Finding tablets for your team is not the easiest task. However, finding ways to pay them can be an even more exhausting challenge. Especially, when you live in different regions. Bank transactions may take days and ask you to pay enormous fees.
That’s why crypto developers decided to build crypto-first payroll, where both employers and staff can sense the true power of blockchain. New systems free the time of staff, accountants, and many managers, calculating work time, results, and salary and sending it fully automatically to the staff’s preferred crypto wallet.
In this article, I want to introduce you to how new technologies can disrupt the accountant workflow, and change it for good. Implement practices from it to see your business flourish with the worldwide talent pool.
Historical Context of Payroll Systems
The concept of payroll systems existed for centuries since employers started to calculate staff wages. In ancient and even medieval times, most people got paid with goods or commodities, so there was no need for a separate payment system. However, over time, economies developed. Employees start to be paid with money.
And the first half-automated payroll systems were manual ledgers. Before the advent of computers, companies maintained manual payroll ledger systems. Accountants write by hand records of employee work hours, salary rates, deductions, and other relevant information.
The late XIX century was the time of the first punch card machines that were ancestors of a binary system of modern computers. The punch in that card symbolizes 1, and the whole sheet symbolizes 0. Employees insert their cards inside the machine to log their working hours, just like modern workers do with electronic cards. It eases the working hours calculation, so accountants can partially automate the payroll system.
In the middle of the XX century, we finally started to see computerized payroll systems, where devices track hours. After that, the systems convert it to payroll systems and generate partially automated payroll, relieving the administrative burden from accountants.
Just a few years ago, tech-savvy businesses realized the power of blockchain and started to pay their remote employees with crypto to the best talents regardless of location. However, it turns out that employers need to send crypto to staff wallets manually. That’s why we begin to see the first crypto payroll solutions.
All work is recorded in the blockchain, so the system can have all the source data to calculate salary precisely. And while you enter the staff's crypto wallet, the system can send them their salary without any accountant interference.
Understanding Crypto-First Payroll Systems
A crypto-first payroll system is a payment system where the primary way of paying salaries is through cryptocurrencies. Instead of using fiat money (e.g., USD, EUR, etc.), the employer pays staff using crypto coins like Bitcoin or Ethereum. Most crypto-first payrolls have similar functions:
- Initial setup. Employers and staff should set up separate accounts on the payroll system. They need to ensure that their wallets support chosen cryptocurrencies.
- Salary conversion. At the time of payroll, the employer converts the salaries from their native currency (e.g., USD, Euro) into the chosen cryptocurrency. Defiway PayRoll service has built-in credit card support. Thus, employers can fill their payroll wallets with their cards.
- Salary distribution. Once the salaries are converted into crypto, the system automatically transfers the pre-described amount of crypto to the staff wallet at the chosen payroll time. Defiway tools have a built-in bridge feature allowing users to safely convert crypto from one network to another.
- Employee Access. Staff can spend their salary however they want. Defiway has a built-in exchange, so employees can switch their salary to a more preferable digital currency.
The main differences between traditional and crypto-first payrolls are the currency type, payment infrastructure, transaction speed, and fees. Classic payment systems use fiat regulated by governments. Sometimes it can be international options like the US dollar or Euro.
Traditional payrolls often rely only on established financial institutions, banks, and payment processors to facilitate payments. In contrast, crypto-first payroll systems use blockchain technology and decentralized networks to execute transactions directly between employers and staff.
Cryptocurrency transactions are generally faster and have fewer fees compared to banks, especially for international payments. Traditional cross-border transactions can take days or weeks, while crypto transactions are processed within minutes or hours.
Also, traditional services don’t work with unbanked or underbanked populations, which is common in emerging economies. Crypto works with everyone until a person sticks to the determined behavioral rules for the network.
However, you should consider crypto volatility and regulatory considerations. Crypto is an asset that constantly changes its price. But in some emerging economies, crypto volatility is less than its national currency. Some countries blocked crypto, while others implemented laws to make it legal. So, each employee and staff should consider the specifics of their situation.
Operational Benefits
Сrypto payroll unlocks multiple advancements both for employers and staff. Firstly, crypto payrolls allow borderless work culture. Cross-border transactions become more accessible and efficient. Traditional banks often involve multiple fees: conversion, international transfer fees, some additional government fees, etc. Moreover, unbanked or underbanked populations can’t receive international transactions with traditional finance systems.
Crypto-payrolls eliminate the need for conversions and bank fees since there is no central governor structure or other intermediaries. It boosts speed and efficiency. In banks, domestic payrolls can take 1-2 days, and international 3-10 business days. However, in crypto, it is only a question of a few hours.
Blockchain technology provides an immutable and transparent ledger. Every transaction is recorded on the blockchain. And since each has a reference to a previous transaction, it can’t be changed or removed. Each transaction is secured by strong cryptography that is almost impossible to hack with modern computers.
It may take 5-10 years to crack public and private keys to a single transaction. Considering crypto constantly adds new info, it will be impossible to hack or remove data since it will be already securely stored in multiple computers.
