Paying Contractors by Crypto

In today's world, companies frequently work with foreign contractors to utilize their different skill sets and access global talent. However, paying these contractors through traditional banks can be difficult due to fluctuating foreign exchange rates, fees associated with overseas banking, and long waiting periods.

Paying through bank accounts across international borders involves various charges, such as currency conversion fees, wire transfer fees, intermediary bank fees, and receiving bank fees. Banks can deduct a huge percentage of the payment. On the other hand, paying contractors in crypto using networks like Arbitrum can cost just about $0.4 per transfer.

Crypto is becoming a popular choice among global players for paying international contractors. According to reports, in 2023, there are more than 420 million global crypto users. Statistics show that between 2018 and 2022, the global user base of cryptocurrencies increased by more than 190%. 

In this blog, we will see the benefits and challenges of crypto pay and the step-by-step process of how to pay international contractors in Crypto.  

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Benefits of paying international contractors by crypto

There are multiple advantages to paying your contractors through cryptocurrency. Companies, especially those dealing with international employees or contractors, prefer Crypto as it is a much faster, more convenient, cheaper, and secure payment option. 

Crypto pays are faster

Pay with cryptocurrency involves fewer steps to sending money, as the payer doesn't have to depend on banks or other financial institutions. While traditional international bank transfers can take days, crypto transactions can take just a few minutes, regardless of geographical boundaries.

Crypto pays are cost-efficient

Crypto pay involves lower transaction fees than traditional banking or other money transfer services. Cost-effectiveness like this can add significant savings over time, especially for companies that send out many foreign payments.

Cryptocurrencies are decentralized

Pay with cryptocurrency uses a peer-to-peer payment method so that you can send money to your contractor directly. Your payment will be secured; you don't have to be concerned about legal obstacles.

It is independent of bank or financial institutions

There are countries like Argentina, where inflation has been notoriously high for decades. Paying with cryptocurrency gives workers of those nations a chance to be paid in a currency that retains its worth on the international market.

Moreover, people don't need to worry about currency conversions. Cryptocurrencies like Bitcoin are worth the same in the US, Colombia, and France.

Cryptocurrency is secure and transparent

The core of cryptocurrencies, blockchain technology, provides high security and transparency. As crypto transactions are recorded on a public ledger, it is practically impossible for fraud to occur without detection.

Crypto pay influences broader access to a diverse talent pool

Contractors in areas with no access to conventional banking systems can now achieve financial inclusion through crypto pay. As a result, businesses may have easier access to a diverse talent pool.

Crypto pay simplifies record-keeping

Cryptographic transactions can be digitally tracked. So, companies and contractors can maintain records and conduct audits more easily. This transparency can improve trust and accountability in the payment process.

Read More: How to hire independent contractors

Challenges of pay with cryptocurrency

There are several challenges to paying with crypto. These may include:

Risks related to value fluctuations

Cryptocurrencies are known for their price volatility. Like stock, cryptocurrencies can lose value. This means having cryptocurrencies on your company's balance sheet can create complications, particularly for tax-related reasons. Businesses risk non-compliance(e.g., not paying at or above minimum wage) if the value of cryptocurrencies falls below a specific threshold.

Even contractors can face challenges when they find the value of their payments fluctuates significantly between the time of receipt and conversion into fiat currency.

Regulatory risks

The legal framework related to cryptocurrencies varies considerably from nation to nation and is dynamic. Businesses must carefully manage these restrictions when working with international contractors to maintain compliance.

Taxation challenges

Pay with cryptocurrency can complicate the taxation process. Companies must deal with the tax implications of paying contractors with cryptocurrency and ensure proper reporting and withholding.

Insufficient information about crypto pay

Every contractor may not be familiar with cryptocurrencies. So, recruiters have to provide the necessary training and infrastructure to receive and manage crypto pay. Providing education and support to contractors to get ready to be paid in crypto can be time and money-consuming.

Read More: Cost of an employee vs. cost of a contractor

How to pay international contractors in crypto?

Paying international contractors in crypto is a convenient and cost-effective way to handle cross-border transactions. Here is a step-by-step guide on how to pay with cryptocurrency:

1. Get written/ verbal authorization from contractors

Getting consent from your contractor before implementing cryptocurrency payments is important. Ensure contractors understand the process, risks, and benefits of getting paid in crypto. Therefore, having written or verbal agreements in place can protect both parties.

2. Communicate with contractors

Having a clear communication channel with your contractors will help to maintain transparency regarding the preferred cryptocurrency for receiving payments, conversion rates, and payment schedule. Transparency in this process is key to building trust.

