Do you think Bitcoin will be used to pay employees?

[nii236]

I receive part of my salary in Bitcoins.  The simplest way for a company to pay using Bitcoins is to make it an "after tax deduction elected by the employee".  My salary is $X USD.  The company already deducts payroll taxes, income taxes, and benefit premiums.  I elected (by written authorization) to have a certain amount of my salary paid in BTC.  The options my company gave me were a specific USD amount, a specific % of salary, or entire net (after withholding and deductions) amount.  

On Payday the company converts the USD amount to BTC using the volume weighted average exchange rate over the entire pay period.  Our company's program covers all costs and fees but a company could charge a reasonable fee for the service.  I am sure on a long enough timeline payroll companies like ADP will offer this.

Now there are other ways to do this but the advantage of doing it this way is that it is very simply for any company to implement.  All Payroll software allows post tax deductions.  The amount deducted becomes a credit on the company USD books and an equivalent debit is made on the company's BTC books.   The tax implications are already taken care of (other than any capital gains on rising value) as the taxes were based on gross salary.  The company can still deduct the entire cost of the employees salary with no changes to accounting.  

What are the difficulties faced in doing this with a company who has never heard of Bitcoin, and probably has no interest in paying out in Bitcoins? Can they pay that pre-tax amount to an exchange? How does it work?

[lukestokes]

I'd love to offer BTC as payment for our team, but we'd like to get customers paying us in BTC first. If you need a shopping cart that is seamlessly integrated with Bitpay and the traditional payment systems (PayPal, CC gateways, Dwolla, Ogone, etc), please consider going with FoxyCart. The sooner we start getting paid in BTC, the sooner we can offer (at least a portion) of our team member pay in BTC (I blogged about our support here, if you're interested).

Sorry for the self promotion, but this is really important for business owners. If they don't have an inflow of BTC, they can't easily pay it out to their team members and vendors without paying extra in exchange costs, administrative overhead, and the fight against a deflationary currency. Sure, it can be done right now converting USD to BTC every pay period, but it doesn't make as much sense to me from a business standpoint.

Chicken. Egg.

I want a chicken omelet.

[justusranvier]

I think there's room in the ecosystem for a service called BitPayroll.

[The 4ner]

With a limit of 21 million BTC, how can a company expect to continue paying their employees? Where will they get the bitcoin necessary to pay them?

[bitbybit2]

It is being used today. Come to think of it we are somewhat the employees of this peer to peer technology. And bitcoin faucets and mining are being used to pay us. The 21 million coin limit is not an issue if you are investing in stocks you should know that there is a limit to the stocks being issued by a company but it is not an issue in stock investing. The overprinting of money devalues a currency or currencies at present. So the 21 million coin limit gives an advantage to bitcoins because you are assured that it will not overprint coins now and hundred years from now.

[maco]

I don't think bitcoin will make it as an official currency in place of the USD. Simple answer: no.

Although I believe that employees shouldn't get paid with it at all times just in case of the influx of the market. Some peoples ability to pay their bills might be at risk if values drop.tough call.

[bitbybit2]

I don't think bitcoin will make it as an official currency in place of the USD. Simple answer: no.

Although I believe that employees shouldn't get paid with it at all times just in case of the influx of the market. Some peoples ability to pay their bills might be at risk if values drop.tough call.

I beg to disagree the currency of Cyprus went down the toilet and the only thing that save the Turkish zone is Bitcoins. You   are basically telling us that bitcoins are more volatile than Cypriate currency when in the real world the reverse happened. Yes Bitcoins are volatile but its volatility is more positive because 5 years ago it is just worth nothing. The problem with US dollar is that everybody in the world is exchanging currency except USA because their money is the international currency. Where is fair play in that? Bitcoin levels the playing field because if it is adapted globally nobody will exchange money because it is the money.

[freedomno1]

Some companies do in San Francisco
http://www.forbes.com/sites/kashmirhill/2013/05/01/living-on-bitcoin-for-a-week-the-journey-begins/
That said stability is important with wages at some point down the line yes but at the moment not yet entirely  

[Kazimir]

I don't think bitcoin will make it as an official currency in place of the USD. Simple answer: no.

Eh, dude, people's salaries are already being paid in Bitcoin today. What's still to deny?

Although I believe that employees shouldn't get paid with it at all times just in case of the influx of the market. Some peoples ability to pay their bills might be at risk if values drop.tough call.