On the other hand, banks have a centralized server that it's possible to crack advanced hackers. Once these criminals crack the bank payroll system, they will get access to sensitive data.
Crypto-first payroll systems are often more flexible than classic rivals. Employers have multiple currencies to choose to send. Staff can exchange their money for fiat or leave some coins in their wallet to start a crypto investment journey. With traditional payroll, employees get fiat money in regional currency on their credit or debit card.
Case Studies
Crypto payroll is still a new concept, so there are just a few companies providing you with these services. And one of the most user-friendly platforms is Defiway Payroll.
It’s an automated platform where employers can set up any schedule: monthly, weekly, daily, etc. It has a user-friendly dashboard where businesses can track their finances, and staff can see their future salary and when they get it.
Defiway Payroll has built-in automated tax compliance, which eases your filing process since both employer and employee won’t need to do papers manually. It also has integration with Time and Attendance, Expense Management Systems, and ERP systems which ease the calculations even more.
Other payroll services are Bitwage, BTCS, and BTCPay Server. Yes, this sub-technology is still in its early days, so just a few providers can offer this service to you.
However, all these companies increase employee satisfaction: tech-savvy users finally get an alternative to classic banks. Crypto payroll tools also improve compliance of international teams: it becomes easier to stick to the law with big international teams. Once this concept becomes more popular, we will see wider adoption and more services.
Potential Challenges and Their Mitigation
Blockchain payroll has its challenges. Crypto is a volatile asset, especially when it’s not a fiat-pegged stablecoin. So your salary may fluctuate if you stack coins on the wallet to earn interest. That’s why employers should think about strategies on how their staff can easily exchange their salary for fiat.
Also, both employees and staff should use trustworthy services. It would be perfect if they create separate wallets for this: it mitigates the chances of being hacked since they don’t show wallet addresses anywhere except the payroll system.
There are still regulatory issues in many regions. Crypto law is not perfect, so it will be constantly changing at least for the next 5-10 years. Employers should keep it in mind. They should hire legal and tax experts in the blockchain field to receive recommendations on how to stick to modern regulations. They also should use tools with automated tax calculations, like Defiway Payroll. It will ensure accurate deductions and reporting, reducing the risk of tax errors.
Engaging with experienced consultants and using great tools with the latest security patches mitigate all possible crypto risks. So you have nothing to be worried about.
Predictions for the Future
Crypto payroll is new technology. It needs time to establish, so we may not see widespread adoption in the next few years. However, we will see tech pioneer adoption. They like to experiment with promising technologies, and crypto payroll is one of them. It will boost globalization and ease cross-border payments even more.
Crypto payroll may boost stablecoins development, providing coins with predictable prices for every region and country. It will address the volatility challenge and provide a more stable salary in an ever-changing crypto world.
The further integration of crypto-payroll systems with decentralized finance (DeFi) platforms and smart contracts will revolutionize the blockchain landscape too. Smart contracts can automate salary payments and employees may also have the option to invest a portion of their salaries directly into DeFi protocols, potentially earning higher returns on their holdings.
Since we are talking about the work environment, it needs to be standardized. So we will see new laws and regulations aimed directly at payroll services. A few years later, we may also see the first integration with traditional payment services, which provides even more freedom of choice to all parties involved.
Expert Opinions
Industry leaders see this technology as highly promising. Brad Garlinghouse, CEO of Ripple, thinks that crypto gains more and more institutional power daily. In a few years, it can surpass SWIFT for the number of international business transactions. Payroll is one of the most common business-ish transactions, so Mr. Garlinghouse sees the future of all crypto-business tools as promising. And it includes salary payment services too.
Rishi Sunak, prime minister of the UK, wants London to become a global fintech hub. He asks the British government to implement new blockchain-promoting laws, including payroll regulations.
David Flores, Softledger CFO, says that crypto payroll services save time on journaling every entry and facilitating the accounting maintenance. He understands that those services save time so employees can do more value-adding projects rather than calculating salaries.
Wrapping Up
Crypto payroll is a prospective technology that enables speedy international transactions with lower fees. It unlocks new globalization opportunities, allowing to hire talents from all around the world. It will benefit businesses by unlocking unlimited access to the greatest workforce they can find.
It will give more flexibility and choice. Staff can choose how they get paid: with fiat on their bank accounts or with crypto. Blockchain payrolls are secure and immutable. All data is stored in the distributed ledger coded by cryptographic protection. Businesses can be confident that their payroll payments are processed accurately and securely.
Cryptocurrency has the potential to revolutionize salaries. Crypto-first payroll systems offer multiple advantages over traditional payroll systems. Blockchain tools are more transparent, flexible, secure, cost-effective, and faster than classic services. Especially, when it comes to international transactions.
The adoption of crypto-payroll systems will be gradual but inevitable. As technology matures and the regulatory landscape becomes clearer more businesses will adopt crypto-payroll systems. They benefit every party involved. Companies can save money on fees, and employees can have more control over their finances.
I encourage businesses to consider implementing crypto-payroll systems into their workflow. You can start it now with the Defiway Payroll protocol. Become one of the tech-pioneer businesses with us!
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