Can you pay your employees in bitcoin? Moreover, should you pay your employees in bitcoin?
That very 2018 question is the topic of a recent article written by our friends and colleagues at Fisher Phillips. Sparked by the news that GMO Internet, a Japanese web technology company, has started giving employees the option to receive a portion of their salaries in bitcoin, the article examines a few important legal considerations of the practice.
Before we go further, however, it’s time for the requisite “Bitcoin 101” section. While I doubt that this blog post will serve as most readers’ introduction to the topic, bitcoin can be a challenging subject to understand for those unfamiliar with the crypto world (more on that piece of jargon in a moment), so…
What Is Bitcoin?
Bitcoin is a digital currency—an intangible form of money that exists solely electronically. You can buy bitcoins with cash (the same way you might trade 20 dollars for, say, 16.21 euros). Or, if you have a powerful computer, you can “mine” bitcoins by running software that competes with other users’ software around the world to quickly solve complex math equations. The faster your computer solves an equation, the better your chances of successfully mining bitcoins.
Unlike other kinds of currency, bitcoin is not controlled by a central bank or financial authority. In other words, no single person or institution creates, manages, or determines the value of bitcoin. Like gold, bitcoin is a finite resource—there are 21 million bitcoins in existence, and there will never be more.
Bitcoin transactions stay secure by relying on a public ledger known as a blockchain. The blockchain is distributed among numerous sources, updates at regular intervals hundreds of times per day, and is protected through advanced cryptography. Essentially, to break into the blockchain and steal bitcoins, a person would need to hack into thousands of computers and crack thousands of impenetrable secret codes in a matter of minutes.
For this reason, bitcoin and other so-called cryptocurrencies are considered to be more secure than any centralized form of currency. Bitcoin was the first decentralized cryptocurrency and remains the most popular, and is therefore among the most valuable. How valuable? Well, as of this writing, the value of a single bitcoin was $8470. Keep in mind, however, that the value of bitcoin fluctuates wildly—another reason the market is so hot.
Got all that? We’re talking about a super valuable, super volatile digital currency with a fixed supply that no one controls. Investing in bitcoin or other cryptocurrencies is kind of like playing a version of the lottery that’s based on math rather than luck. Some people are drawn to it; others see it as a risk or bubble. And that brings us back to our original question:
Should You Consider Paying Your Workers in Bitcoin?
There are plenty of good reasons to consider offering bitcoin as a compensation option:
- Transactions occur near-instantaneously—you don’t have to wait for a bank or other middleman to approve a transfer.
- Bitcoin is not subject to any exchange rate, which makes it an attractive option for international transactions.
- It’s “cool”—as the attorneys at Fisher Phillips write, paying workers in bitcoin “might signal to the community that you are a cutting-edge business on the forefront of modern strategies” and “give you an advantage when recruiting and retaining new talent.”
And then there’s the volatility, which some workers may see a bonus: a bitcoin transferred today could be worth double or triple its value tomorrow. Or it could lose its value overnight.
In short, the answer to the big question is a resounding “sure, why not?”—as long as your employees are aware of the risks, and as long as you pay at least minimum wage in conventional US currency. The attorneys at Fisher Phillips write:
“First and foremost, federal and state law may not allow you to use bitcoin to pay employees’ salaries. The federal Fair Labor Standards Act (FLSA) requires you to pay employees in ‘cash or negotiable instruments payable at par,’ and because an employee in receipt of a certain number of bitcoins may not be reasonably capable of spending the currency as they see fit, it could create an illegal hurdle. Moreover, various state statutes require you to make wage payments in U.S. currency, and the IRS has said that bitcoin and other cryptocurrencies are considered ‘property’ instead of ‘currency.’
It’s crucial … that you provide your employees’ base compensation in standard currency that meets state and federal limits for minimum wage and overtime. For non-exempt employees, you would also need to use the correct bitcoin value to determine the employee’s average regular rate for purposes of calculating overtime.
Even if permitted, you probably want to avoid singular payment in bitcoin because the wild fluctuations in value create minimum wage dangers. A better option is to agree to pay employees in traditional currency that is automatically converted to bitcoin (assuming the employees agree in writing to such a conversion) or pay bitcoin only as a discretionary bonus.”
Since over 95% of all security incidents investigated recognize ‘human error’ as a contributing factor, training your staff members to be the first line of defense is critical. Learn how to protect your dealership.