I consider the US Dollar and Euro both very risky as well (even more so than Bitcoin, in the long run). The monetary system on which these fiat currencies are based, is inherently broken and simply doomed to fail.

Too bad, there's simply no such thing as 100% security.

[Kazimir]

With a limit of 21 million BTC, how can a company expect to continue paying their employees? Where will they get the bitcoin necessary to pay them?

It's always the same with that "21 million BTC is not enough" nonsense.

When will people finally understand... The 21 million is just an arbitrary number, it doesn't make ANY difference if there were 21 million, or 900 quadrillion, or only 4 bitcoins worldwide. It's digital, and therefore infinitely divisible (currently up to 8 decimals but this can be adjusted in the software if the need ever arises). So, by definition, there is NO shortage of units, EVER.

If you still think otherwise, do you think the limited supply would also be a problem if a company would pay its employees in gold?

[jubalix]

With a limit of 21 million BTC, how can a company expect to continue paying their employees? Where will they get the bitcoin necessary to pay them?

they get paid in satoshis, by that time

[DeathAndTaxes]

What are the difficulties faced in doing this with a company who has never heard of Bitcoin, and probably has no interest in paying out in Bitcoins? Can they pay that pre-tax amount to an exchange? How does it work?

If the company has never heard of Bitcoin it will require a little work simply because there is no "bitADP" (ADP is major payroll provider in the USA) at this time.  However if a company is interested it wouldn't require more than an exchange account that accepts wires from the US (like MtGox).  The exchange account would be in the name of the company. The cost of the wire plus trading fees is still <1% which is a reasonable cost to provide this as a perk for employees (a cost of doing business, traditional payroll also has operating costs).

What would be useful is for MtGox (or a third party service provider) to have the ability to setup standing periodic market orders (i.e. buy $x worth of BTC every 24 hours at market). The company would also need a signed agreement with each employee on the amount of the election and clearly laying out the terms. 

One thing which needs to be considered (and should clearly be articulated in the election agreement) is how will the exchange rate be calculated.  The simplest method would be for the company to simply use the exchange rate at the time of payment.  If the company owes an employee $1,000 in "bitcoin elected salary" the company on payday would buy $1,000 worth of Bitcoins at the current market price and transfer it to the employee.    That is the easiest way but elected to but it diminishes the power of dollar cost averaging (what if on payday the exchange rate spikes up 10% before crashing back the next day).  In my instance our company uses the volume weighted average price for the entire pay period.  If the company does not have significant Bitcoin cashflow it would make sense for the company to to pre-deposit sufficient USD into an exchange account to handle employee Bitcoin purchases and buy in equal installments throughout the pay period. 

Example:  A company has 5 employees who combined have elected to have $6,000 of salary per pay period paid in BTC.  The company would make a single wire transfer to an exchange prior to the pay period beginning.  Say this company issues paychecks on the 1st and 15th of each month.  Everyday during that pay period the company would buy $400 worth of Bitcoins.  This way the company has the Bitcoins on pay day and they employee gains the advantage of dollar cost averaging. 

As for accounting or tax implications.  For the employer the accounting (from company book's standpoint) is no different than paying an payroll only in USD.  Any costs beyond the payments to employees are operating expenses.  Companies already have to withhold various taxes, and insurance premiums from an employees pay and the company then incurs the liability of making sure those payments are made.   I am not a tax attorney but at least in the US there are no tax implications for paying an employee by alternate means.  If the company realizes a capital gain (or loss) on their Bitcoin holdings they will need to account for that but this is true even in non payroll situations.

Example employee (based on this free tool:  http://www.paycheckcity.com/calculator/salary/ )
The example employees is opting to receive 20% of gross pay in BTC.