3. Select the appropriate cryptocurrency

Determine the preferred cryptocurrency of your contractor. Though Bitcoin (BTC) and Ethereum (ETH) are widely accepted cryptos, your contractor may prefer other stablecoins like USDC or USDT to avoid price volatility.

4. Calculate payment amount and conversion

Based on the agreed-upon exchange rate and the contractor's home currency, determine the payment amount in cryptocurrency. Use a trustworthy cryptocurrency exchange or financial service to find the most recent exchange rate.

5. Verify the contractor's wallet address

Make sure your contractor gives you the correct address for their cryptocurrency wallet. Double-check the address to prevent any mistakes.

6. Initiate the cryptocurrency transfer

Use your cryptocurrency wallet or exchange platform to start a crypto pay. Here, you need to provide information like the contractor's wallet address, the payment amount in cryptocurrency, etc.

7. Notify the contractor

Once you've started the cryptocurrency transfer, let your contractor know. So that they can keep track of the transaction's status, give them the transaction ID or a link to a blockchain explorer.

8. Monitor the transaction

Track the transaction progress until the blockchain confirms it. Depending on the type of cryptocurrency and network congestion, this could take a few minutes to a few hours.

9. Keep records

Keep thorough records of each crypto pay, including the transaction IDs, wallet addresses, date, and amount. This is crucial for accounting and tax purposes.

10. Consider taxes

It is important to consult with tax professionals or legal experts to understand the tax implications of paying international contractors in crypto. Ensure you meet tax compliance requirements and keep detailed records of all transactions for reporting purposes.

11. Choose a crypto payroll provider

To pay your contractor with crypto in a hassle-free way, select a reliable crypto payroll provider. A crypto payroll provider will simplify the payment process and ensure compliance. 

Let’s discuss how you can get the best crypto payroll provider.

How to choose a crypto payroll provider?

Looking for your first crypto payroll provider? Here are some pointers to consider.

1. Check supported cryptocurrencies

When choosing a crypto payroll provider, ensure that the service provider supports the specific cryptocurrencies you plan to use for payments. Some renowned options like Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP), or stablecoins such as USDC and USDT are preferred by most contractors. You must look for a payroll provider with various options that can provide flexibility for both parties.

2. Payment security

When dealing with crypto pay, security is of the highest priority. Make sure the payroll service has strong security measures, such as:

a. Multi-Signature Wallets: A provider using multi-signature wallets for storing and managing funds offers better payment security. Multi-signature wallets require multiple private keys to authorize a transaction, making your crypto pay more secure.

b. Cold Storage: A provider using cold storage to store a significant portion of their funds is less susceptible to hacking.

c. Two-factor Authentication (2FA): Ensure the provider offers 2FA for account access. 2FA gives an additional layer of security to your account.

d. Insurance: Before selecting a payroll provider, ensure that the provider has insurance coverage in case of theft or loss of cryptocurrency funds.

3. Compliance

Cryptocurrency regulations vary from country to country. So, you must ensure that the payroll provider is experienced in cryptocurrency regulations and compliant with local and international laws. This includes:

1. Anti-Money Laundering (AML) and Know Your Customer (KYC) Compliance: When dealing with international payments, ensure that the provider must have procedures in place to verify the identity of users.
2. Tax Reporting: Make sure your crypto payment provider facilitates tax reporting. It must generate necessary reports for your accounting and tax purposes as well.
3. Legal Expertise: The provider should have access to legal expertise to navigate regulatory changes and ensure compliance.

4. Reputation and reviews

Do a proper background checking of the crypto payroll provider by reading reviews and seeking recommendations from trusted sources. A provider with a good reputation and positive track record for security and reliability is preferable.

5. User-friendly interface

An efficient and user-friendly interface can better manage your cryptocurrency payment. So, look for a provider offering an easy-to-navigate dashboard and clear transaction history.

Pay International Contractors in Crypto via Gloroots

Paying international contractors in Crypto can revolutionize the way businesses handle cross-border transactions. While it offers multiple benefits, it is essential to navigate the challenges effectively to ensure a smooth and compliant process. 

By following the steps outlined in this guide and choosing a reputable crypto payroll provider like Gloroots, businesses can embrace the power of cryptocurrencies to streamline their global contractor payments, reduce costs, and enhance efficiency.

Gloroots can make your contractor's payment management much simpler through crypto pay. We offer a user-friendly, fully automated, and efficient system to pay your contractor with cryptocurrency. 

With Gloroots, you can pay your contractors with cryptocurrency and give your business a competitive edge, allowing it to get the best talents worldwide without the hassle of traditional payment methods. 

All the risks involved in paying international contractors with Crypto can be handled. With efficient payroll management, Gloroots will also take care of payment security and compliance.

To know more about paying in cryptocurrency, contact the Gloroots team now!