Converting paychecks into bitcoins through exchanges is tedious task for companies and employees, which is why employees are now accepting salaries directly in bitcoins. To make the task less tedious, a Canadian payroll software company, Wagepoint, is letting employers pay remuneration to their staff directly in bitcoins.
The firm takes care of companies’ payroll systems, including handling necessary paperwork and tax deductions to calculate net salaries. Wagepoint has handled payrolls worth over $120 million in terms of fiat currency, but the bitcoin’s growing popularity caused the company to start bitcoin payment services as well. Wagepoint handles bitcoin payrolls in a convenient way, without companies and customers having to worry about exchanging the fiat currency into virtual currency; Wagepoint uses the virtual exchange, CA Virtex, to handle the transactions.
Wagepoint CEO Shrad Rao claimed the project was previously a side business and was not expected to yield tremendous results. Starting out in November 2013, the company did not receive a great response for the first three months, but in January, an employer who paid over $2,000 in salaries requested the bitcoin payroll service. Since then, Wagepoint has paid salaries in bitcoins totaling $75,000.
The technology sector is notably fascinated by the idea of receiving salaries in bitcoins. According to Charles Mire, co-founder and president of Structur3D Printing – a producer of universal paste extruders for 3D printers – paying salaries in bitcoin does not present much financial incentive to companies, but it does offer recruitment incentives.
Mire gave an example of how Structur3D Printing hired a contractor to lead the business development segment for the company’s new project, Kickstarter campaign, and paid him in bitcoins. Meanwhile, Mire’s co-founder and director of research and development Andrew Finkle gets 10% of his salary in bitcoins.
Around 10 Canadian companies including Bench and RateHub have bought the bitcoin payroll service from Wagepoint. According to Wagepoint’s statistics, 80% of employees accepting bitcoin-salaries take their entire salary in bitcoins, while the rest take a combination of fiat currency and bitcoins.
However, bitcoin-salaries have a disadvantage. Since bitcoin is treated as an asset in Canada (like a transaction in a barter exchange), any gains on the currency, due to price fluctuations, are tax deductible.
Xen Accounting, a specialist firm in virtual currencies, stated that employees who receive salaries in bitcoins need to be very careful due to bitcoin’s tax requirements. For instance, if an employee has $5,000 worth of bitcoins, due to an upward revision in bitcoin’s price, the amount can go up to $6,000; the change in the amount is the capital gain on the virtual currency, which is subject to tax deductions.
Fluctuation in bitcoin prices can work negatively for employers as well. A decrease in price can result in a lower net disposable income for employers, contrary to what they would get if employees got salaries in fiat currency.
Therefore, bitcoin may not be suited for frequent transactions. Instead, it should perhaps be considered more a means of investment