To attract and retain employees, use cryptocurrency to attract and retain employees

To attract and retain employees, use cryptocurrency to attract and retain employees ...

It can be particularly difficult for startups to compete for good people. Google, Amazon, Facebook, and other technology giants have staffed war chests that they can''t match.

According to an analysis from Bain & Company, around 40% of software engineer and developer hires were made by companies outside of technology.

What can the Davids of tech hiring problems do? I am an expert in business, and I am taking a close look at how businesses are hiring. One trend I see is companies offering cryptocurrency in a bid to attract employees.

Some Goliaths are considering cryptocurrency as a reward for employees, according to the CNBC Executive. Even the City of Miami is getting in on the move. Mayor Francis Suarez announced in October that he is moving forward with a proposal to pay city workers in bitcoin.

Why are businesses attempting to incentivize workers with cryptocurrency?

In most instances, the calculus is that its a form of differentiation that may attract workers seeking for a forward-thinking, innovative employer that provides substantial benefits and compensation. For the right worker (and often its type of worker that a tech company is looking for), a $10,000 starting bonus in bitcoin may be seen as more valuable than a $10,000 cash bonus.

When a startup operates remotely and its workforce is dispersed around the world, cryptocurrency compensation may be an attractive option, as there is less time, less time, and less money to pay with crypto than it is often required to transfer US dollars across jurisdictions.

Is it legal to pay workers in cryptocurrency?

The answer to whether or not it is legal to pay employees in cryptocurrency in the United States is dependent. There are a number of factors to consider, whether the pay at issue is a [minimum wage and] overtime compensation. In addition, the Fair Labor Standards Act (FLSA) requires payment of the prescribed wages, including [minimum wage and] overtime compensation, in cash or negotiable instrument payable at par.

Since cryptocurrency is not cash, the question arises whether a pay of employees in cryptocurrency would be considered as a payment at par. Again, there is no clear answer. While there is no doubt that bitcoin, for example, is akin to a currency (although the IRS qualifies it as property) with a visible value and liquid marketplace, yet neither the US Department of Labor nor any court has clarified this issue.

It''s important to keep an eye on that federal law is not the only obstacle businesses face when it comes to using cryptocurrency as a form of employee compensation. Different states have different standards, including many with regulations on the books (including California, Texas, and Illinois) requiring wages to be paid in United States currency. Employers who pay wages in cryptocurrencies in such jurisdictions run the risk of violating these state laws.

One way to avoid going aground under the FLSA and other laws is to offer employees the option of having a designated amount of their cash wages from each paycheck automatically converted to cryptocurrency. Another option is to pay wages in cash and reserve crypto payments for bonuses or other benefits.

Employee incentives include leveraging cryptocurrencycurrency tokens.

Beyond salaries and benefits, a common approach of attracting and retaining talent in the IT industry is the granting of stock awards and options. Today, companies are using cryptocurrency in the same way they use equity as an employee incentive.

If a company raises funds through an initial coin offering (ICO), it may use its cryptocurrency tokens to stimulate its workforce without lowering its capitalization table.

As with stock awards, token awards may be granted exclusively to employees or restricted and subject to a vesting period. Regardless of the company''s decision to grant tokens, it is important to understand the tax and other legal implications of doing so, and to collaborate with experienced professionals (legal and tax, in particular) when it comes to completing a token award program or using cryptocurrency as an incentive in any way.

Proceed with care

Several years ago, many (perhaps most) were still debating whether cryptocurrency was at best a fake or at worst a scam. What a difference a few years makes. Today, the concept of cryptocurrency, including as an employee incentive, is virtually universal in the tech world and is steadily becoming more prevalent in the larger economy.

While cryptocurrency as a way to attract and retain talent poses some legal and tax risks, there are options to proceed and remain effective. Companies must become creative in order to win today''s competition for talent. And crypto as a form of compensation is one way to gain a competitive advantage.

CORPlaw''s founder is Kristen Corpion.

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