Benefits and challenges to crypto payroll products

Fintech has changed the face of payroll. With fintech solutions offering everything from early payments to paying in different currencies, the classic payroll product is no longer just automating payments. But these different currency options are now starting to include the option to manage payroll in cryptocurrencies. Utilizing blockchain technology has made incorporating crypto easier - but what are the benefits and challenges of advancing payroll opportunities with crypto? 

Crypto and payroll

Crypto payroll products allow employers to compensate employees using cryptocurrencies. This offers an alternative to traditional payment methods that are solely to be paid in fiat currencies. Employees give the information of their digital wallet to their employer and the cryptocurrency of their choice, and their salary is converted from local fiat currency and then sent in the desired crypto coin. These platforms also allow for traditional fiat currency salary payments, meaning that all preferences are covered. 
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Benefits

Simplified global transactions. Cross-border payments can be a sticking point when it comes to paying employees and contractors. These transactions can be expensive and slow through traditional banking systems, with intermediaries delaying speed and increasing costs. Crypto payroll uses blockchain technology which creates almost instantaneous cross-border transactions, bypassing the traditional banking networks and intermediaries.  

‍Understand tax and legal complexities. Payroll platforms do all of the compliance protocols for legal and tax implications. These are especially important for cryptocurrencies, as there are differing approaches to crypto around the world. With an effective payroll product, employers can hand over the responsibility of knowing and applying tax and legal implications to experts.   

Reduced fees. Traditional payment fees can come with significant transaction and processing fees. These can add up for businesses with employees with different payment platforms. 

Employee autonomy. Fiat currencies are not always the most stable option in some parts of the world. If employees face high inflation and volatile financial markets, crypto and stablecoins as a form of payment can be a solid alternative to their native currency. The autonomy of employees is based on the ability to choose, and for whatever reason the employee would prefer crypto, the option gives everyone a chance to pick what best suits their needs. 
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Disadvantages

Volatility. Cryptocurrencies can be volatile, which might make them a less attractive option to employees and affect the value of payments given by employers. This makes options such as stablecoins very popular, as they are pegged to the value of the US dollar 1:1, making them much more stable. 

Regulatory changes. There is no global regulation on crypto, and many jurisdictions’ rules do not match up. Crypto regulations are also subject to swift change, meaning that paying employees with crypto needs flexibility and a strong understanding of local and international regulatory frameworks that pertain to employees. 

Integration. Existing traditional payroll products can be cumbersome. Trying to integrate with existing systems can be difficult and sometimes impossible, requiring the expense of building a brand-new system.   

User education. Companies taking on crypto payroll services will need to be able to explain how everything works to their users. There will always be a learning curve with financial products but with crypto especially so. There is also the issue of uptake. If users don’t know the benefits and opportunities that come with being paid in their choice of currency, there may not be enough understanding to even begin. User education also stops damaging mistakes or misunderstandings that can lead to reputation issues.  

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The future of crypto and payroll

Crypto payroll products are becoming increasingly visible in the market. According to some reports, as many as over 25% of businesses worldwide are now using cryptocurrency for payroll, an increase of 10% over 2023. Another survey showed that more than half of millennials and 56% of Gen Z are open to receiving crypto as part of their payroll. This generational shift in attitudes will mean that more and more employees will be making that ask for their employers. 

Fideum are currently working on future payroll products to merge crypto and fiat salary management opportunities. Keep an eye out on our social media for more updates. 

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