- Speed – in a post pandemic world it is not unusual for employees who are working from home to be located all over the world. Cryptocurrency transactions are realised and settled almost immediately unlike standard banking transactions which can typically take longer.
- Workforce appeal – payment in the form of cryptocurrency could give a company an edge in the competitive recruitment market when looking to recruit and retain employees, especially where you pay independent contractors or use freelancers in computing and other high-tech fields.
- Investment potential – it is common knowledge that unlike cash payments, cryptocurrency can significantly fluctuate in value. When the rates are high, employees will effectively be paid far more than they would have received via a bank transfer.
It is unlikely entire salaries will be paid in cryptocurrency (at least in the foreseeable future) however, we may start to see a move towards paying bonuses and other benefits by crypto. Payments in this form would begin to educate employees about investments, whilst attempting to protect assets for employees futures and/or retirement.
Whilst there are many benefits, cryptocurrency does of course have its disadvantages:
- Volatility – whilst this is also an advantage, the volatility of cryptocurrency also means there is an increased risk in the currency quickly decreasing in value, leaving employees underfunded without warning. Understandably, this would be a huge concern where employees are receiving their salary in crypto but if this is used for bonuses or part payment, this may reduce the risk.
- Compliance – if you are considering paying employees in cryptocurrency, you must ensure you are complying with the laws of the country in which you operate. A failure to comply with the law could result in fines and legal cases if an employer fails to correctly calculate gross and net pay for example.
The cryptocurrency market is predicted to grow from 910.3 million USD in 2021 to 1,902.5 million USD in 2028 which is an annual growth rate of 11.1%, which in turn creates huge investment opportunities for those who hold cryptocurrency.
In summary, it is possible to pay employees in the form of cryptocurrency, however if you are considering using cryptocurrency to incentivise employees either through bonus payments or part payments of salaries you should consider any compliance issues and check if this is something your employees want. Do your employees have the knowledge or experience to soundly agree to investments, and is this something your business can implement to be more futureproof?
