First off, a refresher – what is Bitcoin? It is a decentralized, digital currency that is not controlled or backed by any government or bank (like the Federal Reserve). It is bought and sold in exchanges through a type of bidding process, which sets the exchange rate. The exchange rate fluctuates based on supply and demand – very similar to shares on a stock exchange.
You might ask yourself why would anyone want to pay their employees in Bitcoin? It’s surprisingly become more and more common. Perhaps not an entire salary, but parts of a salary or incentives being paid out to employees is no longer considered unusual. In fact, some employees are even requesting Bitcoin.
Pro’s of Paying in Bitcoin
There aren’t any real financial benefits for the company to pay employees in Bitcoin. However, some companies claim that offering gives them a competitive edge when hiring. A recent study from Tech in Motion showed that 51% of their readers would like being at least partially paid in Bitcoin.
It can also be used to incentivize employees. With it’s air of mystery and difficulty to obtain, Bitcoin is considered a valuable prize that companies can use to up the cool factor of their next competition or recognition. Bitcoin bragging rights.
Con’s of Paying in Bitcoin
If choosing to pay in Bitcoins, a few things should be taken into consideration. The first and foremost should be labor laws. Make sure that you are meeting the minimum wage each time you do a payout, based on the current exchange rate at the time of payment. Also, make sure that the country and state you are paying your employee in recognizes Bitcoin as a form of wages. Some countries, such as Canada do not recognize it as as a form of legal tender. That doesn’t mean you can’t pay them in Bitcoin, it just means you may want to consult legal advice before entering into that agreement – things can get sticky.
The other thing that gets a little complicated is taxes. You’ll need to pay the tax rate based on the currency equivalent of the country that your employee works in. Since the rate fluctuates, you’ll need to make sure you are paying taxes on the correct value. You’ll also need to make sure you are paying your employee the correct amount. The easiest way to overcome this is to use a Bitcoin payroll service like Bitwage or Paybits.
Bitcoin still has a way to go before it becomes universally accepted, which will need to happen in order to be a common way to pay your employees. Of course, by then it won’t be nearly as cool!