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A number of U.S. companies are paying their international workers in bitcoin these days. It can be a benefit for the worker and a money-saver for global employers--and it’s likely here to stay, sources told Bloomberg Law.
About 200 employers are using a third-party payroll platform called Bitwage that lets workers determine how much of their pay comes in cryptocurrency, the company’s CEO told Bloomberg Law.
About 65 percent of Bitwage employer clients are U.S. companies, and 95 percent are using it to pay international workers, CEO John Lindsay said. Bitwage is based in California and has been around since 2014.
More companies will soon be paying in cryptocurrencies, especially those with large numbers of international employees or contractors, sources told Bloomberg Law. The flexibility and low fees involved could reduce the complications and costs of handling an international payroll, and ease the global exchange of labor, they said.
Using cryptocurrencies can be “a flexible way of paying for global resources with less hassle and removing the middleman,” human resources and technology consultant Soumyasanto Sen told Bloomberg Law. It can help attract talent and enhance the employee benefits package, said Sen, who is based in Germany.
Paying internationally via bank transfer is expensive because the employer is charged per transaction, and it’s also “cumbersome and tedious,” said Jing Moore, vice president of finance at WRSHealth.
The New York-based company provides medical practices with software for managing patient records. The company has 100-plus billing workers and developers around the world that it pays using Bitwage. Moore says it has saved the company time and helped it grow.
Wire transfer usually takes four to five business days, with a fee of $20 to $25, plus the about 1 percent loss on the currency conversions, Baskaran Ambalavanan told Bloomberg Law. While government currency remittance services could be quicker, they cost 5 percent to 15 percent of the transaction amount, and the employee has to go to the physical location to collect the money, said Ambalavanan, an HR technology consultant with Hila Solutions. He’s also a member of the Society for Human Resource Management’s Special Expertise Panel of Technology and HR Management.
Cryptocurrency transactions carry fees too, as a reward for “miners"--those running codes to secure the network. To save money, Lindsay explained, Bitwage sends one transaction that contains the amount of 25 transactions to its company in the Philippines, or a partner in another country. That partner in turn would send 25 domestic bank transfers of Philippine pesos or other local currencies to the receivers, he said. Bitwage now supports conversion to 11 local currencies.
Payment in cryptocurrency could eliminate the need for middlemen like business process outsourcing companies, common in the Philippines and India, which serve as points of connection between outsourced workers and companies, dealing with the payment, Lindsay said. “With Bitwage, instead of being concentrated on the BPOs, employers can connect to the outsourced teams directly and more easily,” he said.
For workers in South and Latin American countries without a matured banking system and stable currency, the ability to get payment in cryptocurrencies “provided employers more access to workers who couldn’t be connected to otherwise,” Lindsay said. For example, developers in Venezuela got a lot more business after bitcoin existed, he said.
“Previously, the U.S. and European companies had to send international wires that were expensive and took two weeks. This created big friction because if anything went wrong they had to send it again. Then those companies didn’t want to work with these groups. But now because of cryptocurrency it can arrive in the same day,” he said.
However, the volatility of cryptocurrency could be a big concern, Sen said. “It’s impossible to say for certain what the future holds for cryptocurrencies,” he said, citing bitcoin as an example. “If the prices crashed suddenly, the workforce could be in trouble for sure,” he said.
Although Lindsay agrees that cryptocurrencies are volatile, he said expectations need to be weighed. In countries with strong banking systems, people expect the cryptocurrency not to be volatile. So any volatility is seen as a problem, he said. “In an opposite case, if the workers are in an unstable banking system, even though cryptocurrencies are volatile, it could be worth it, because their local currencies are more volatile,” he said.
That’s why U.S. and European workers usually select a lower percentage of payment in cryptocurrency, Lindsay said. About 10 U.S. employers are using Bitwage to offer domestic workers cryptocurrency payment as an employee benefit. There’s also a significant number of individual users that set up direct deposit with their employers using Bitwage accounts to get their payment in cryptocurrency, without having to involve the employers.
Sen thinks cryptocurrency payment will gain more popularity, especially in paying international and freelance workers. And with Immigration issues increasingly affecting the labor market, a payroll approach that could ease remote working and outsourcing could be a very helpful tool, Sen said.
However, the use of cryptocurrency isn’t legal everywhere Sen said. “Some countries are prohibiting bitcoin transactions, citing its untraceable nature and its reputation as the currency of choice for criminal activities like terrorism or the drug trade.” Bangladesh, Bolivia, Ecuador, and Kyrgyzstan, for example, have banned the use of bitcoin.
U.S. employers may still rely on the traditional payroll system for their domestic workers, without intermediary bank transaction fees or time delays, Ambalavanan said.
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