With cryptocurrency becoming popular every day, many employees demand that they be paid in bitcoins. Even a big company like Twitter is now thinking about paying their staff in crypto. It is true that with more freedom over funds, fast cross-border payments, and no bank involvement in the middle, crypto-powered payroll is beneficial to both employers and employees.
Companies can now pay partial salaries in bitcoins, which in turn benefits today’s tech-savvy workforce. Because of such a significant rise in crypto, even a payroll services company has to think about extending its services to crypto-powered payroll. This blog discusses all the benefits and the necessary considerations you must keep in mind about using crypto to pay your employees.
Benefits and considerations to make when paying staff in crypto
Whenever you want to make a major business decision, keep in mind that there will be certain risks. Before you proceed, you must assess those risks and plan accordingly. Also, as cryptocurrency is still not regulated, you should be more careful about these risks. There are very few payroll service providers that offer top-notch crypto-powered payroll management services, and it will be a good idea to take advice from them.
Benefits of crypto payroll
We have already mentioned the key features of using cryptocurrency in paying employees. Here we discuss those features in more detail.
Cross-border payments will be much easier if you have a global workforce
With digital technology advancing, political borders are no longer barriers for companies to collaborate. Using the advantage of the internet, you can easily partner with a company in another country. But the main issue that arises is with the payment.
That is where digital currency has a role to play. Relative to wire transfers, digital currency transfers can be 96% faster. Another thing to note is that digital currency payments offer 100% transparency as they are verified. In short, the blockchain payment system reduces the uncertainty that arises between sending payment and the time the payment takes to reach the recipient’s bank from the sender’s bank.
Digital currency empowers the domestic workforce
Even if all your company staff are based in Australia, you can access benefits associated with crypto payments. When individuals receive payments in crypto, it opens their doors to make investments in other crypto assets. In a few countries, digital currency is expected to displace a significant portion of national currency in a decade.
So, allowing your valuable employees to access this financial technology can be a progressive move.
There will be high security associated with the transactions
As all the transactions get recorded on a public ledger, it will ensure that your employee payments are safe and fixed on the blockchain. The best thing about digital currency payments is that you will not have to worry about whether your employee has received the payment or not.
You will use web3 wallets while handling digital currency payments. These wallets are non-custodial, and thus, you can securely keep all the digital assets without needing any help from a middleman. These wallets are known for the pragmatic security precautions installed there, which provide them effective protection from hacking. So, when it comes to the best method to pay employees using crypto, nothing can beat a safe web3 wallet.
Important considerations to look at
Now, let us discuss what you have to consider when choosing to give payments in crypto.
In addition to federal government legal obligations, you have to remain compliant with the legal requirements of the specific state your business is located in. A lawyer or other legal professional will be the best individual to help you. So, before you decide to pay your employees using crypto, you must consult with someone like this.
Regardless of what you do using cryptocurrency, you must be aware of all the tax obligations. While tax obligations may vary according to your circumstances, records must be kept properly for all cryptocurrency transactions. One thing to note here is that if you use a foreign cryptocurrency, you may be subject to tax obligations in that country. A professional crypto accountant may help you remain compliant with these tax obligations.
Usually, you will have to follow the following three steps to manage your crypto tax responsibilities.
Report cryptocurrency disposal
You must report cryptocurrency disposal for capital gains tax (CGT) purposes. Disposing of cryptocurrency generally occurs when you
- Trade, gift, or sell cryptocurrency,
- Exchange one digital currency for another, or
- Convert your digital currency to Australian dollars or any other fiat currency.
Calculate how much you must pay for CGT
If you exchange your digital currency for cash, goods, or any other cryptocurrency, the ATO (Australian Taxation Office) will consider its disposal for CGT purposes, and you will need to include a capital loss or gain in the annual tax return.
To calculate your capital loss or gain, you must calculate the amount of cryptocurrency you have purchased or sold in Australian dollars. A capital loss or gain refers to the difference between the cost base and capital proceeds. While the cost base includes purchasing price, ownership cost, and holding and acquiring costs, capital proceeds refer to the amount you receive.
Above all, you must keep records of all transactions related to acquiring, disposing, and holding cryptocurrency. After cryptocurrency disposal, records must be kept for the next five years.
Finding the right solution
One of the biggest problems for blockchain businesses is that only a few companies offer top-quality crypto payroll services. Whenever you approach a payroll management solution, you must check whether they offer a non-custodial detailed solution for crypto payroll.
The main issue with a custodial option is that it will have control of your funds, just like a traditional payroll. It means you cannot enjoy the benefits attached to using blockchain technology.
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According to the most recent announcements by the Australian Government, important cryptocurrency regulations will be soon introduced to provide more protection to the customers. There will be clearer obligations that you must be aware of before deciding to use crypto. You can keep an eye on the government website for further updates.