It's official, bitcoin-based payroll is coming to North America. Online payroll management firm Wagepoint is planning to integrate the feature into its product for Canadians next Monday, with a US rollout expected in January.
The Halifax-based company is working with incumbent Canadian exchange Virtex to transfer payments into bitcoins for its customers’ employees.
Employees must set up a bitcoin wallet themselves (employers cannot do this for them) and tell the system how much of their net pay they want converted into bitcoins. Wagepoint then converts this amount via Virtex at the exchange’s current ask price.
Bitcoins will hit employee wallets once the payroll has been processed. Any tax deductions will be handled before the bitcoins are converted, meaning that the employee will only receive bitcoins from their net pay.
In theory, this avoids any potential tax hurdles further down the line, should the Canadian Revenue Agency revisit its rules on taxation. Earlier this month, the CRA reaffirmed its original position on bitcoin, which was to treat it as a barter transaction.
Advantages for employees
One of the advantages for Canadians who want to receive bitcoins in this way is that they’ll get a better rate.
Virtex normally charges 1.5% on transactions less than 400 BTC in a 30-day period. Employees accepting bitcoin payments via Wagepoint will be charged a 1% fee. Virtex normally requires an exchange of 1,200 BTC to 1,600 BTC – that’s at least $1m at the time of writing – to give that rate.
According to reports, Wagepoint Pay has processed $40m in payroll since launching in July.
Additionally, Virtex has introduced a debit card that can be used to spend bitcoins by converting them to dollars automatically at an ATM or point of sale. However, this service requires people to own a Virtex account, rather than a third-party wallet.
Leema Thampan, Wagepoint's chief marketing officer, hopes to promote the feature primarily to merchants who already accept bitcoin payments, she commented: “As they are already comfortable with the concept, they will be likely to consider a payroll solution that supports bitcoin to pay their own employees.”
Risks for employees
This focus on companies that already take bitcoin could mitigate another risk – the uneducated employee. Bitcoin is notoriously volatile, thanks to a market that still lacks liquidity. Indeed, speakers at Tuesday’s banking Senate hearing even suggested it was closer to a commodity than a currency because it tracked currency so poorly. Thampan commented:
“We expect employees who set up a bitcoin wallet to understand the implications of their decision, given the volatile nature of bitcoin. We are simply enabling them [...] to buy bitcoin at the time they get paid.”
Thampan added that the company would not provide advice to employees about bitcoin, saying: “Employees are definitely taking a risk when accepting payment in bitcoin, but it is no different than employees making decisions to invest their money in stock options.”
The firm will be rolling out a similar US-based service in January with an undisclosed US bitcoin exchange. US company Coinvoice already provides an invoicing system for freelancers and contractors who wish to invoice in US dollars and get paid in bitcoins.
Image Courtesy of Wagepoint's website.