Semi-monthly Gross Pay$3,541.67
Federal Withholding: $309.13
Social Security: $219.58
Medicare: $51.35
California: $95.71
SDI: $35.42
Health Insurance Premium: $385.00
Bitcoin Withholding: $708.33    <--- this portion converted to BTC and paid to employee's BTC address according to terms of payroll deduction program
Employee Life Insurance: $5.65
401K (Employee Contribution): $177.08

Net Pay$1,554.42   <--- balance paid by check or direct deposit as normal.  If employee did not elect partial BTC pay this amount would be $2262.75 instead

Calculation Based On
Gross Pay: $85,000.00
Pay Frequency: Semi-monthly
Federal Filing Status: Married
# of Federal Allowances: 2
Health Insurance Premium: $385 (pre tax deduction)
Employee Life Insurance: $5.65 Fixed (after tax deduction)
401K (Employee Contribution): 5% of Gross Pay (pre tax deduction)
Bitcoin Withholding: 20% of Gross Pay (after tax deduction)

As you can see Payroll is already complex and this doesn't include employer matching portion of 401K, employer's portion of FICA taxes, unemployment insurance, etc.  Payroll involves a lot more than "paying the employee"  It is taking a employee's gross pay and disbursing it to a variety of accounts.  Often like in the case of taxes those funds are only paid quarterly but accurate payroll requires the company to account for the liability of those future payments.  Adding yet another post tax deduction to a paycheck to allow employees to take pay in BTC is pretty simple in any payroll or accounting software.

[Stunna]

I remember there was one company that attempted this and they eventually had to discontinue due to the extreme volatility of bitcoin. Now that bitcoin is slowly becoming more stable it may be possible in the near future.

I'm quite sure that coinbase pays its employees in BTC currently.

[Welsh]

I remember there was one company that attempted this and they eventually had to discontinue due to the extreme volatility of bitcoin. Now that bitcoin is slowly becoming more stable it may be possible in the near future.

I'm quite sure that coinbase pays its employees in BTC currently.

Well, coincha pays it's moderators 1BTC per month, which is nice I guess. Isn't a company but it's a start. I'm not sure of coinbase, I'll take a look.

[nii236]

What are the difficulties faced in doing this with a company who has never heard of Bitcoin, and probably has no interest in paying out in Bitcoins? Can they pay that pre-tax amount to an exchange? How does it work?

If the company has never heard of Bitcoin it will require a little work simply because there is no "bitADP" (ADP is major payroll provider in the USA) at this time.  However if a company is interested it wouldn't require more than an exchange account that accepts wires from the US (like MtGox).  The exchange account would be in the name of the company. The cost of the wire plus trading fees is still <1% which is a reasonable cost to provide this as a perk for employees (a cost of doing business, traditional payroll also has operating costs).
*snip*

Wow thanks for the informative post! From the looks of it, I really doubt the payroll department of a big company is flexible enough to add in an option to pay out in Bitcoins. There is a set up and manual conversion of money and stuff (unless MtGox does its automated market orders like you mentioned) that would have to be done by someone who has no idea what Bitcoins are.

[The 4ner]

With a limit of 21 million BTC, how can a company expect to continue paying their employees? Where will they get the bitcoin necessary to pay them?

It's always the same with that "21 million BTC is not enough" nonsense.

When will people finally understand... The 21 million is just an arbitrary number, it doesn't make ANY difference if there were 21 million, or 900 quadrillion, or only 4 bitcoins worldwide. It's digital, and therefore infinitely divisible (currently up to 8 decimals but this can be adjusted in the software if the need ever arises). So, by definition, there is NO shortage of units, EVER.

If you still think otherwise, do you think the limited supply would also be a problem if a company would pay its employees in gold?

It doesn't matter whether it's divisible currently the only thing making BTC worth anything is its USD worth. Not many people can purchase anything with BTC what would they do with BTC if they were to get paid with it?

[areebmajeed]

Archive.org already pays.

[AliceWonder]

Not many people can purchase anything with BTC what would they do with BTC if they were to get paid with it?

Sorry boss, I was gonna go to work, but then I got high.

[mco65]

So, do you think companies will use Bitcoin to pay their employees in the future?

I'm not sure if there are companies that already do that, but I haven't heard of anything.

As for US based companies (on a large scale), I don't see it happening anytime soon and probably NOT in my lifetime. It would take a serious economic crash, much worse than the US has ever seen, to incur a shift in monetary currency.  On a small scale, sure.. it could and likely will happen.  I could easily see a small (<10) employee internet based company offering btc as wages vs USD.

[justusranvier]

As for US based companies (on a large scale), I don't see it happening anytime soon and probably NOT in my lifetime. It would take a serious economic crash, much worse than the US has ever seen, to incur a shift in monetary currency.  On a small scale, sure.. it could and likely will happen.

Do you honestly think the United States as it is presently formulated will continue to exist for the rest of your life?