With the gig economy changing the work landscape, it is hardly surprising that the financial landscape, and how workers may be paid in the future, is also under scrutiny. With this in mind, are crypto-payments a likely next step?
There are already platforms available which make it possible for employees to be paid using cryptocurrency. However, while there may well be some employees in the UK already being paid this way, there are challenges to be overcome if this is to become mainstream.
Perhaps the greatest of these challenges is that cryptocurrencies are very volatile at the moment, with the value of bitcoin recently falling more than 25% against the dollar in just one week, according to the exchange rate published between 10 July and 17 July 2019.
Such erratic exchange rates mean that staff would have no certainty about the amount of remuneration they would receive. Nevertheless, the development of new cryptocurrencies, such as Facebook’s Libra, which it claims will be backed by a basket of currency assets to avoid the wild swings experienced by bitcoin and other cryptocurrencies, may overcome this difficulty.
Another challenge for payroll will be the tax treatment. HM Revenue and Customs (HMRC) has stated in a briefing document that cryptocurrencies have a unique identity and cannot, therefore, be directly compared to any other form of investment activity or payment mechanism.
Needless to say, the guidance on how to account for the tax and national insurance (NI) on crypto-assets received as employment income adds many layers of complexity to an already complex system.
However, payroll professionals are nothing if not adaptable. The Future of payroll report 2019, published by the Chartered Institute of Payroll Professionals (CIPP) in January 2019, revealed that 61% of respondents with an awareness of cryptocurrencies believe it will become an alternative payment method in the future.
As the challenges above are overcome and cryptocurrency becomes more mainstream, it is easy to presume that crypto-payments will indeed be a likely step as the industry evolves further.
Helen Hargreaves is associate director of policy at the Chartered Institute of Payroll Professionals (CIPP)